The gutting of the corporate back office continues at a rapid pace, as CEOs outsource large chunks of their operations. In 2002, a flurry of year-end activity—including a $4.5 billion deal between Bank of America and EDS, as well as a $5 billion agreement between JP Morgan Chase and IBM—brought the total value of large-scale outsourcing deals to $29 billion, compared with $16 billion in 2001.

But for every deal that works, it seems another comes up short, resulting in finger-pointing and bad publicity. More important, botched outsourcing deals fail to create value for shareholders.

What separates the successes from the failures? Our research and client work at Marakon Associates reveal that outsourcing deals are usually won or lost long before the vendor is chosen. Winning arrangements often depend on the ability of the client company to look beyond organizational boundaries to find combinations of related activities that can be merged into bundles, to be packaged and farmed out.