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Earlier on, firms used to outsource IT functions on a limited basis. Currently, most companies outsource their IT functions for the entire department. This has been used in delivering the IT functionality. Whilst there exist a considerable body of knowledge regarding IT outsourcing, the research on reasons why businesses outsource their IT functions is still limited. Therefore, this paper source to determine the reasons why organizations outsource the IT functions (Peslak 2012, p. 14).
The process of outsourcing is underpinned by basic premise of whether an organization must pay or make the service. The decision to purchase a service enlists two fundamental objectives of outsourcing. These include, first, transfer of ownership of a business process to a third party, and second, to enable concentration of major competences by vendee. Based on the transfer of ownership, outsourcing significantly affects organizations productivity, cash flow, profitability, transaction costs and growth. There has been a rising outsourcing incidences worldwide to improve the strategy of the organization in lightening the workloads, saving time and trimming the costs. Studies indicate that outsourcing can turn a business with high fixed cost to one with only variable costs. This is critical for businesses with activities involving extensive variance throughout the year or the one experiencing pressures to reduce the overhead costs. The core business competencies help in maintaining a competitive edge as well as increasing customer benefits and growth of business. The major functions of a business evolve through information sharing and collective learning. Such competences may not be enhanced by using huge investments; rather, they must focus on strategies and resources targeting the dominating corporate decisions (Peslak 2012, p. 15).
The exact determination of core competencies contests the
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