The Strategies of Outsourcing and Offshoring

In recent years, however, outsourcing strategies have undergone a profound evolution, from simple forms of production contracts made with third parties to agreements that involve functions and activities which, requiring “core competencies”, or being part of the “core business”, have until now been considered inseparable from the company and not capable of being outsourced. In order to decide on outsourcing and formulate a satisfactory outsourcing contract, it is fundamental to identify the “strategic intent” behind the choice to outsource, since this depends on the organizational culture of the two sides in question, which are often diverse and lead to different evaluations regarding the functions and processes to outsource. Precisely for this reason, the greater the strategic importance assigned to the outsourcing, the more important it is for all parties involved that top management be given the responsibility for managing the outsourcer-outsourcee relationship. The tendency today is to attain “global sourcing” and offshoring; that is, outsourcing that involves outsourcers located in countries other than that of the outsourcee. This tendency to outsource most of the functions and processes can take on an extreme form, which we can define as “extreme outsourcing”, and lead to the formation of a virtual organization, a company characterized by the pure business coordination of its businesses, where all the productive and economic processes have been outsourced through the formation of a stable but flexible network.