In another example, Xcel Energy, the fourth-largest energy company in the United States, with a delivery network in thirteen states, outsources its IT functions to IBM.Why would Xcel Energy duplicate the capabilities of one of the largest information technology companies in the world when they can partner with them, receive their expertise and knowledge, and spend less for the service?

Let me cite one more example. I once worked with two partners who were in the mortgage banking business. In that business there are many players, each with a specialized role. There are closers who close a real estate transaction, lenders who loan the money, mortgage servicers who handle the loan, and mortgage custodians who manage the documents. This case involved mortgage servicers and mortgage custodians.

The servicers handle customer calls, accept and apply payments, and pay escrowed taxes and insurance for the mortgagee. The custodians file and store the documents and then, when they’re needed, ship them to appropriate locations—a cumbersome process considering the thousands of real estate transactions that occur every day.