Friday, February 06, 2004

Coase On Demand

Coase is popping up on this site a lot these days, but when you are talking about the boundary of the firm he really did say it all. I think it's interesting to think about the effect of current IT on where a firm should begin and end.

Essentially, you want to do something internally only when the coordination cost of doing it outside is too high.

Web services, among other things, lowers the coordination cost of sourcing various IT functions from external vendors (although it also lowers the cost of doing them internally). Look to see more IT processes externally sourced and hosted.


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