Explain the outsourcing risk of failure to perform.
What will be an ideal response?
Once a client firm has outsourced specific IT assets, its performance becomes linked to the vendor's performance. The negative implications of such dependency are illustrated in the financial problems that have plagued the huge outsourcing vendor Electronic Data Systems Corp. (EDS). In a cost-cutting effort, EDS terminated seven thousand employees, which impacted its ability to serve other clients. Following an eleven-year low in share prices, EDS stockholders filed a class-action lawsuit against the company. Clearly, vendors experiencing such serious financial and legal problems threaten the viability of their clients also.
PTS: 1
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