Outsourcing vs. Insourcing: What's best for your Organization?

What is Outsourcing?

Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.
Most organizations choose outsourcing because outsourcing work offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. outsourcing work can also help organizations make better use of their resources, time and infrastructure.

In the outsourcing of jobs, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT jobs. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.

Most organizations are opting to outsource because outsourcing work enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.

What is Insourcing?

The opposite of outsourcing can be defined as insourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as insourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for insourcing because it enables them to maintain a better control of what they outsource. Insourcing has also come to be defined as transferring jobs from one organization to another organization which is located within the same country. Insourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.

Organizations involved in production usually opt for insourcing in order to cut down the cost of labor and taxes amongst others. The trend towards insourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing work have moved towards insourcing. Some organizations feel that they can have better customer support and better control over the jobs they outsourced by insourcing their work rather than outsourcing it. According to recent studies, there is more work insourced than outsourced in the U.S and U.K. These countries are currently the largest outsourcers in the world. The U.S and U.K outsource and insource jobs equally.

What is best for your organization?

If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. outsourcing work in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.

If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.

If your job involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.

It is not necessary to choose outsourcing over insourcing or vice versa. Your organization can outsource and insource at the same time. By outsourcing work and insourcing simultaneously, you can have the best of what both offers and your business can get a competitive advantage.

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