Which Capabilities Should You Outsource--and Which Should You Keep In-House?

How to maximize outsourcing's value? Make strategic decisions about which capabilities to outsource and which you'll handle in-house. Use this three-step process:

1) List all your capabilities--including HR, finance, IT management, logistics distribution, product development, and packaging.
2) Identify capabilities with "high proprietary value." Your company executes these in ways that generate measurably more value than rivals could. And your company would suffer major strategic damage if rivals imitated them.
3) Identify capabilities with "high commonality." Outside suppliers could achieve scale or other advantages by providing these to many others in your industry.

Outsource capabilities that have low proprietary value and high commonality.

By washingtonpost.com Editor  |  October 7, 2008; 6:57 AM ET  | Category:  Management Tip of the Day
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In addition to which functions you outsource, it is crucial to pay attention to *how* you implement and manage the outsourcing process. HR and IT teams will be challenged immediately and in coming weeks as a result of the financial fallout and will be pressured to show productivity and agility. Next week, OutsourceWorld in New York City, will give real world examples of how companies ranging from Fortune 1000 to small businesses are succeeding and using outsourcing for profits and to drive innovation: www.outsourceworld.com

Posted by: Sarah Sadowsky | October 7, 2008 2:59 PM

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