Advantages of Outsourcing Vs. Insourcing

Though not new in the market, there has always been a good amount of debate on whether it is wise to actually partner with outsourcing service providers or stick to insourcing. Irrespective of the process in question, majority of the business gurus agree that outsourcing is the best solution to stem burgeoning operational and overhead costs while ensuring professional, quality-based process execution. Only a few advocate that insourcing facilitates better management control and job creation within the organization, thereby avoiding loss of process control for critical operations.

Outsourcing Vs. Insourcing

Going by the definitions, simply put, outsourcing means deploying a third party service provider for the purpose of handling non-core business activities while companies can concentrate on core competencies. On the other hand, insourcing can be defined as setting up means for carrying out all operations in-house in order to ensure proper operational control. The downside of such an arrangement is obviously the cost factor and ineffective time management in case of voluminous operations.

The major reason for outsourcing to offshore outsourcing services providers is that a huge amount of work gets offloaded to the service providers, thereby saving time and costs while securing optimum results and swift task delivery. However, in case of insourcing, the whole purpose of cost-cutting gets defeated. Not only that, the organization is unable to give undivided attention to core operations as time needs to be allotted to other non-core activities to ensure smooth functioning.

Outsourcing ensures availability of the best of resources and expertise available within the outsourcing companies. Companies become wary of hiring and managing manpower during expansion since such activities come with their own set of problems, not to mention the extra funding that goes into the maintenance of office space and staff. Therefore, insourcing turns out to be an impediment with regards to growth and expansion.

Outsourcing doesn't necessary mean only cost-cutting. If such was the case, then organizations have more to lose when faced with sub-standard process delivery from outsourcing service providers who employ cheap, low-skill labour in order to compensate for the low-cost services. Since this is not what actually happens when processes are outsourced, therefore, it can be easily proved that offshore outsourcing services actually facilitate in streamlining voluminous and repetitive tasks, thereby delivering accurate outputs within very short timelines. Since long-term relationship-building with clients is the main objective of outsourced business service providers, hence, they always make sure to take the extra effort to deliver value-based results. However, insourcing is unable to compete with this kind of professionalism vis-à-vis the obvious cost-savings that outsourcing reflects. Effective management of entire department in-house can turn out to be very non-productive in that case.

Outsourcing may not work out in some cases whereby the organizations face cultural differences with business process outsourcing companies and lose control over the processes, that, at times, might be governed by various laws and policies passed by local government bodies. In such a scenario, insourcing allows companies to assert more control over critical processes, though non-core, and ensure smooth operations by working in tandem with the government organizations.

Essentially, in spite of the never-ending debate and the facts that lean heavily in favour of outsourcing, the choice of insourcing and outsourcing must be based on the process itself. Such decisions are better made on a case-by-case situation instead of considering it as a generic issue.