Gree or disagree: Standard financial investment information and criteria are all that is needed to effectively evaluate IT outsourcing decisions
In recent years many companies chose to at least partially outsource their IT operations. They are of the opinion that the IT is not the core competence of the company and outsiders who will undertake to provide the IT operation as outside contractors will do a better, and possibly cheaper job.
The financial manager must be able to assess the wisdom of the investment in technology, and in particular in IT, from the viewpoint of the shareholders. The basic question that one must try to answer is: would an investment in technology and IT raise the value of the shares and increase the wealth of the owners of the company the shareholders? Would an outsourcing be more beneficial? Should the company lease (or outsource) these technologies or should it invest in developing new technologies? What impact would these decisions have on shareholders value?
consider this investment decision with reference to capital budgeting and risk. Please review at least in overall terms the following documents relating to capital allocation:
John Graham and Campbell Harvey (2002) How Do CFOs Make Capital Budgeting And Capital Structure Decisions? Journal of Applied Corporate Finance. edu/publications/guides/roi
The following are two articles relating specifically to the defense context:
Department of Defense (1997) Guide for Managing Information Technology (IT) as an Investment and Measuring Performance .