OUTSOURCING INFORMATION SYSTEMS
If a firm does not want
to use its own internal resources to build and operate information systems, it
can hire an external organization that specializes in providing these services
to do the work. The process of turning over an organization’s computer central
operations, telecommunications networks, or applications development to
external vendors of these services is called outsourcing.
Outsourcing information
system is not a new phenomenon. Outsourcing options have existed since the dawn
of data processing. As early as 1963, Petrot’s Electronic Data Systems (EDS)
handled data processing services for Frito-Lay and Blue Cross. Activities such
as software programming, operation of large computers, time-sharing and
purchase of packaged software have to some extent been outsourced since the 1960s.
Because information
systems play such a large role in contemporary organizations, information
technology now accounts for about half of most large firms’ capital expenditure.
In firms where the cost of information systems function has risen rapidly,
managers are seeking ways to control those costs and are treating information
technology as a capital investment instead of an operating cost of the firm.
One option for controlling these costs is to outsource.
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