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e-outsourcing

For a business, e-outsourcing is buying information technology products and services that could be furnished in-house from one or a variety of sources on the Internet. For example, an organization might hire a Web hosting firm to set up and run its Web site, an application service provider (ASP) to provide specific back- and front-office applications, and an outside security firm to install and maintain a firewall and a virtual private network (VPN). In a sense, the vendors act as the IT departments for the company, which is then free to focus on its core competency. E-outsourcing may also be provided in a package from one vendor that provides a wide range of services from other vendors.

Usually e-outsourcing enables a business running faster than if it tried to deploy the same technology using in-house staff. In the evolving Internet economy, where time to market is crucial and skilled IT labor is scarce, e-outsourcing is gaining in popularity. In fact, IBM CEO Lou Gerstner forecasts that the e-outsourcing market will soar to $55 billion in 2003 and predicts the movement will be "one of the really game-changing [IT] developments." Gerstner is so confident in the model that IBM is investing billions in new e-business hosting centers. Other top vendors are also making significant moves to enhance their e-outsourcing offerings.

E-outsourcing isn't without potential pitfalls, though. Some firms are less than confident when it comes to giving e-outsourcers access to their sensitive data. Also, some question how much responsibility an e-outsourcer will accept when its service isn't sufficient and whether it can integrate its offerings with a business's existing infrastructure and legacy applications.

This was last updated in September 2005

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