Adapted from Harvard Business Review, February 2005, Best Practice

Outsourcing has become strategic – yet many executives remain unprepared. A new era of capability sourcing will trigger organizational redesign and require a new set of managerial skills.

Outsourcing is becoming so sophisticated that even core functions like maintenance, sales, and housekeeping can – and often should – be moved outside.

Forward thinking companies are making their organizations more flexible, and with the decline of the vertically integrated business model, sourcing is evolving into a strategic process. The question is no long whether to outsource a capability or activity but rather how to source every activity.  This is the new discipline of “capability sourcing.”

A strategic approach to sourcing can dramatically improve your company’s competitive position.  So how do you make something that’s always been tactical more strategic?  Stop focusing on incremental cost improvements, step back, and re-evaluate your strategy and your capabilities.

There are three steps to find out what you should outsource:  The first step is to identify the components of your business that represent the core of the core. These are the activities that your company does better and cheaper than its rivals. In deciding what to outsource and what to keep inside, consider two factors:

1. Whether a capability is a proprietary.
2. Whether an outside company can achieve the standards that would allow you to maintain competitive advantage.

Once you’ve discovered which capabilities promise high potential for alternative sourcing, the next question is:  How should you source them?  How do your capabilities stack up to customer expectations and budget requirements?

The third step is a reality check in which you determine whether a capability that is a strong candidate for strategic sourcing can be carried out at a distance without any loss of quality.

Formulating a sourcing strategy is only the first stage of a sourcing effort: Partners then have to be chosen, contracts negotiated, and management structures established and monitored. By taking a broad, strategic view of capability sourcing, your company can make the most of its sourcing choices.

To realize the full potential of sourcing, companies must forget the old peripheral and tactical view and make it a core strategic function.

–Havard Business Review

MasterCorp focuses on one thing and does it better and more often than any other:  resort housekeeping services.