The Next Step in Outsourcing Move forward to “Smart-Sourcing” and Containing Innovation

When we raise the specter of work mobility, the first thing that most people think of is outsourcing. Smart-sourcing is not synonymous with outsourcing. Outsourcing is only one part of Smart-sourcing. Outsourcing is meant primarily to reduce costs and transfer the risks of a defined process to a third party.

Approximately 60% of all organizations that undertook an outsourcing initiative did so, initially, for only cost objectives. The term used for this sort of outsourcing is "lift and shift," meaning an existing process is lifted out of its current organization and shifted over to the third party. The third party may achieve economies of scope through shared services, technology or international wage arbitrage, but such a relationship will rarely lead to higher levels of innovation. This innovation deficit in current outsourcing relationships represents a huge opportunity lost. One tends to believe that this is one of the most limiting factors in the acceptance of outsourcing and off shoring.

Organizations need to focus their precious resources on what they do best in order to innovate on their core competencies. But, they also need partners who can continue to innovate on the non-core processes that they outsource.


Smart Sourcing advocates using partners who can help a company to focus on its core, balance risk and opportunity, lower costs, increase innovation across all of its processes and finally, put in place attitudes to optimize all of these factors, socially and politically. Outsourcing and off shoring are essential components of this but only if they pave the way for organizations to free up resources so they can focus on core competencies that lead to greater innovation.