A sourcing strategy for enhancing core capabilities

Abstract

Purpose

Most companies focus on using outsourcing to achieve cost cutting. This article urges them instead to consider outsorcings potential for capability enhancement.

Design/methodology/approach

Reports on a handful of companies that place outsourcing – onshore or off – in a strategic context.

Findings

Leading companies start by analyzing not just where they can outsource to lower costs and improve quality, but which capabilities are vital to their core business.

Research limitations/implications

A recent Bain survey of large and medium‐sized companies reports that only 10 percent are highly satisfied with the costs they're saving, and a mere 6 percent are “highly satisfied” with offshore outsourcing overall.

Practical implications

Outsourcing has become so sophisticated that even functions like engineering, R&D, manufacturing, and marketing can be moved outside.

Originality/value

The authors show that it's no longer a company's ownership of capabilities that matters, but rather its ability to control and make the most of critical capabilities. In other words, capability sourcing has become strategic.

Citation

Gottfredson, M. and Phillips, S. (2005), "A sourcing strategy for enhancing core capabilities", Strategy & Leadership, Vol. 33 No. 6, pp. 48-49. https://doi.org/10.1108/10878570510631675