Today's Solution and Tomorrow's Problem

The article focuses on corporate risk management of its outsourced information technology (IT) and business procedure operations (BPO). Such deals have grown exponentially in business, yet little literature has examined the subject beyond basic assessments of the most common types of outsourcing agreements. As outsourcing expands into businesses' core operations, a better understanding of the vendor-client relationship is needed. The most visible sign of a failing outsourcing relationship is cost overrun for the client, since most outsourcing is done as a cost cutting measure. A lack of precise and detailed product specifications is the most common flaw in the vendor-client relationship which causes such overruns. Even successful outsourcing efforts pose dangers for the client firm. In the long run, those create relationships more beneficial to the vendor, which tends to gain knowledge. Increased dependency on the vendor's performance tends to stifle innovation within the client.