Evaluating the relationship between IT outsourcing and knowledge management

This paper explores the relationship between knowledge management and IT outsourcing. A paradox is evident in that companies are advised to develop, exploit and retain their knowledge-based assets at the same time as entering large-scale IT outsourcing deals where staff, databases and other equipment are transferred to a third-party supplier. Using empirical data from two case studies (the London Stock Exchange and the Post Office), this paper considers two competing models of how IT knowledge is acquired and managed. The first model perceives IT as a commodity that may be obtained from the marketplace. Conversely, the second model views IT as a core competence within the organisation. The paper concludes by suggesting that knowledge-based assets need to be carefully assessed before entering into outsourcing arrangements, especially where core competencies are difficult to identify, evaluate and sustain.