Outsourcing strategies: opportunities and risks

Abstract

Managers in developed countries are increasingly interested in outsourcing as a potential source of competitiveness and value creation. There has been a growing awareness of the potential of outsourcing to support a range of strategies beyond that of lower cost. This article makes corporate strategists familiar with four of the most promising opportunities for using outsourcing strategies – focus, scale without mass, disruptive innovation and strategic repositioning. While assessing the potential of these opportunities in specific corporate situations, strategists also need to look at two of the most significant associated risks – the risk of losing skills that could be key to competing in the future, and the risk of turning to outsourcing at the wrong stage in an industry’s evolution. The article widens managers’ views of the strategic alternatives that outsourcing can be used to support, while making managers aware of the main risks to be weighed in the balance. Case examples of companies that have successfully attempted the four types of outsourcing are examined.