Pisano: Sometimes there is no case against outsourcing. There are strong skills at very good costs available from lots of places. But, where they have to be careful is when they are outsourcing capabilities that become critical to the future. Can you justify that in some spreadsheet financial analysis? Probably. But standard tools of financial analysis are very limited when it comes to evaluating these kind of capability-creating decisions. You need management with judgment.
Shih: This is a classic short term versus long-term investment question. Long-term investments in capability maintenance and development are no different than other long-term investments in productive capacity. The harder thing to evaluate is the investment in the health of the commons. This is a classic "tragedy of the commons" problem; firms don't see the short-term benefits of such investments. That's one of the challenges. Our financial tools don't have a good way of capturing this.