Outsourcing
Delegating to an external provider functions previously performed in-house. It can cover support functions — accounting, payroll, IT — or core business activities. Outsourcing reduces fixed costs and allows management attention to focus on higher-value activities.
In practice
Sound outsourcing follows one principle: externalise what is standardisable and non-differentiating, retain in-house what constitutes a competitive advantage. Outsourcing accounting to a specialist firm is rational. Outsourcing development of a core software product to an agency without an explicit intellectual property assignment clause can result in losing control of the company’s primary asset. The outsourcing contract must define service levels, reversibility conditions, and data ownership clearly.