Managing IS services with something in between outsourcing and insourcing: buffer organizations

Abstract

Traditionally, organizations have faced the dilemma between outsourcing and insourcing, both of which have shown a certain amount of problems. In between the two of them a new concept arises. This is the use of internal markets as a buffering mechanism for organizations, which create an intermediate society between the main organization and the market. This article shows two cases of organizations from different environments in which the sourcing process involved the creation of an intermediate organization to act as the described buffering mechanism. Both processes were related to the IT function. The first case was that of a Public Spanish University that decided to create the buffer society as a way to outsource certain IS/ICT functions while retaining a good level of control over workers and over management of these functions. The second case was that of an Italian SME which decided to create a buffer company in order to manage the implementation project of an ERP System. The study of the two cases has helped us identify and confirm empirically a number of features achieved by this internal mechanism use.