Outsourcing vs Insourcing: Which Is Best For Your Business?

We've discussed "Outsourcing" as a very useful business tool. But What Is Outsourcing? Outsourcing is the practice of sub-contracting many of your business processes to a third party. Of course, this happens when you ship products or use a payroll company or an accounting firm to do your taxes. But as an all-encompassing concept, Outsourcing could be ONE place where you get all the preceding services done by a single vendor. The advantages are obvious! Skilled staff that your business does NOT have to support with hiring, training, paying for vacation time, company-supplied healthcare costs, retirement funding, and the list goes on and on. But what are the disadvantages? The opposite of "Outsourcing" has to be "Insourcing," right? But we never used the word until "Outsource" was a thing. It's just another word for business, as usual.

The company advertises for the employee position, does the background checking, goes through the hiring process, trains the new employee, pays payroll taxes and into a retirement fund, pays for vacation, and the temp who fills in while the employee is on vacation pays for a healthcare plan, and on and on. The "Outsourcing" is really Business Process Outsourcing (BPO). Outsourcing means that your third-party vendor does all the employee-related functions and saves you money on costs. A reputable BPO can slash your overhead by as much as 40%! And give your in-house staff more time to connect with new and existing customers.

What Is Outsourcing? Exactly?

When talking about Outsourcing vs. Insourcing, it's essential to make sure your comparisons are correct. Comparing staff functions can be difficult in any business because there are many cross-over or blended duties. This is truer in smaller enterprises but not unheard of in larger ones as well. But when outsourcing a function, chances are you will have a complete list of the duties to be performed. If an Outsource position can cover more than one function, great! Otherwise, a second position might be needed. But when everything is considered, Outsourcing still offers more than just cost advantages.

Space.

Your in-house staff needs a place to work. Outsourcing eliminates the need for you to supply it.

Equipment.

Your in-house staff needs things like desks, phones, restrooms, and break room spaces. They need parking places or access to public transportation.

IT.

Servers, printers, computers, and digital storage space are all expensive. Most firms rent these items, including tech support, and save money. Outsourcing is no different. You'll save money on both sides of the equipment link.

Security.

Keeping on the cutting edge of server and network security is a game of constant vigilance and hardware and software upgrades. In-house security can be erratic. Outsource providers keep up to date, not only in equipment but standards and practices as well.

Hiring and HR.

An expensive, labor-intensive function that is indispensable. Did we mention costly? All of this is handled by your outsourcing partner. They have their pool of talent to draw from and their HR department.

Communication.

Your first thought might be: "if this part of my business is not in the same building as me, how can we collaborate effectively"? one answer is "experience." Business Process Outsourcers are well-versed in overcoming this issue. They know how to keep communication channels open and know how to ensure they're "two-way."

Quality control.

When partnering for the first time with an Outsourcing firm, some business owners have concerns about QC. Their view is something along the lines of "if I'm not there to supervise, how do I know that it's done right the first time?" the best BPOs will make sure that it's right the first time! They didn't become and stay successful in the cut-throat global Business Process Outsource market by not delivering a quality product.

Freedom.

One thing that you have to count on a BPO to deliver is freedom. A BPO will free up your key staff to pursue the most important things in your sector. Things like maintaining customer relations and finding new customers in new markets, and using your talents and those of your core team to concentrate on building business.

What About Insourcing? How Does That Work?

Insourcing means just that, finding the source for work that takes place in your business infrastructure. It needn't be the physical structure, but your company staff doing the business activities. There are exceptions that we've discussed previously, but the in-house team does the bulk of the functions. What does that include? Everything. Everything that your business does. What are the advantages of Insourcing?

Control.

This is usually at the top of the list of concerns for Outsourcing. Loss of control is a common fear when subcontracting anything! The fear escalates when it includes certain vital functions that you might consider Outsourcing.

Skills.

When you build a team from the ground up or out in, cohesiveness is challenging to replicate from an outside source.

Security.

When data goes "out of house," there is a natural tendency to be concerned about that data. You think your security protocols are as good or better than any, but you're not so sure about anyone else.

Confidence.

At the beginning of any partnership, most business professionals are rightfully skeptical of a potential partner's ability to do the job assigned to them. This keeps many prime candidates from using a BPO.

Outsourcing vs. Insourcing. Your Choice.

Outsourcing vs. Insourcing. While that choice might not be easy, it's not impossible to evaluate the two and decide which method will work for your situation. We're obviously biased, but even objectively viewed, Outsourcing delivers many benefits that Insourcing can't match. For many, it will be the savings in expenses that Outsourcing delivers. For others, it might be the tremendous upgrade in technology that Outsourcing provides. And yet others will see extra value in the security an Outsourcing partner supplies.

Whatever your decision, don't try to reach it without some authoritative input. Rely Services can supply that. Although we wish it were otherwise, we know that Outsourcing is not for everyone. We can give you an objective look at the cost/benefit of Outsourcing as it would work for you.