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|D13:||The Economics of Outsourcing in the Information Economy|
So far, there is only one good explanation that fits almost every case of outsourcing information technologies: The outsourcing corporations are trying to return to profitability by cutting employment and shifting of work where it can be performed at a lower cost.
This document presents innovative ways for measuring outsourcing. It presents different points of view how to analyze the importance of making make vs. buy decision. An illustrative case provides an example how to address the importance of making outsourcing decisions from the standpoint of the CTO, the CIO, the CEO and a hypothetical competitor.
|The Brain of the Firm||8|
|When Out-Tasking Makes Sense||8|
|What is Outsourcing?||10|
|The Logitech Case||11|
|The Value Chain Perspective||12|
|The Outsourcing Perspectives||13|
|The Perspectives of Information Executives||15|
|The Outsourcing Ratio||17|
|Outsourcing and Profits||22|
|Figure 1 - Purchasing Constitutes the Largest Cost Component of a Firm||10|
|Table 1 - The Value Chain Defines Outsourcing||12|
|Table 2 - What is Outsourcing Depends on a Control Perspective||13|
|Table 3 - Importance of Information and IT Depends on Perspective||15|
|Table 4 - Value-Added Can be Calculated if Labor Cost is Reported||18|
|Table 5 - External Transactions are Larger than Internal Transactions||18|
|Table 6 - Purchase / Sales Ratio In the Global Materials Sectors||19|
|Table 7 - Outsourcing Ratios Show a Wide Range in Value||20|
|Figure 2 - High Outsourcing Ratios Not Associated with Profitability||23|
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