The microstock photography industry took shape in the early 2000s, when iStockphoto commercialized its online catalogue of images contributed by a community of amateur and semi-professional photographers. This case takes place about four years after iStockphoto's purchase by Getty Images, an event that signalled a shift of market dominance from traditional stock photo houses to their microstock competitors. The industry has changed dramatically. Three firms - iStockphoto, Shutterstock and Fotolia LLC - control the lion's share of a mature market, and each dominates a particular segment. The Fotolia management team must find ways to grow Fotolia N.A., even as competitors also seek to exploit the "long tail" in the market. The case asks students to develop strategies to generate new revenue in this rapidly changing environment.

The received wisdom--which many practitioners rigidly follow--assumes that competitiveness in a global economy requires companies to focus on core competencies, reduce their number of suppliers, and develop strong partner relationships built on shared information and trust with the remaining suppliers. But interviews with leading practitioners indicate that blind adherence to this three-step approach trivializes the issue and may be bad medicine. We provide a simple guideline for choosing the appropriate relationship for each supplier. An important consideration is whether the supplier relationship aims at cost reduction or value-added benefits for the customer, or both. The appropriate relationship could be one of competitive tension, cooperative partnership, or strategic alliance. In this study, the firms with successful outsourcing strategies began with well-developed and rigorous technological forecasts. Otherwise, strategic outsourcing will be filled with many blind avenues and deeply regretted decisions.