Outsourcing

tags
Finance

Contracting out “non-core” functions of a business to reduce costs.

Increasing coordination costs can be a problem - heavily outsourced firms can end up using all their capacity doing nothing but coordinating subcontractors.1 There's a sort of Resilience vs Efficiency tradeoff to it: As firms outsource more and more, they get things for cheaper but lose the ability to get different things (or even understand what kind of different things they might want).

Footnotes:

1

bert hubert, “How Technology Loses out in Companies, Countries & Continents and What to Do About It” (January 16, 2021), https://berthub.eu/articles/posts/how-tech-loses-out/.