7.1 THE STRATEGIST IN YOU: The Outsourcing Decision Matrix

(SHORT NOTES FROM STRATEGY TOOLS:

Sourcing and Purchasing Strategy at http://www.mindtools.com)

economistsview.typepad.com

Making the right decision is significantly to the organization's bottom line in terms of cost savings and increased efficiency.  Outsourcing can be considered as it brings fresh minds to the business, and also frees time up for innovation and other vital tasks.  The use of Outsourcing Decision Matrix will help see clearly the tasks, processes, or functions to be kept in-house or to be safely outsourced.

Figure1: The Outsourcing Decision Matrix

www.mindtools.com

The quadrants
Form a strategic alliance	Tasks are high in strategic importance but contribute little to operational performance they are relatively insignificant in terms of cost or smooth running and so not worthy of full in-house focus
Retain	Tasks are high in strategic importance and have a big impact on operational performance These tasks should be kept in-house so that your organization keeps maximum control
Outsource	Tasks are important for successful operational performance but are not strategically important These tasks could safely be outsourced
Eliminate	Tasks are not important to your organization's overall strategy Tasks do not make a significant contribution to its day-to-day operational performance

Process in identifying whether to outsource a task:

1.     Identify the task's strategic importance

2.    Identify its contribution to operational performance

3.    Plot the task on the matrix

The Outsourcing Decision Matrix gives an initial idea about whether to outsource tasks in businesses.  Strategically important tasks should be kept in-house so that leaders are able to control the most vital processes.  Operationally tasks that needs to done effectively, but does have significant impact to overall strategy, can be safely outsourced.