IT Outsourcing - a background

It is predicted that by the Year 2004 the worldwide IT outsourcing market will grow to over $120 billion. The range of IT activities being outsourced is expanding fast. It's clear that IT outsourcing is not simply a fashionable, passing trend of the '90s. It is an increasingly viable option being taken by more and more public and private organizations.

A significant change in management philosophy is taking place since the 1990s. Organizations have switched emphasis to concentrate on their core activities in order to increase market penetration and become more competitive. It is now widely recognized that to compete effectively, it is essential for business to concentrate on what they do best and where they can add value.

To begin with, outsourcing requires an understanding of the concept of core competencies. Core competencies are the capabilities of an organization that truly distinguish it from its competitors. They are unique capabilities upon which the success of the company, both today and in the future depends. Core competencies are what give an organization its clear leadership position as seen by its customers.

All remaining activities are non-core, and executives are now asking if their company is best-in-world at performing these activities. If not, they explore how outsourcing these activities might enable the company to deliver greater value to its customers at lower costs.