First, outsourcing requires that a client company surrender a degree of control over critical aspects of the enterprise. The potential loss of control could extend to several areas: control of the project, scope creep, the technologies, the costs, financial controls, accuracy and clarity of financial reports, and the company’s IS direction. By turning over data center operations, for example, a company puts itself at the mercy of an outsourcing provider’s ability to manage this function effectively. A manager must choose an outsourcing provider carefully and negotiate terms that encourage an effective working relationship.

Second, outsourcing clients may not adequately anticipate new technological capabilities when negotiating outsourcing contracts. Outsourcing providers may not recommend so-called bleeding-edge technologies for fear of losing money in the process of implementation and support, even if implementation would best serve the client. Thus, poorly planned outsourcing can result in a loss in IS flexibility. For example, some outsourcing providers were slow to adopt social technologies for their clients because they feared the benefits would not be as tangible as the costs of entering the market.

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