Abstract
We have all heard and read about companies moving their plants, development units or production facilities outside, as a result of outsourcing. The foremost reason of outsourcing seems to be the transaction cost theory that states that a "company should outsource activities if, to carry them out internally, would require excessive investment to get the lowest unit cost" (McIvor 2000, p.22). However these days, cheaper costs usually aren't the major force behind the outsourcing boom. Most organizations have realized that by outsourcing their non-core activities to external vendors, who perform them as their core competencies, they can concentrate more on their core competencies. Since core competences are being kept in-house, the concept of selective outsourcing has risen (Judenberg 1994, p. 37). Globalization has also facilitated the outsourcing process. The outsourcing organization and outsourced vendor can now embark on different relationships. This paper looks at four such relationship types (support, reliance, alignment and alliance) that come into play when outsourcing IT functions. One important thing to note is that two organizations that outsource the same IT function to the same vendor can have different relationships with the vendor. Interestingly, some outsourcing organizations also transfer their resources including employees to the vendor.
