My company is a shared service center for IT expertise. If I need serious legal or accounting services I will outsource those. My first experience being outsourced was a little frightening but I now understand it's just an attempt to improve efficiency. One way it may achieve this is by minimizing human resource expenses (Michaels, 2003). I have my doubts about how effective it actually is for large organizations (Charette, 2010) but at the same time I don't know if I will ever really think of myself as an employee again.
There is a market for extra-organizational expertise for several reasons. The most obvious is that some skills required to run a business may have nothing to do with its core competencies (PhysioGenix, 2010). Another is the possibility of finding a more 'objective' viewpoint with an outside party. Related to this is the ability to transfer culpability for desirable but politically infeasible activities to the outside entity.
When Mount Sinai/NYU outsourced their IT to IBM it was largely for the former reason (Brewin and Perez, 2003). Mt. Sinai in particular did not want to be in the IT business. But because their infrastructure had become so large and indispensable in so many ways, they needed a large partner who could absorb as much of the personnel and expertise as possible. As far as I know, it's worked out for Mt. Sinai; many people stayed on campus as IBM employees, some continued to do some of the work from IBM campuses and a few remained insourced. I have heard that NYU, on the other hand, was not entirely satisfied, and had to pay some penalties for rehiring outsourcees.
After this experience I no longer feared outsourcing. In fact I find it rather amusing when combined with globalization. The primacy of profit has become so unthinkingly accepted that America has now outsourced professionals to lower expense countries as well as service and manufacturing. The infrastructure is already crumbling (New York Times, 2009). Who will follow their lead in the interest of maximizing shareholder value? China's infrastructure is coming along pretty well right now. I'd call this a success.
For my company outsourcing makes the same sort of sense it made to MSNYU on a much smaller scale. Law and accounting are not my core competencies. I don't have resources to hire lawyers and accountants full-time. So when I need their services a shared center makes perfect sense.
Brewin, B. and Perez, J. (2003) IBM Signs $380M outsourcing pact with three NYC hospitals [Online]. Available from: http://www.computerworld.com/s/article/82533/IBM_signs_380M_outsourcing_pact_with_three_NYC_hospitals (Accessed: 14 May, 2010)
Charette, R. (2010) 'Indiana and IBM Sue Each Other Over Failed Outsourcing Contract', IEEE Spectrum [Online]. Avalable from: http://spectrum.ieee.org/riskfactor/computing/it/indiana-and-ibm-sue-each-other-over-failed-outsourcing-contract (Accessed: 15 May, 2010)
Michaels, M.P. (2003) The Macroeconomics of Global Outsourcing [Online]. Available from: http://www.outsource2india.com/why_outsource/articles/MacroeconomicsofOutsourcing2.pdf (Accessed: 15 May, 2010)
New York Times (2009) U.S. Infrastructure Is in Dire Straits, Report Says
[Online]. Available from: http://www.nytimes.com/2009/01/28/us/politics/28projects.html (Accessed: 15 May, 2010)
PhysioGenix (2010) Outsourcing: Non-core Competencies in Drug Development [Online]. Available from: http://blog.physiogenix.com/2010/01/outsourcing-non-core-competencies-in-drug-development/ (Accessed: 15 May, 2010)