Outsourcing Core Functions

After our panel discussion for outsourcing, Prof. Schwarz posed the question, "what stops firms from outsourcing core and strategic functions?"  I would contend that it really isn't possible for a company to outsource such things without it altering their core competency itself.  For example, a software development company cannot remain a software development company if they outsource software development.  That kind of outsourcing effectively makes them a different kind of business.


What I wonder is whether the expansion of outsourcing will effectively lead to the introduction of different kinds of businesses.  As economies of scale are being created through networking, I wonder a segment of businesses will develop whose primary focus is the creation of those networks themselves.  This will depend upon whether networking is sufficiently time consuming and expensive to justify outsourcing their networking needs to another firm, and whether a firm can be efficient and effective enough at network creation to use that as its core competency.


In today's world of network-centric working relationships, and the push to outsource as much as possible, it will be interesting to see if businesses end up outsourcing to such an extent that it that they cut out much of the meat of their business. If too many businesses emerge that are essentially just managers of a collection of contracts, they may cost more than the value they create, meaning we could see a swing back in favor of insourcing.