Question

What are some differences between outsourcing a non-core support function such as IT and outsourcing a core function like manufacturing?

What if IT represents a competitive advantage? Should outsourcing IT still be considered?

Is "Cloud" IT Outsourcing?

Answer 1

1.

Outsourcing a non core function, brings efficiency and cost effectiveness, whereas outsourcing of core functions, causes dependency upon the third party firm and it creates loss of competitive advantage. It also makes the firm to be hostage of the demands made by the third party firm in terms of price, technology transfer and cost of services. In contrast to it, outsourcing of non-core functions, will make the firm lean and increase its competitive advantage by focusing its attention upon the core activities. It brings sustainability. Though, when outsourcing of core functions takes place, then resources are not utilized properly and it does not contribute to the competitive advantage development.

2.

If a firm delivers IT products and services, then IT forms the core function. In this case, IT should not be outsourced. Rather, there should be an in-house team that should work upon and develop IT products and services.

Cloud is a platform that provides storage of data and different activities. Simply, using cloud services is not outsourcing. If Cloud is granted the permission to perform the task on behalf of the firm, then it is outsourcing.