Companies have always "out-tasked," that is, hired special contractors for particular jobs or to level-off peaks and valleys in their workload. They have always partnered — forming needed relationships with firms whose capabilities complement their own; companies have always contracted for shared access to resources that were beyond their individual reach — whether it be buildings, people, or technology. Indeed, none of these concepts are new, yet, none of them represent what we today call outsourcing.
Outsourcing applies to every facet of today's corporation and at every level. It is a central management tool for the fundamental redesign of America's businesses. Many believe that outsourcing must be embraced by corporations if they are to compete successfully in today's global economy. It is a rethinking of what an organization is and must do itself to deliver all of its promises to customers.
Rethinking Traditional Organizational Structures
An understanding of the importance of the outsourcing megatrend in the U.S. starts with a reexamination of the traditional U.S. view of a "company," which is rooted in the post-industrial-revolution model defined by giants such as General Motors and DuPont in the 1920s and `30s. On the basis of this model, a company is generally thought of as a large, vertically-integrated, self-sufficient organization — that is, as an organization that directly owns and manages most, if not all, of its required resources. Under this model, business success was traditionally seen as synonymous with owning and directly controlling the factors of production.
Over the years, as organizations became more complex, their resources were further specialized and directed toward various aspects of the company's operations — product design, engineering, manufacturing, human resources, information technology, distribution, and sales, just to name a few.
Viewed strategically, outsourcing fundamentally challenges executives to rethink this notion of the traditional vertically integrated firm in favor of a much more flexible organization. The factors of production have given way to the primary of the intellectual capabilities of the firm that tie the factors of production together. An organization where internal investments are made in a more focused way on the organization's core competencies with mutually beneficial longer-term outside relationships used to source many, if not most, of these ever increasingly specialized sub-disciplines.
The reality is that in the U.S. this traditional vertically integrated firm is not the only, nor necessarily the best, way to create value — especially in today's ferociously competitive, highly volatile global economy. Almost any organization can gain access to resources and factors of production. What differentiates companies today is their intellectual capital, their knowledge and their expertise, and their ability to leverage the capabilities of others— not just the size and scope of the resources they directly own and manage.
As a result, outsourcing has been adopted by firms from across the corporate spectrum as well as governments at all levels and not-for-profits. No organization is too large or too small to be examining outsourcing. Preeminent organizations, such as those on the FORTUNE 500® list of America's largest corporations, are adopting outsourcing as a cornerstone of their efforts to sharpen market focus, capitalize on global opportunities, and energize operations. At the same time, smaller, rapidly expanding companies are using outsourcing as a way to match the capabilities of a large firm without the expense and delay of directly acquiring and managing each new resource needed.