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Analysis on the Costs of IT-Outsourcing

Outsourcing is regarded as a new strategy to gain more competence under the condition of limited resources. Especially offshore outsourcing has been popular since 2001 in the developed countries. More often than not, outsourcing models and methods have been the focus of discussion, the cost of outsourcing is underestimated. This paper tries to discuss the cost issues when engaged in business process outsourcing for information technology (IT) service companies. Firstly, this paper presents the incentives and contents of outsourcing, then analyzes the dilemma of outsourcing, following presents the transaction costs theory. Lastly, this paper finds the solution to save the costs of outsourcing for IT service companies from the different points of view, such as returns from scale, returns from skill, returns from relationship, returns from models, etc