Outsourcing Decision Matrix
The Outsourcing Decision Matrix plots each function by its strategic impact and its impact on day-to-day operations, so 'outsource or keep' stops being a gut call and starts being a placement on a grid.
A single dot marks where a function sits on the grid of strategic weight against operational impact.
Reach for this when…
- You're weighing whether to outsource a function and the argument keeps circling back to cost alone.
- A team insists their work is 'too important to outsource' and you want to test that against how much it actually drives day-to-day operations.
- You're scaling fast and need a repeatable way to decide what stays in-house.
How to run it
- List the functions or processes under review.
- Score each on strategic impact - how much it shapes your competitive position.
- Score each on operational impact - how much day-to-day performance depends on it.
- Plot each into the grid: retain, form a strategic alliance, outsource, or eliminate.
- Start with the eliminate quadrant first - low strategic impact, low operational impact functions are the easiest calls.
A worked example
Situation. Rafael Duarte ran Duarte Transporte, a regional haulage firm in Asuncion, Paraguay, with in-house teams doing everything from route planning to payroll to fleet maintenance.
Applied. Plotted on the matrix, payroll scored low on strategic impact but high on operational impact - the safe outsource quadrant. Fleet maintenance and route planning both scored high on strategic impact and high on operational impact, landing squarely in retain.
Result. He outsourced payroll within a month and hired a maintenance lead to strengthen fleet maintenance in-house. Route planning, his highest strategic-impact function, stayed exactly where it was - retained and protected.
The catch
Scoring 'strategic impact' is itself a judgement call, and teams protecting their own function will rate it higher than it deserves. The matrix also treats functions as separable, when many are tangled together operationally - outsourcing one can break another.
If the team doing the scoring is the team that might get outsourced, get a second scorer.
Origin: Philippe-Pierre Dornier