Plata Coloidal

Outsourcing involves an agreement in which a company transfers part of their existing internal activity to another company using a contract (Yang et al. 2007).

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Many definitions of information systems outsourcing have been proposed by researchers. For example Dhar and Balakrishnan (2006) defined IT outsourcing as:

“An act of delegating or transferring some or all of the information technology related decision making rights, business processes, internal activities, and services to external providers, who develop, manage, and administer these activities in accordance with agreed upon deliverables, performance

standards and outputs, as set forth in the contractual agreement”

Vendors may provide computing assets to customers from outside their organisation which may result in transferring the ownership of the outsourced assets to the providers. Vendors may also utilise their personnel to deliver the required services (Stefanie 2010).

Over the last few decades increasing attention has been paid to outsourcing of information systems (Zhao et al. 2014). This has become an important strategic business approach to gain a competitive advantage through products or services that can be obtained more effectively and efficiently from outside providers (Yang et al. 2007). Outsourcing of IT resources is not a new phenomenon and its root established in the 1960s with the use of the traditional timesharing and professional service resources that enable multiple users to interact simultaneously with a single computer. Since then, outsourcing has extended that includes: a range and different level of services, the change from client-provider relationship to partnership, business process outsourcing, in addition to service providers taking on more responsibilities (Grover et al. 1996).

Organisations usually seek outsourcing for a number of reasons: cost savings, a focus on core competency, flexibility in management, business process improvement, access expertise, skills, and new technologies, and scalability (Lacity et al. 2009). However, there are some disadvantages that include information security and loss of control (Yang et al. 2007). Management should also consider the properties of the external environment including: service quality, market maturity, and similar outsourcing projects, when deciding to outsource services or eequrments (Yang et al. 2007).

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Arnold (2000) proposed an outsourcing model (see Figure 5), which consists of four major elements: outsourcing subject, outsourcing object, outsourcing partner, and outsourcing design. In this model, all the company’s activities are classified into four types: company core, core-close activities, core-distinct activities, and disposable activities. Outsourcing objects include all the necessary activities for a company’s existence, but not the company core, which are outsourced to the outsourcing partner depending on the manager’s decision.

Figure 5. Outsourcing model developed by Arnold (2000)

2.8.1 Evolution from traditional outsourcing to cloud computing

The demand for cost-effective, efficient and flexible delivery of IT services from service providers, at a maximum of financial flexibility is increasing (Leimeister et al. 2008). Cloud computing has emerged as a response to the demands and challenges posed by clients. Cloud computing is a new trend to outsource some or all IT applications to a third party that provides a flexible and highly scalable platform for (Armbrustet al. 2010). It provides the technical foundations to meet customers’ demands for flexibility at the business level. The cloud was started by providers that have not been known in the traditional outsourcing market such as such as Amazon

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and Google (Dhar 2012). These companies were active in other markets, but they developed new business models to promote their former products (e.g., large storage and computing capacity) as new products. By this, they entered the traditional outsourcing value chain and started a competition with previously established outsourcing providers.

There are some differences between the traditional information systems and cloud computing (See Table 3). In the first, the physical resources can be kept either by the customer or the provider while the latter provides an asset-free provision of technological capacities. The traditional outsourcing of information systems usually required long term contracts which can be difficult to change while cloud computing services can be provided instantly with high flexibility in terms of contract duration.

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Table 3. Differences between IT outsourcing and cloud computing, adopted from Dhar (2012, p.6)

The impact of cloud computing on IT outsourcing is no doubt significant (Dhar 2012). Cloud computing has reconfigured the IT supply industry. It established a new

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culture in which new types of services can be easily developed, tested and provided (Schubert and Keith 2012). It has led to significant increase in the use of external service provision, resulting in a much smaller internal IT function. Cloud computing have made a substantial impact on outsourcing vendors, who need to adopt new strategies to include cloud-based services in order to sustain with the changes in the IT services industry (Dhar 2012).

2.8.2 Migration to cloud computing

Cloud migration, for the purpose of this thesis, can be defined as a transition process of all or part of legacy IT resources of an organisation including: hardware, software, stored data, and business processes, from on-premise deployment behind its firewalls to the cloud environment where they can be managed by a third party. The process also encompasses the shifting of IT resources between different cloud providers; this process is known as cloud-to-cloud migration. The cloud migration process may involve retaining some IT infrastructure on-site (Pahl 2013).