From Outsourcing and Offshoring Strategies to Extreme Outsourcing

Abstract

Technological innovation and competition have made products increasingly complex. This allows firms with complex production processes to specialize in one part only of the entire activity, outsourcing the other parts to specialized suppliers. The outsourcing strategies have undergone a profound evolution, from simple forms of production contracts made with third parties to agreements that involve functions and activities which, requiring core competencies, or being part of the core business, were until then considered inseparable from the company and not capable of being outsourced. The tendency today is to adopt global sourcing and offshoring. The propensity to outsource most of the functions and processes can take an extreme form, which we can define as extreme outsourcing, and lead to the formation of a virtual organization, a company characterized by the pure business coordination of its businesses, where all the productive and economic processes have been outsourced through the formation of a stable but flexible network.