Is Outsourcing And Application Service Provision

IS outsourcing has been a popular topic within the IS community over several decades. During the 1970s, the term ‘‘facilities management’’ was used and the emphasis was on service bureau contracts, where companies would rent space on a mainframe owned by the vendor. This simple form of outsourcing expanded during the 1980s and 1990s to encapsulate business systems, such as enterprise resource planning (ERP), supply chain management, financial and accounting and human resource systems. Large outsourcing vendors such as EDS and IBM Global Services significantly increased their revenues from outsourcing, with many large single customer contracts being signed. Throughout the 1990s, IS sourcing evolved into four distinct types: total outsourcing (where a company would outsource more than 70 per cent of its IS facility); selective sourcing (often using multiple suppliers); joint venture sourcing (where a company would set up or partner with another company to provide systems and applications); and insourcing (where a company procures, manages and develops its own IS function) (Currie and Willcocks, 1998). During this period, much of the research work on IS outsourcing concentrated on the client-side in terms of contracts management (Fitzgerald and Willcocks, 1994); achieving success in outsourcing decisions (Saunders et al., 1997); and managing the IT resources as a value center (Venkatraman, 1997). The IT infrastructure emerged from a closed mainframe environment to a distributed computing environment, and more recently towards a net-centric infrastructure, with the potential to link customers and suppliers. The convergence of software and IT infrastructure towards an Internet/net-centric environment has therefore enabled the application service provider (ASP) concept to emerge. Software has evolved from custom-coded, proprietary applications to pre-packaged, off-the-shelf offerings and now to the development of net-centric applications. ASPs are third-party service firms which deploy, manage and remotely host software applications through centrally-located services in a rental or lease agreement. During the last two years, the ASP phenomenon has grown considerably, with many established and start-up firms developing their ASP strategies. Forecasts for the growth of the ASP industry vary, with Ovum predicting that it will be $25 billion and Dataquest, $22.7 billion, by 2003 (Currie and Seltsikas, 2001). ASPs will have a significant impact on outsourcing policies and practices, if the business model successfully penetrates the under-exploited small and medium enterprise (SME) sector. In this special issue on ‘‘IS outsourcing and application service provision’’ for the Logistics Information Management, six theoretical and research papers are presented on a range of topics from identifying ASP business models to cross-national perspectives on outsourcing practice. The paper by Sharma and Gupta on