Chronology

1770s: Adam Smith, in his book ‘The Wealth of Nations’, formulates a theory of competitive advantage, extracting the notion of outsourcing as a mean to cut costs by hiring cheap labour in developing countries.

1960s: It became common to outsource IT functions that involve massive amounts of information, such as data processing, to external vendors, due to the high costs and physical storage requirements associated with computers, signifying the genesis of the trend to IT outsourcing.

1963: Electronic Data Systems signed an agreement with Blue Cross of Pennsylvania for the handling of its data-processing services. It was the first time a large company had turned over its entire data-processing department to a third party.

1970s: It became common for computer companies to export their payrolls to outside service providers for processing.

1980s: Outsourcing enters the business lexicon. Functions such as accounting services, payroll, billing and word processing all became outsourced work due to a widespread development of workstations, personal computers and LANs.

1985: The Internet became a well-established technology supporting a wide community of researchers and developers.

1989: Outsourcing became formally identified as a business strategy. Eastman Kodak made a revolutionary move for business that was seen as a watershed event as it decided to outsource its IT systems that underpinned its business.

1990s: Marked the shift to outsourcing mainframes, PCs, and telecommunications as outsourcing became very profitable with the advent of the World Wide Web. As organizations began to focus more on cost-saving measures, they started outsourcing non-core functions necessary to run a company but not specifically related to their core business.

1998: Outsourcing became a US$100 billion-per-year industry.

2003: The outsourcing industry accumulates US$298.5 billion in global revenues.

2004: Outsourcing became one of the topics of debate between candidates in the United States presidential election.

Sunday, January 18, 2009