It is sometimes difficult for organizations to decide when they should contract out and when they should totally outsource.

The following diagram may help.

The criticality and competiveness matrix

The vertical axis is "value to the business". Each process, activity or task can be regarded as either "useful" or "critical" to the business.

The horizontal axis is "competitiveness". Each process, activity or task can be regarded as either a "commodity" or a "differentiator", depending on the competitive advantage that they provide to the business.

The chart may look like this:

A completed criticality and competiveness matrix

The financial systems are a "useful commodity". The business does not depend upon them, and their do not add to the organization's competitive edge. Useful commodities should be outsourced.

The billing systems are critical to the business, but not competitive. They form a "critical commodity". Critical commodities may be contracted out, for preference, or outsourced, or facilities managed.

The customer information systems are a "critical differentiator": they are essential to the business and they add competitive edge. Critical differentiators should usefully be retaine "in-house".

The web site is a "useful differentiator". That means that, although it adds to the competitive position of the business, it is not critical to the success of the business. Useful differentiators should be moved. The Web site should become either a useful commodity (which is a negative result) or a critical differentiator. If the Web site is perceived in the marketplace as a major reason to do business with the organization, then the organization should consider making its business more dependent on the Web site for doing business.