Insourcing Versus Outsourcing: Which One To Choose For My Business?
Amy | On 05, Aug 2015
Are you in a dilemma, of whether to use insourcing or use an outsourcing Company? Well, we will provide you with solid information to help you reach a decision. Below, we will list out some pros and cons of insourcing and outsourcing.
What is Outsourcing?
Outsourcing is when you hire a consultant service provider or agency, to manage a part of your business.
Advantages of Outsourcing:
- Grants you the ability to focus on core business.
- Determination and risk management – Outsourcing manages helping out persistence and at the same time decreasing risks which an inferior operation level would cause.
- Greater flexibility in resources – Outsourcing agreements frequently guarantees certain amount of liberty in applying a suitable level and expertise combination of employers at an inexpensive price.
- Reduced expenses – Allocating expenses of an inside task over a number of accounts may authorise a service merchant to supply such a management service at a decreased price.
Disadvantages of Outsourcing:
- Management control loss – Sometimes, goals of the customer and service merchants are different, which may lead to several management control issues.
- Diverse cultural methods of running a business -Depending on the origin of the outsourcing merchant, rules for managing a business might differentiate significantly.
- Poor publicity – with all the negativity rotating around outsourcing companies in the world, it has become very easy for a company to fall in the dark place, where employees are getting confused with being divided into parts. But, this can always be avoided with the right strategy adopted.
Here are some companies that are outsourcing:
- Adobe Systems
- Cisco Systems
What Is Insourcing?
Insourcing is one of the latest concepts, which has been explained as an “alternative” to outsourcing. Insourcing is when manufacturing companies hire labour and services from an external organization in order to cut costs and decrease their tax burden. A simple example for insourcing might be: A company in America opens a company in China, with the idea of employing Chinese workers to manufacture American products – if this example is viewed from America, it is considered outsourcing, and if viewed from China it is considered insourcing. Another example for instance might be: Using engineers to write manuals on the technical tools (they have produced), rather than sending the work to an expert from an outside technical writing company- Here, your engineers might have to take writing lesson or courses in order to finish the task successfully.
Advantages of insourcing:
- High level of control over inputs – Higher control of information and functions
- Increased perceptibility over the procedures – Since you are in direct contact with everyone
- Helps in building a team of skilled people – In insourcing you have the advantage to choose your people, which will help you build a team of experts
Disadvantages of insourcing:
- High investment- As in equipment and other materials that will be required to get the tasks done.
- Dedicated equipment have limited uses – Some equipment might be needed to be used once in order to finish a specific tasks.
- Problems may occur with the supply chain integration – Since supply chain consists of many parties which may be involved in manufacturing products, fulfilling an acquisition, as well as raw materials, various problems may occurs when trying to reach a specific decision.
Even though insourcing may look like an upfront option, businesses may need to observe closely how difficult it is to put into action. Insourcing might make sense if the business’s needs are just temporary or where no major investment is included. Insourcing can also be a preference for businesses who want to outsource, but are cautious to do so.
When businesses need to reduce costs but still have the need of expertise personnel, outsourcing is the clear winner here. Not long ago, outsourcing was considered luxurious, since only big companies could afford it. But today, outsourcing has become reachable to all size companies and is now the most used strategy in helping businesses let go of managing non-core functions, while they get to save money in the entire process.
The most important feature for outsourcing your business is that “Outsourcing grants you access to expert skill sets of resources and procedures which insourcing simply CANNOT match.”