Gone are the days of Henry Ford's River Rouge plant, which achieved complete vertical integration. "In came iron ore and rubber, out came automobiles. Ford made his own steel, tires, and parts, then assembled them into cars." No longer is it the case that one company maintains the resources and skill set to do everything needed to output its finished product. "The use of external support is increasing. Companies are moving towards having a network of hardware, software, service and training advisers that they rely on." These relationships rely heavily upon an efficient exchange of information. Each of the steps in the outsourcing doctrines is information levied against contracted services.
1.) "to form a relationship with a few service providers to keep aware of overall market trends"
2.) "to examine which services are provided"
3.) "To allow the IT managers to compare the products available"
4.) "to analyze the match of supplier offerings and business needs"
When deciding whether or not to outsource, it must be decided what the set of core strategic activities are and how to best use the limited resources available. "The benefit of outsourcing is that the technique allows the company to focus resources on strategic activities of the firm and to capture economies of scale in non-core activities." This decision making process is one of simple economy. Cost and benefit of each process remaining in-house are weighed. "The same calculation that determines whether an organization makes or buys inputs. Does the extra value that the organization obtains from performing its own marketing or information processing exceed the extra bureaucratic costs of managing such functions? If the answer is yes, the organization develops its own function. If it is no, the organization outsources the activity." An Information Technologies framework or network of communications between contracted... [continues]
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