The auto industry already outsources up to 70% of its manufacturing to suppliers, but now we’re seeing companies outsource all their non-core processes. More functions and activities are being outsourced. Information technology is one function that lends itself to massive outsourcing. Hilton Hotels farms out the lion’s share of its $12 million information technology (IT) budget to two vendors. General Dynamics spun off most if its entire 2,500 person IT organization in 1991 so it could morph from a lumbering defense contractor into a nimble commercial enterprise. General Dynamics in the process shrunk from a $10 billion to a $3 billion a year company.
The rationale for outsourcing goes something like this. We, the manufacturer, are in the business of making widgets so why should we spend our time focusing on running our own telephone company, information technology department, or training organization. The company should spend its time on things that will make a real difference to the customer, to the bottom line and leverage its core competencies.[i]
[i] King, Julia, “Outsourced But Not Outclassed,” Computerworld Premier 100, November 16, 1998, p. 36-37.