Question

What term refers to the way some companies focus on what they do best and outsource other functions to key partners?

Short answer

Capability sourcing.

Step-by-step solution

Capability sourcing

Capability sourcingis a method of executing strategic sourcing and enhancing a company's competitive position by getting access to best-in-class capabilities across the value chain, ensuring a long-term competitive advantage. Capability sourcing is a business strategy in which a company strives to be best-in-class in every organizational process and function.

The organization believes that irrefutable excellence in each business process confers competitive advantage; and if the organization can honestly declare it is unable to improve to the degree of being outstanding, it should consider outsourcing the function.

Four options are considered in capability sourcing

a) Keep the status quo:That is where management requires full control of service and reaps the most benefits by keeping ownership.

b) Outsource to a local service provider:The commercial case for outsourcing to a local service supplier is persuasive, and leadership does not seem to be in direct charge.

c) Establish a dedicated offshore facility:The business case here is one of the significant cost reductions, but management requires direct authority.

d) Outsource abroad:The economic case is for significant cost savings, with no direct control.