Outsourcing

Factual definition

Arranging for external providers to perform activities or supply components or services that could otherwise be handled internally.

Outsourcing in practice

Hypothetical: a manufacturer buys a component from external mills instead of producing it internally. To assess concentration risk, establish each supplier’s share for a defined period and denominator, then examine inventory buffers, alternative capacity, qualification requirements and replacement lead times.

Shayne Fitz-Coy’s definition of Outsourcing

Outsourcing is doing work with third parties, and it is a continuum rather than a switch. At one end you run your own payroll, which most companies do not, and at the other you run nothing in house.

Everyone is already comfortable outsourcing software development to SaaS firms. Most people do not call that outsourcing, which tells you where the line really sits.

How Shayne Fitz-Coy uses Outsourcing

The word took its reputation from the 1990s and firms moving work to India. That framing is stale.

Outsourcing now happens everywhere and in every direction, so ask what capability you are giving up rather than where the work went.