Outsourcing: a core or non‐core strategic management decision?

Abstract Practicing managers often use the idea of core competence as one of the principal guidelines for making decisions about outsourcing. Managers of large corporations commonly support their outsourcing decisions with the familiar argument that ‘We keep core competences in‐house, and we outsource non‐core activities’. This paper questions the usefulness of the ‘non‐core competence’ concept for practical decision making. It reviews and discusses a comprehensive list of drivers for outsourcing decisions as well as the potential risks related to outsourcing initiatives. Instead of taking the simplistic ‘core or non‐core’ approach, the paper suggests a more creative way to evaluate a larger variety of competencies. The business contexts of four successful companies are described and several examples of their outsourcing/insourcing decisions are presented. Examples show that poor implementation undermines decisions that are based on even the most imaginative definition of competence structures. Successful outsourcing depends on managing the outsourcing relationship well after the decision is made. Copyright © 2002 John Wiley & Sons, Ltd.