October 2024
Background Note
HBS Case Collection

Outsourcing Primer

Format:Print
| Language:English
| Pages:9

Abstract

This note provides some background on one of the key resource allocation decisions managers make as they develop and produce products and services: what should they do with the walls of their own firm, and what they should depend upon suppliers or contractors to perform. This note describes substitution-based and abstention-based outsourcing decisions, and considers advantages and disadvantages. It looks at the economic logic, and discusses asset specificity, specialization, and the impact of modulari partitioning of systems, as well offshoring and some of the recent challenges and controversies.