Outsourcing vs. Insourcing: What's the Difference?

Insourcing assigns a project to a person or department within the company instead of hiring an outside person or company. It utilizes developed resources within ... Investopedia Business Outsourcingistheprocessofhiringanoutsideorganizationthatisnotaffiliatedwiththecompanytocompletespecifictasks. Insourcing,ontheotherhand,isabusinesspracticeperformedwithintheoperationalinfrastructureoftheorganization. Themaindifferencebetweenoutsourcingandinsourcingisthemethodsinwhichwork,projects,ortasksaredividedbetweenvariouscompaniesanddepartmentsforstrategicpurposes. Outsourcing Outsourcingusesthedevelopedworkforceofanoutsideorganizationtoperformtasksandalsotheresourcesofanoutsideorganizationforservicesandmanufacturingproducts.Savingmoneyoncostsistypicallythemotivationforoutsourcingworktoanothercompany.Industriessuchastelecommunications,travel,transport,media,andretailoftenrelyonoutsourcingtocompleteimportantprojectsortasks. KeyTakeaways Outsourcingenliststhehelpofoutsideorganizationsnotaffiliatedwiththecompanytocompletespecifictasks.Insourcing,ontheotherhand,isabusinesspracticeperformedwithinanorganization'soperationalinfrastructure.Theorganization'scontroloveroperationsanddecisionswilldifferdependingonwhetherthecompanyisusingoutsourcingorinsourcing.Insourcing generallyplacesnewoperationsandprocesseson-sitewithintheorganization,whileoutsourcinginvolvesanoutsideorganizationthatisseparatefromtheprimaryorganization'soperations. Companiescanuseoutsourcing tobetterfocusonthecoreaspectsofthebusiness.Thatis,outsourcing non-core activitiescanimproveefficiencyandproductivity.Atthesametime,outsourcingcanaffectjobsrangingfromcustomersupport tomanufacturing,aswellas technologyand thebackoffice.  Theorganization'scontroloveroperationsanddecisionswilldifferwhenusingoutsourcingandinsourcing.Organizationsthatuseoutsourcingforaparticularserviceormanufacturingprocesshaveminimalmanagerialcontroloverthemethodsoftheoutsideorganizationthatwashiredfortheproject.Forinstance,anorganizationthatisknownforfriendlycustomerservicedoesnothavetheabilitytoenforceormanagehowanoutsidesupportcenterinteractswithcustomers. Insourcing Insourcingassignsaprojecttoapersonordepartmentwithinthecompanyinsteadofhiringanoutsidepersonorcompany.Itutilizesdevelopedresourceswithintheorganizationtoperformtasksortoachieveagoal.Forexample,anorganizationmightinsourcetechnicalsupportforanewproductbecausethecompanyalreadyhasexistingtechnicalsupportforanotherproductwithintheorganization. Further,insourcing generallyplacesnewoperationsandprocesseson-sitewithintheorganization.Forthatreason,insourcingcanbemoreexpensiveforacompanybecauseitofteninvolvestheimplementationofnewprocessestostartadifferentdivisionwithintheorganization. LawFirmsExample WhileoutsourcingjobsandworkareoftenamajordiscussionregardingtheU.S.economy,insourcingisrelativelycommonandisseeinggreaterusagebycompaniesseekingbettercontrolofimportantprojectsandtasks. Lawfirmsareanexampleofcompaniesthatuseinsourcing.In2018,resultsofasurveyinaLegalBenchmarkingReportindicatedthatlawfirmsarecurrentlyconductingatleast75%oftheirworkin-house,anincreasefromjust17%theyearbefore.Further,20percentofthosesurveyedsaidtheyperformallsuchworkinternally.Another20percentbringinatleasthalfoflitigationande-discoveryworkin-house. ArticleSources Investopediarequireswriterstouseprimarysourcestosupporttheirwork.Theseincludewhitepapers,governmentdata,originalreporting,andinterviewswithindustryexperts.Wealsoreferenceoriginalresearchfromotherreputablepublisherswhereappropriate.Youcanlearnmoreaboutthestandardswefollowinproducingaccurate,unbiasedcontentinour editorialpolicy. AmericanEnterpriseInstitute."WehearaboutUSjobsoutsourcedoverseas(‘stolen’)butwhataboutthe7.4Minsourcedjobswe‘steal’fromabroad?"AccessedApril10,2020. Law.com."LegalDepartmentsAreInsourcingMoreLitigationWorkThanEverBefore."AccessedApril10,2020. CompareAccounts AdvertiserDisclosure × TheoffersthatappearinthistablearefrompartnershipsfromwhichInvestopediareceivescompensation.Thiscompensationmayimpacthowandwherelistingsappear.Investopediadoesnotincludealloffersavailableinthemarketplace. Provider Name Description RelatedArticles CorporateFinance Outsourcingvs.Subcontracting:What'sthedifference? Business WhenIsOutsourcingPreferabletoVerticalIntegration? Economy Employability,theLaborForce,andtheEconomy Accounting IntroductiontoAccountingInformationSystems–AIS Investopedia TheUltimateGuidetoWorkingFromHome CareerAdvice BestEntry-LevelFinanceJobsfor2022 PartnerLinks RelatedTerms WhatYouNeedtoKnowAboutIn-HouseActivities In-housereferstoconductinganactivityoroperationwithinacompany,insteadofrelyingonoutsourcing. more WhyCompaniesUseOutsourcing Outsourcingisapracticeusedbydifferentcompaniestoreducecostsbytransferringportionsofworktooutsidesuppliersratherthancompletingitinternally. more TheInsandOutsofInsourcing Insourcingistheassignmentofaprojecttoapersonordepartmentwithinacompanyratherthantoathirdparty.It'stheoppositeofoutsourcing. more HowKnowledgeProcessOutsourcing(KPO)HelpsCompaniesBoostProfits Knowledgeprocessoutsourcing(KPO)involvesoutsourcingworktoindividualsthattypicallyhaveadvanceddegreesandexpertiseinaspecializedarea. more Scope Scopeisaprojectmanagementtermfortheobjectivesnecessarytocompleteaproject,allowingmanagerstoestimatecostsandtimerequired. more InternalAuditor(IA)Definition Internalauditors(IA)areemployedbycompaniestoprovideindependentandobjectiveevaluationsoffinancialandoperationalbusinessactivities. more