Strategic sourcing for information processing functions

Outsourcing is the usc of outside vendors to provide services that are too expensive in time, personnel, equipment, or money for an organization to provide for itself. Computer tasks such as data management, network operations, or disaster recovery can ail be expertly handled by outside sources. Many companies have successfully applied outsourcing techniques to provide added services or products to their customers. Historically, many firms have made sourcing decision, commonly known as make-or-buy decisions based disproportionately on unit cost . with insufficient regard for strategic or technological issues. This cost-focused approach has led to competitive tragedy for many firms. Managers need better tools for evaluating sourcing decisions. These tools should accommodate the long-term, strategic issues. This paper presents such a tool, the Strategic Sourcing mode, which augments the traditional cost analysis by considering strategic and technological factors. Using this framework, in conjunction with a cost analysis, can assist firms make the sourcing decisions that will position them for sustained competitive success in the future.