The present age of Era often puts businesses in a situation where they have to decide whether to opt for outsourcing or insourcing for the completion of their project.
First, the Terms- Outsourcing vs Insourcing
Before we proceed to further this Discussion, you must know exactly what do insource and outsource refer to;
“Insource” or “insourcing” is a process when any task or project is done by the in-house team in any company.
Outsource” or “outsourcing” is a process when any particular task or any project is done by an outside resource that could be done either by a consultant or an outsourcing agency.
Let’s suppose, your company has a lot of accounts payable work and now you have two options you can either outsource it to the outsourcing agency specialized in doing account payables or you can hire an employee for this purpose. This is a simple example of outsourcing and insourcing.
This decision can further proceed in a variety of ways. your company may be is progressing well that you’re considering outsourcing to help with volume or your company may be going through a financial downturn phase, and outsourcing is a better option as a cost-cutting measure. In both situations deciding whether to insource or outsource is a crucial decision and must be taken keeping all pros and cons in mind. This decision has a lot riding on it. It can either contribute to the further progress of your company or it may become a reason for the downfall of your business.
Now it is clear how important the decision of insourcing vs outsourcing is. Let’s have a look at the advantages vs disadvantages of both options.
Insource vs Outsource: The Benefits of Insourcing
The basic advantage of insourcing is when you are getting any task or project done in-house, you have more control over the process. Consider a previous example here, if you hire an employee to manage your account payable, you are well aware of how they were trained. This way, you can properly guide them for how they handle your accounts payable that you have not been able to do, but if you work with an accounts payable outsourcing service, the situation will be different.
An employee always owns his work with pride. this means that an employee whose loyalty is attracted with your company will go the extra effort and will make sure that he manages the account payables without any error but if you get this work done by someone through outsourcing, there are chances that a person assigned for this work may commit more mistakes and will likely be less innovative because he has no loyalty attached with your company.
This is a universal phenomenon that we human beings tend to put maximum effort and feel pride in doing something that we own versus something that someone else owns.
Since the outsourcing company has to provide their service to many clients, they will have to fix a standardized process that applies to all clients. In other words, any customization, or things that you do in a specific way and unique from the others, will more than likely be impossible.
You can always customize the process and respond to changes faster if you have an in-house team to manage your account payables, but in case if you outsource, you lose control over certain things and become dependent on an outsourcing agency.
In case, if a client of your company needs their accounts payable done, your in-house employee will be more capable to accommodate and work upon their request as per the client preference compared to an outsourced accounts payable firm where you’ll have to phone the client success manager and then get a pricing quote for the new process modification.
Insource vs Outsource: The Disadvantages of Insourcing
Although insourcing has a great number of advantages, some disadvantages should be considered before opting for insourcing.
The biggest disadvantage of insourcing is that it is comparatively quite costly and most of the firms lack resources at the initial phase of their startups. The cost includes the expenditures of hiring, training, and recruiting as well as it consumes a lot of time.
But if you outsource you don’t need to worry about the expenses connected with employing and training. The more work you have the more you contract with the outsourcing agency. Suppose, every week you have 60 hours of accounts payable work, when you opt for outsourcing you are assured that the outsourcing firm can handle it.
And as your company expands, you will more likely to face this problem. In a scenario, where you need a team of employees capable of managing accounts payable and handling the workload of the company. Do you need to recruit a manager to oversee that group? Will you provide regular training to employees to enable them to meet industry standards? In some cases, the scalability of an insourced team is tough and not easily configurable as contracting with an outsourced firm.
Insource vs Outsource: Advantages and Disadvantages of Outsourcing
When it comes to the insourcing vs. outsourcing issue, the advantages of insourcing are frequently the disadvantages of outsourcing. And the other way around.
While, enables you to have control over the entire process and promotes dedication and pride among your employees, and makes you able to fix quick changes and have more customization, the opposite is the case with outsourcing.
In many cases, except until you outsourced your work to an extraordinary firm that only prioritizes the satisfaction of their clients, the employees of the outsourced firm are not as dedicated as your in-house employees and will not take the same pride in the work that they do for you.
The basic reason for this problem is that you are not the only client of the outsourcing firm. Most probably they are not capable enough to respond rapidly enough to adapt or customize a procedure to your company’s specifications. Although it is also a fact that all outsourcing firms are unique and different from the other, but this issue is often faced by businesses when outsourcing their specific business tasks.
Insourcing has one drawback that obviously cannot be ignored. The costs, training requirements, and scalability can soon spiral out of control if your company is expanding and progressing rapidly. In the insource vs. outsource debate, outsourcing comes out as the first choice of firms as despite having some drawbacks, outsourcing has a greater number of advantages.
In the long run, Outsourcing is a fantastic way to minimize expenditures and control the budget. Because they have the required sets of skills and resources, they can scale considerably more easily than insourcing. Adding 20 hours to your weekly work schedule won’t be a big deal for an outsourcing company, but for your internal staff, it could be an issue!
Outsourcing firms conduct their training. It gives you relief from a worry about onboarding a new worker to a task when you need to get your project or any task done.
Furthermore, because outsourcing firms are always specialized in certain business processes or tasks, they have great expert-level knowledge. For example, if you are looking to hire a software developer with a particular skill-set and abilities is indeed a very costly take for your company so relying on an software outsourcing company with that expertise is a wise decision.
The Final Say
When you have to choose whether to insource or outsource, you must critically weigh all of your alternatives and choose the best one for your business goals. Even though insourcing gives you greater control and flexibility, outsourcing is indeed more scalable and cost-effective, and time-efficient.