The fall of Railtrack, Britain's rail infrastructure operator, has many lessons. But the one that may resonate the longest is the failure of its attempt to rely on a web of subcontractors to carry out maintenance and other routine tasks.

Railtrack had about a dozen prime contractors, which in turn farmed out the work to about 2,000 subcontractors. Getting this web of relationships to work properly was a daunting task. Gaps in communication, and the consequent "blame culture", are thought to be important causes of the track problems that led to the Hatfield crash, which undermined Railtrack's credibility.

In adopting this approach, however, Railtrack was merely taking 1990s orthodoxy to its logical conclusion. It was focusing on its core competence - managing and rebuilding the railway network - and outsourcing the routine, low-value tasks.

Sir Robert Horton, Railtrack's first chairman, had come from the oil industry. The outsourcing approach he was using is common there, both in running the exploration and production rigs and in maintaining refineries and petrochemical plants.

In the 1990s, the outsourcing fashion spread far beyond the oil industry. Its most basic appeal lay in the cost savings potentially achievable by encouraging competitive bidding on contracts.

The practical advantages of wholesale outsourcing rely, however, on unexamined assumptions. It is these that the Railtrack episode comprehensively demolishes.

The first belief holds that properly specified contracts can replicate the operations of an integrated business. Indeed, on this view, they may be better than integration because everyone understands what their responsibilities are, and their incentives are clear and tightly defined.

This approach had a particular appeal to governments, as they attempted to step back from the minutiae of delivering public services. British Conservative governments used the approach to break up monolithic nationalised industries into individual entities. They put this approach into effect at the top level of the railway system by splitting the task of running the track and the signalling (Railtrack's job) from the role of operating the trains.

But former government bodies are not the only candidates for this approach. It is attractive to anyone faced with reforming a big institution. The decision to outsource parts of the public sector was political. In private sector companies, there is also often a political element to outsourcing. It can be seen as the outcome of a victory by departments that consume internal services over their colleagues who supply them.

What fuelled the outsourcing boom of the 1990s in Britain was the second unexamined assumption - that the cost of negotiating, monitoring and maintaining contractual relationships with outsourcing partners had dropped sharply, thanks to the revolution in electronic communications.

In practice, of course, the real costs of establishing and maintaining contracts are not those of information exchange but of establishing trust, alignment of interests and a common purpose. Speedy and cheap electronic communications have only a minor role to play in this process.

But the biggest of all the unexamined assumptions that led to the outsourcing boom is also the one that looks most out-of-date. The move to replace internal corporate activities with a web of external contracts could have come about only in a stable economic and political environment.

In such circumstances, contractual relationships are fine. But in a crisis - after a serious rail accident, at a time of a sharp economic downturn or during geopolitical uncertainty - contracts alone are likely to prove an unstable basis on which to build a business.

This is particularly true where the activity is central to a company's credibility. And perhaps that is the most useful lesson from the Railtrack story: it is essential to decide what tasks are vital to your corporate purpose and to devote serious resources to achieving them.

Maintaining thousands of miles of steel tracks and stone chippings may be a dull, 19th century kind of task but, as Railtrack found, if you can't keep the railway running safely, you haven't got a business. Given that sort of priority, the outsourcing debate looks very different.