Information Systems Outsourcing in the New Economy - An Introduction

When Eastman Kodak announced that it was outsourcing its information systems (IS)1 function in 1989 to IBM, DEC and Businessland it created quite a stir in the information technology (IT) industry. Never before had such a well-known organization, where IS was considered to be a strategic asset, turned it over to third party providers (Applegate and Montealegre, 1991). Since then both large and small companies have found it acceptable, indeed fashionable, to transfer their IS assets, leases and staff to outsourcing vendors (Arnett and Jones, 1994). Kodak appears to have legitimized outsourcing, leading to what some have called “the Kodak effect” (Caldwell, 1994). Senior executives at well known companies in the U.S. have followed Kodak’s example and signed long term contracts worth hundreds of millions of dollars with outsourcing “partners”. A number of highprofile multi-billion dollar “mega-deals” have been signed which has raised awareness even more. A recent Dataquest report (2000) notes that since 1989 there have been over 100 of these mega-deals (Young, 2000).