Outsourcing has become an increasingly popular way to reduce costs and focus operations upon the main objectives of an organization. This article considers outsourcing in general, and automatic data processing (ADP) outsourcing in particular.

Private industry and government each have their respective successes and failures; lessons learned from them should guide outsourcing decisions. In general, outsourcing, especially of ADP processes, has been popular, but it should not be expected to produce savings in all instances; rather, most gains with outsourcing have been quality improvement. With foresight and proper structuring of the contract, more successes will come.

Outsourcing is taking a more prevalent role both in government and corporate strategies in the current environment of fiscal constraint. As Secretary of Defense William S. Cohen has recently stressed (Cohen, 1997), in order to afford the future modernization of our force structure, we need to reduce the current cost of our existing support structure to "make it perform better at less cost by harnessing the revolution in business affairs." He goes on to say "we still do too many things in-house that we can do better and cheaper through outsourcing." This sentiment was previously advocated by the Defense Science Board (1996), and is also present in new House and Senate bills, which seek to require privatization of nongovernmental functions, unless they can be shown to be less expensive in-house (Brewin, 1997; "OMB favors," 1997; and Harris, 1997).