In recent years many companies chose to at least partially outsource their IT operations. They are of the opinion that the IT is not the core competence of the company and outsiders who will undertake to provide the IT operation as outside contractors will do a better, and possibly cheaper job.

The financial manager must be able to assess the wisdom of the investment in technology, and in particular in IT, from the viewpoint of the shareholders. The basic question that one must try to answer is: would an investment in technology and IT raise the value of t he shares and increase the wealth of the owners of the company - the shareholders?

Would an outsourcing be more beneficial? Should the company lease (or outsource) these technologies or should it invest in developing new technologies? What impact would these d ecisions have on shareholders value?

In this module we will be considering this investment decision with reference to IT outsourcing and its relation to capital budgeting an d risk. Please review at least in overall terms the following documents relating to IT outsourcing: