According to the January 2011 issue of Industrial Engineer, “The trend toward outsourcing both locally and offshore has increased dramatically throughout the world’s developed economies.” This is due to a drive for greater efficiency and cost reduction. “Leading firms have been adopting more sophisticated outsourcing strategies and have been outsourcing core processes such as design, engineering, manufacturing and marketing.” The problem is that many smaller firms fail to capitalize on the opportunities provided by outsourcing. They don’t know how to strategize their outsourcing efforts.

“Effective outsourcing involves analyzing a number of key dimensions, including relative capability in the process, contribution of the process to competitive advantage and the potential for opportunism from outsourcing the process.” This means that outsourcing is most valuable for processes which are not vital to competitive advantage.

The graphic below describes the how outsourcing should be prioritized among business processes.

Image Source: Twobee