Rise and Fall of an Information Technology Outsourcing Program: a qualitative Analysis of a Troubled Corporate Initiative
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Rise and Fall of an Information Technology Outsourcing Program A
Information Technology Outsourcing (ITO) has been common practice among large U.S. corporations for decades. The practice began in the 1960s and gained popularity in the 1980s as companies outsourced their data center and facilities management to firms such as IBM and EDS (Dibbern, Goles, Hirschheim, & Jayatilaka, 2004). The dot-com bubble and year-2000 (Y2K) readiness from the mid–1990s and early 2000s shifted outsourcing practices to hiring temporary Indian technology workers under H1-B visas (Watts, 2001) and offshoring (Economist special report, 2013). Over the last decade, the practice of augmenting internal IT staff with third-party contractors and increased offshoring has grown ITO into a nearly $50 billion practice in the U.S. and over $115 billion globally (Tapper, 2011). ITO is defined as contractual agreements in which service providers assume responsibility for IT department functions. These functions can include developing new applications, maintaining clients’ information systems, computer networks, data centers, or devices such as phones, laptops, and tablet computers (Tapper, 2011). The practice has received significant scholarly attention over the previous two decades. In this section, I provide a historical review of ITO paradigms in the U.S. beginning with a) the origins and early evolution of the practice (Dibbern et al., 2004), b) the emergence of staff augmentation and foreign technology workers and the growth of H1B visas (Watts, 2001), and c) the present drift from staff augmentation toward managed-services agreements (McCarthy et al., 2011; Tapper, 2011). I conclude this section by reviewing the normative ITO research and theory as well as tensions and gaps in the literature. 7 Early Information Technology Outsourcing Information technology outsourcing in the United States began in the early 1960s when Blue Cross of Pennsylvania entered into an agreement with Electronic Data Systems (EDS) to manage its data processing services. This was the first case of a large corporation turning over its entire IT department, including employees, to a third party. During the 1970s, EDS added General Motors and Frito-Lay as outsourcing clients. The business practice gained popularity in the 1980s as EDS added First City Bank, Continental Airlines, and Enron as clients (Dibbern et al., 2004). Two factors contributed to the emergence of information technology outsourcing—first, the unclear value delivered by IT departments, and second, corporations’ focusing resources on core competencies. Unless a firm is in the actual business of creating and selling hardware, software, or IT services, executives often view IT departments as overhead cost. Therefore, IT departments can represent an essential, but non-core, expense. Executives also believe focusing their organizations’ resources on what they do better than others, while outsourcing non-core functions, is a recipe for sustainable competitive advantage. From these perspectives, it is a logical argument to believe that because IT vendors provide expertise at economies of scale, they can deliver non-core IT functions or capabilities more efficiently than internal IT departments (Dibbern et al., 2004). Several researchers (e.g., Loh & Venkatraman, 1992; Dibbern et al., 2004; Gonzalas et al., 2005; Blaskovich & Mintchik, 2011) consider Kodak’s 1989 agreement with IBM to outsource the management of its data center facilities as the watershed moment for information technology outsourcing. The subsequent rise of ITO by firms including Delta Airlines, Xerox, McDonnell Douglas, Chevron, Dupont, JP Morgan, and Bell South marked the legitimization of 8 ITO as a widely accepted business practice. Today, this sudden growth in ITO is widely referred to as the “Kodak Effect.” Download 1.05 Mb. Do'stlaringiz bilan baham: |
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