Explain how IT outsourcing can lead to loss of strategic advantage

Answer 1

Alignment between IT strategy and business strategy requires a close working relationship between corporate management and IT management in the concurrent development of business and IT strategies. This, however, is difficult to accomplish when IT planning is geographically redeployed off-shore or even domestically. Further, since the financial justification for IT outsourcing depends upon the vendor achieving economies of scale, the vendor is naturally driven to toward seeking common solutions that may be used by many clients rather than creating unique solutions for each of them. This fundamental underpinning of IT outsourcing is inconsistent with the client's pursuit of strategic advantage in the marketplace.