This is what happens when a field matures; companies transition to "managing assets" and source commoditized products and services rather than retaining detailed control and knowlegde themselves. This promotes cost efficiency and is a valid business practice.
At least as long as the field they operate in is stable.
The problem is that it makes businesses vulnerable to disruptive change, and when disruptive change does occur companies usually struggle to re-evolve talents that they shedded when their business matured. The trick is to realize the necessity of restructuring what they do and how and to do so before loss of revenue makes it hard or impossible. The first reaction, though, is often to cut cost. Which is a great way to start the downward spiral.
It is almost like drowning: all your natural reflexes conspire against your survival.
I can't remember what this cycle is called, but I read about it in some textbook used at business schools, so it is probably part of a typical MBA curriculum. (The rest of the book was too dull for me to actually remember its title).
When Apple raised the standard for handsets and brought handset software significantly closer to state of the art of software in general, handset manufacturers were caught napping. Then they panicked. And now they are taking on water.