Outsourcing vs. Insourcing
Table of Contents
In the previous few decades, outsourcing has become increasingly popular and adopted by many organizations in the business world. Due to the numerous benefits of the BPO industry, it has seen tremendous growth over the years, and estimates indicate that this growth will continue shortly. According to a study, by 2025, the global IT outsourcing market will be worth $397.6 billion. Many activities or services are outsourced, ranging from manufacturing to human resources, customer service to back-office operations, and marketing to design. This article on “Outsourcing vs. Insourcing” will explain what outsourcing and insourcing are and the benefits. So, first, let us understand what outsourcing is and its benefits.
As we have seen the intro about Outsourcing vs. Insourcing, we will now see both topics in detail.
It is the process of negotiating with a non-affiliated third party company to complete a specified job. Outsourcing uses an outside organization with specialized staff to complete the desired tasks and uses their resources for services and producing products. Now, the motive for outsourcing the work to another organization is to save money on expenses. It utilizes in industries when there is a labor shortage for a given position or work and where the cost of recruiting staff for a specific function is high. The primary reason for business process outsourcing is that it lowers the costs of producing a product, which results in a higher profit margin. But, organizations that outsource a certain service or process have less management control over the procedures used by the outside organization engaged for the project.
Benefits of Outsourcing
- It helps companies eliminate the costs involved in employing new staff
- It helps in reducing the internal team’s work, this is to avoid burnout
- Outsourcing allows the internal teams to focus on important company responsibilities while external parties handle less important processes
- It is considerably easier to manage individuals when you interact remotely rather than in person
- Good outsourcing providers also have the necessary software to deliver the most efficient service
So the tools and systems required are already present with the BPO company, so you no longer need to invest in new tools and applications.
Insourcing is a business method that takes place within an organization’s operational infrastructure. It is the internal sourcing of business activities, that is, allocating or reallocating resources within the company. Insourced operations are carried out separately in company-owned locations.
To explain it in simple terms, it is the process of reintroducing outsourced processes, functions, and departments and performing the tasks internally. This is done by training internal teams and assigning them the necessary tasks or functions.
Insourcing includes bringing or adding efficiency to fulfill short-term demands or investing in the training and development of existing staff to handle different responsibilities that may be outsourced. It is essentially a business choice to carry out operations, processes, or projects using company-owned resources to leverage and grow in-house talent.
Benefits of Insourcing
- The major benefit of insourcing is that it allows for greater control over the quality of work and the people who perform it
- Adding capable team members to the company or educating existing employees to execute outsourced jobs can help achieve new heights. It helps in the development of a skilled team
- Companies whose data are sensitive will opt for insourcing, as they cannot trust any outsourcing provider with the data
- When a company is unhappy with the outsourcing provider’s services, it may choose to insource the outsourcing work or function. Allocate it to a person or department internally that has a better knowledge of that job.
- Furthermore, the cost is lower if the internal team members know the work and utilize existing resources.
This was about insourcing and outsourcing. Now, let us see some key differences between them to understand them better.
Key differences between Outsourcing and Insourcing
Whether the business uses insourcing or outsourcing, the enterprise’s control over decisions and operations will vary. Now, let us discuss some of the differences between them:-
- Outsourcing seeks the services of outside organizations that are not related to the company for completing specific tasks. Meanwhile, insourcing is a business activity done within the enterprise’s operational infrastructure.
- It needs an outside business enterprise that differs from the primary enterprise’s operations. While insourcing usually places new processes and operations in-house within the enterprise.
- Companies mostly utilize outsourcing to reduce costs such as overhead, labor costs, equipment, and technology. When the cost of purchasing products or services is cheaper than the cost of manufacturing the items. Outsourcing is usually the best choice. On the contrary, insourcing is appropriate when you wish to manage company activities rather than trusting them to a third party.
- Insourcing gives the company total control over its operations and staff. In contrast, there is little to no control over how an external organization performs in outsourcing.
Conclusion – Outsourcing vs. Insourcing
Insourcing is acceptable when the business necessity is just temporary, and there is a need to establish a talented and capable workforce. On the other hand, outsourcing is a great option for companies that need to save expenses while still needing expertise in the process. The primary difference between outsourcing and insourcing is how work, projects, or tasks distributes across other companies and departments for strategic goals. So, according to your business needs and financial situation, you can choose to outsource tasks or train your staff and perform the job internally. Invensis’ deep industry specific expertise helps us to tailor customized back office BPO services that match your business needs.
Invensis Technologies is a leading global provider of IT-BPO services with a reputation for excellence. Our carrier-grade infrastructure and commitment to empowering clients worldwide. Achieve business transformation and growth through our services sets us apart from the competition. With over 5,000 staff and more than 22 years of experience, our company has been providing quality services since 2000.
Invensis delivers intelligent contact center and back-office functions for businesses. Invensis is an ISO 9001 and 27001 certified organization and has achieved HIPAA compliance to provide high quality and secured end-to-end outsourcing services. We have a strong base in the USA, Canada, Australia, UK, Ireland, Germany, and other countries serving over 200 clients. Creative methods and technological solutions drive Invensis, offering end-to-end automation from design to implementation, as well as ongoing development and data security. Our solutions tailors to help businesses achieve their strategic goals and help them become industry leaders.