Companies tend to outsource information technology (IT) functions—farming out work to lower-cost locations and cutting back on in-house resources—in the belief that it lowers costs.
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The tendency is to pick the IT services firm they think is best equipped for the job, based on past performance, and to neglect building internal capabilities to monitor the vendor. But cost arbitrage is no longer the prime driver of outsourcing; operational expertise is. And past performance is no guarantee of the vendor’s ability to get the job done. Six common myths about outsourcing are busted here, and action on how to derive maximum value is suggested. A Mint-Corporate Executive Board initiative on exploring management trends.