Michael E. Raynor

In the outsourcing realm, core competence thinking typically manifests itself as a prescription for firms to outsource IT-intensive processes because the IT elements that drive process capabilities rarely qualify as a firm’s core competence. But outsourcing vendors make running IT infrastructures the focus of their business. For them, these activities are their core competence. This reasoning is encapsulated in marketing slogans such as “make your back office our front office.”

Problems arise, however, when the processes these non-core IT functions support are, or become, a critical element of the value chain configuration needed to deliver improvements on that dimension of performance that is the basis of competition. In other words, just because something is not your core competence does not mean you should not do it yourself. The challenges of learning and mastering new capabilities are daunting and difficult, but the alternative is frequently competitive irrelevance.

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