Knowledge Intensive Services' Suppliers and Clients

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narrower range of products will be produced, though there may in fact be a greater
variety of differentiated products within this range.
This trend back to core activities is expressed in the investment policy: the
company invests in technologies and areas of knowledge in which it is (or wants to
be) genuinely competent. This implies that individual activities are assessed, to
establish whether they are core activities – or, if not, whether they should be
dispensed with, or, if they provide necessary inputs to the firm, whether they can
and should be subcontracted. Not all activities are ones which firms feel happy
about subcontracting, and there have been lively discussions about the costs
and benefits of outsourcing and facilities management in computer and
telecommunications functions. The concept of “strategic outsourcing” has been
coined to describe the processes and decisions involved in contracting out
activities, which include not only evaluating the role of the activities themselves,
but also the reliability and relative cost of suppliers. The wide application of
relatively new concepts such as strategic outsourcing and lean production is
likely to contribute to a further subcontracting of non-core activities and the
externalisation of services. Often this will result in the growth of specialised
business services as organisations contracting-out activities to service firms.
Sometimes these service ‘firms’ are actually self-employed individuals, indeed
they may even be ex-employees who are made redundant and then taken on as
subcontractors to carry out the same work – but with less overhead for the core
company. 15 The “hollow corporation” is liable to be surrounded by service firms
performing vital parts of its activity: the challenge is one of finding ways of
ensuring that the same quality of input is maintained. 16
An important reason for firms to seek to focus on the core is the desire for high
quality production, as quality becomes a key issue in competition (recall Peneder’s
conclusion that KIBS consumption was associated with higher quality output,
discussed above). Outsourcing also gives rise to greater demands for certification
of suppliers to quality standards, as “leaner” firms (and public authorities who are
15 For example, a publishing firm may lay off its editorial staff, and then recommission them as
self-employed editors to carry out the same task – Butterworth-Heinemann closed down an entire
office building (in Guilford, UK) on using this strategy in the early 1990s, for example.
16 Many commentators hail these developments as ones that will be multiplied as new technology
allows more people to become ‘telecommuters’, working from remote homes or community offices
for distant organisations. There are certainly moves in this direction, but whether they will develop
on a large scale will depend in part upon whether ways can be found of empowering remote workers
– especially if they are no longer actual employees who can be treated and made to feel like part of the
‘family’ – with the sorts of social support that are common in traditional organisations.