Answer to Question 1
TRUE
Answer to Question 2
A firm might outsource some (or all) of its information systems services for many reasons. Some of these are old reasons, but some are new to today's environment:
Cost and quality concerns: In many cases it is possible to achieve higher-quality systems at a lower price through economies of scale, better management of hardware, lower labor costs, and better software licenses on the part of a service provider.
Problems in IS performance: IS departments may have problems meeting acceptable service standards because of cost overruns, delayed systems, underutilized systems, or poorly performing systems. In such cases, organizational management may attempt to increase reliability through outsourcing.
Supplier pressures: Some of the largest service providers are also the largest suppliers of computer equipment (e.g., IBM or Hewlett-Packard). In some cases, the aggressive sales forces of these suppliers are able to convince senior managers at other organizations to outsource their IS functions.
Simplifying, downsizing, and reengineering: Organizations under competitive pressure often attempt to focus on only their core competencies. In many cases, organizations simply decide that running information systems is not one of their core competencies and decide to outsource this function to companies whose primary competency is developing and maintaining information systems.
Financial factors: When firms turn over their information systems to a service provider, they can sometimes strengthen their balance sheets by liquidating their IT assets.
Organizational culture: Political or organizational problems are often difficult for an IS group to overcome. However, an external service provider often brings enough clout, devoid of any organizational or functional ties, to streamline IS operations as needed.
Internal irritants: Tension between end users and the IS staff is sometimes difficult to eliminate. At times this tension can intrude on the daily operations of the organization, and the idea of a remote, external, relatively neutral IS group can be appealing.
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