The Limit to Outsourcing: Beware of the Consequences for Market Success!

Over the past few decades, outsourcing, in particular offshore outsourcing, has become a widely used means for firms to improve their performance. Outsourcing helps lower the firm’s breakeven point and improve its return on investment. As a result, many firms have increased their outsourcing activities. In our studies we find that although firms may be able to improve their market performance through increased outsourcing, this is only true up to a point, beyond which market performance actually decreases. But we also find that firms that have a weak internal resource base or are facing strong competition can afford to outsource more. As a marketer you should be aware of the marketing implications of outsourcing strategy so that you can proactively shape your firm’s outsourcing strategy.