Thesis: Massive Outsourcing of IT

Sample Thesis Paper

Strassmann stresses on the point that top management view massive outsourcing of IT as a new and imaginative way to obtain services, or as an excuse for getting rid of responsibilities that they have been unable to manage all along? According to him there are discernible characteristics among corporations that chose to outsource more than half of their IT resources. His analysis shows a connection between outsourcing and a firm’s economic value-added. Those corporations that outsourced more than 60% of their IT budget were economic losers when they began outsourcing. They were probably shedding IT resources along with other corporate functions because they were in financial trouble. He could not find any corporation with a consistently large economic value-added and rising employment that outsourced most of its information technologies, despite claims of synergy or the advantages of getting rid of commodity work. The losers were casting off IT because they were shrinking their firms anyway. (Strassmann, 1998)

Companies that try to jump on the outsourcing bandwagon may be chasing a parked car. We found no association between outsourcing and success. If anything, companies that outsourced more of their information systems work tend to have lower productivity and profitability. The only performance measure heavy outsourcers did well on was stock-market returns. In the short term, the market reacts favorably to outsourcing. Whether the market will continue to react favorably, especially if productivity doesn’t improve, remains to be seen. (Brynjolfsson and Hitt, 1993)

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