Abstract

When Eastman Kodak announced that it was outsourcing its information systems (IS) function in 1989 to IBM, DEC and Businessland (now Entex Information Services), it created quite a stir in the IT industry. Never before had such a well known organization, where IS was considered to be a strategic asset, turned it over to third party providers. Since then, both large and small companies have found it acceptable, indeed fashionable, to transfer their IS assets, leases and staff to outsourcing vendors. Kodak appears to have legitimized outsourcing, leading to what some have called “the Kodak effect.” Senior executives at some of the most well known companies in the U.S., such as General Motors, Halliburton, Hughes Aircraft, Scott Paper, American Express, Bethlehem Steel, Continental Bank, Amtrak, Enron, National Car Rental, and Delta Airlines, have followed Kodak’s example and signed long term contracts worth hundreds of millions of dollars with outsourcing “partners.” Recently, a number of high-profile multi-billion dollar “mega-deals” have been signed by J P Morgan, Xerox, General Dynamics, and McDonnell Douglas. Nor is this trend only fashionable in the United States. Lufthansa in Germany; KF Group in Sweden; British Petroleum, Guiness, Inland Revenue and British Aerospace in the U.K.; Canada Post in Canada; Swiss Bank in Switzerland; and Lend Lease and the South Australian government in Australia have all signed significant contracts with outsourcing vendors such as IBM, EDS, CSC, SHL Systemhouse, AT&T Solutions, Andersen Consulting, and Perot Systems. Such deals signal a rise of outsourcing globally. Some outsourcing deals go so far as to involve the formation of new jointly held companies between the outsourcer and client, e.g., TransQuest (Delta Airlines and AT&T Solutions), Technology Service Solutions (Kodak and IBM), and Systor AG (Swiss Bank and Perot Systems).

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