Both insourcing and outsourcing are business techniques used to acquire talent without hiring them as permanent employees. However, outsourcing can be domestic or overseas, but insourcing is always domestic because the talent and skills are brought in-house. This article discusses the key differences between insourcing and outsourcing and helps you choose the best option for your unique business needs.
What is Insourcing?
Insourcing is a technique of hiring skilled professionals from outside and bringing them to work in the organization. The hired professionals bring knowledge, and skills to the table, thus improving productivity, strategy and operations. Simply put, insourcing implies hiring outsiders to work in the company under its direct control.
Benefits of Insourcing
Some of the key benefits of insourcing include:
Insourcing gives companies the ability to scale projects up and down as quickly as needed without affecting the headcount of the core staff.
Collaboration and knowledge sharing:
When you insource employees, you enhance knowledge sharing, making your social capital grow stronger.
Better access to talent:
With insourcing, you have higher opportunities to cultivate talent and nurture them to become future leaders.
More control over critical functions and decisions:
Insourcing allows companies to handle the project in-house, with the internal team making all the critical business decisions.
With insourcing, communication is efficient at all levels because all the members live in the same time zone, making it easier for them to be available for all important meetings.
Better relationships between employees:
When all the staff are in the same physical location, it is easier to build stronger bonds through frequent interactions.
More opportunities for employee development:
With insourcing, it is easier to observe performance and abilities.
More cost reduction opportunities:
Insourcing avoids outsourcing costs or middlemen fees, and other unnecessary charges and commissions.
With insourcing, you are able to deliver a project on time because you have control over the planning and execution of the project.
What is Outsourcing?
Outsourcing is the business practice of hiring another business to perform some of your work activities. These firms are usually located in foreign countries. Most companies outsource their work as a cost-cutting measure.
Benefits of Outsourcing
Some of the key benefits of outsourcing include:
By outsourcing, you avoid hiring expensive resources whose expertise is occasionally required.
With outsourcing, you can source and pay for high-level expertise as and when the need arises.
Trial and error:
Outsourcing services offer you the opportunity to try their services before you buy them. This allows you to choose a service that fits your purpose and provides the value you are looking for.
With outsourcing, you are able to add and remove capacity to fit your variable requirement.
Core business focus:
You can concentrate on your core business, leaving the other aspects of the business to the specialists in the area.
Insourcing vs Outsourcing: Summary
Both business techniques offer flexible contractual labor. Outsourcing provides significant cost benefits, but the work takes place elsewhere, usually in a foreign location where you have no control. Some drawbacks of outsourcing include management, quality control, and work conditions. Moreover, finding the right outsourcing partner can be a challenge as language, and cultural barriers can interfere with the process. However, the right outsourcing partner can make the relationship mutually beneficial.
Insourcing also provides cost savings, but the provider brings the labor in-house. The insourced employees work in the same physical location or can be at a location that is easily accessible by the managers and executive team. This gives more control over all aspects of the business.
Final Thoughts: What to Choose?
Both options have their own share of benefits and drawbacks. However, the best option entirely depends on your business model, specific needs, and strategy. The advantages of both these options are primarily cost savings and flexibility. Choosing between insourcing vs outsourcing can be made easier by defining what kind of services should be managed by which of the two options.
IT services are best for outsourcing. They save huge money with the least risk.
The services that are best for insourcing include:
- Services that might expose your key intellectual property
- Services that involve confidential data
- Highly specialized services
However, these services present a higher reputational risk and usually have a higher price tag. Choosing a hybrid approach might be the best solution for the best outcomes.
Using an Applicant Tracking System like Jobsoid’s can make the process of insourcing and outsourcing manageable. Jobsoid automates the entire recruitment process, making it easier for your HR managers and recruiters to hire the best.