The Secret to Insourcing vs. Outsourcing - Management 3.0

Insourcing makes use of a company's internal resources to perform a new business function, while outsourcing requires business owners to ... 🇺🇦WestandforpeaceinUkraineandworldwide. Readstatement Home»Blog»EntrepreneurialSkills»TheSecrettoInsourcingvs.Outsourcing:What’stheDifference&WhyDoesitMatter? July21,2020 -EntrepreneurialSkills byAdrianAgawin Thebusinesslandscapehasevolvedtremendouslyoverthepastfewyears.Newandinnovativebusinessmodelsarecontinuouslybeingintroduced,workarrangementshavebecomemoreflexible,andcompaniesarediscoveringwaystomaketheiroperationsmoreefficient.Ifyou’reabusinessowneronanever-endingquesttoimproveyourbottomline,youmaybewonderinghowyoucanboosttheproductivityofyourcompany. Totakebusinesstogreaterheights,organizationsofallsizesandindustriesmayinsourceoracquireoutsourcingservicestoeasetheirworkload.Whencomparedhead-to-head,it’ssafetosaythatbothmethodsareviableoptionsthatcanaddressanyorganization’sneeds. However,it’simportanttoknowthatthereareinstanceswhereinonesourcingsolutionmayturnouttobemoreeffectivethantheother.Whetheryou’replanningtoinsourceoroutsource,knowthatthesuccessofyourinvestmentmaydependonseveralfactors.Tohelpyouout,theguidebelowwilldefineanddiscusstheirkeydifferences. DefiningInsourcingandOutsourcing Insourcing:Thesourcingmethodofassigningapersonordepartmentwithinacompanytohandleaspecificprojectorprocess.Insourcingiscommonlyacquiredforbusinessfunctionssuchassupplychainmanagement,qualitycontrol,andsales. Outsourcing:Acquiringtheservicesofathird-partyorganizationtohandlecertaintasks.Outsourcingiscommonlyacquiredforbusinessfunctionssuchasmanufacturing,marketing,finance,IT,andcustomerservice. Insourcingmakesuseofacompany’sinternalresourcestoperformanewbusinessfunction,whileoutsourcingrequiresbusinessownerstotransfersomeresponsibilitiestoanoutsideorganizationandsometimeshirepeople.Bothoptionscanmakeyourcompanymoreefficient,aswellashelpyouintheprocessofbuildinganoffshorecompany.Toedgeoutcompetitors,youneedtofigureoutwhichsourcingapproachcanbringmoreeffectivesolutionstoyourbusiness.Weighingtheprosandconsofbothoptionsisamust. InsourcingProsandCons Pros:Insourcingallowsyoutoworkwithpeoplewhoknowyourcompanybyheart.Sincetheemployeesarepartofyourorganization,theyarealreadyfamiliarwithyourcompany’sidentity,values,andwayofdoingthings.Afterall,asenseoffamiliaritydirectlyimprovescollaborationamongteammembersandmakesprojectexecutionalotsmoother.Asidefromhavingateamthat’salreadyassimilatedwithyourcompanyculture,italsomeansthatyouwillbeabletomanagethingsdirectly.Ifyou’rethetypeofleaderwhowantstobeontopofeverything,insourcinggivesyoucompletecontrolovermanagement. Cons:Choosingtoinsourcewillmeanmoreexpenses.Otherthanpayingformoresalaries,you’llbeshellingoutmoremoneyforpaidleave,healthbenefits,andnewequipment.Atthesametime,youwillalsoneedtogivenewhirestimefortrainingsothattheycanperformtheirtaskswithconfidence. Startinganewdivisioncanalsobeveryoverwhelmingforyourstaff.Sincethey’llbeshoulderingmultipleresponsibilitiesuntilyournewdepartmentcanfunctiononitsown,yourteam’sattentionwillbedivided.Ultimately,thismeansadeclineinproductivity. OutsourcingProsandCons Pros:Outsourcing’smainbenefitisthatitallowsyoutofocusonyourcorecompetenciesatacost-efficientprice.Ifyou’reanengineeringcompanythatdoesn’thaveanyformofexpertisewhenitcomestomarketingorcustomerservice,havingaspecialistfromoutsideyourorganizationcanprovideeffectiveandaffordablesolutions.Sinceoutsourcingprovidershavealargetalentpooltoutilize,youcanexpectthattheyhavecapableemployeesthatcandeliverresults.Otherthansavingyouatonofmoney,italsogivesyoumoretimeandenergytofocusonmattersyou’vesetaside.Sinceyourproviderassumescompleteresponsibilityforthetasksyou’veoutsourcedtothem,youcanevenusetheextrahoursyou’vegainedtorevampyourwholeorganization’sprocesses. Cons:Ifyou’reabusinessownerwhowantscompletecontrolovereverything,youmighthaveadifficulttimepartneringwithanothercompany.Sinceyou’lldelegateaspecificbusinessprocesstoanotherorganization,youcanexpectthemtosticktotheirwayofdoingthings.Ifyourchosenagencyhasadifferentapproachthanyours,thismayresultinacounter-productivepartnership. Asidefromdifferencesinmethods,you’llalsohavetodealwithgeographicalbarriersandtakeextrameasureswithsecurity.Ifyou’replanningtopartnerwithanoutsourcingcompanythat’sinanothercountry,you’llhavetolearntoworkasaremoteteamanddealwithculturaldifferencesanddifferenttimezones.Withdatabreachesincreasinginnumber,you’llalsoneedtostayvigilantwithrespecttoprivacy.Sinceyou’llbepassingonimportantinformationregardingyourcompanyorcustomers,youmaybeatriskofacyberattack. WhichOptionIsBestforYou? Giventheprosandconsofbothsourcingoptions,it’sunderstandabletostillfeelundecidedaboutthemethodyoushouldinvestin.Takethetimetoreflectonyourorganization’slong-termgoalswhileassessingitscurrentcapabilitiesandresources.Tomakethebestdecisionpossible,herearesomequestionsyoushouldaskyourself. #1:DoIwanttostayincharge,ordoIwanttolowermycosts? Ifyouprioritizetheneedtostayontopofprojects,insourcingisamust.But,ifyou’relookingforwaystoeaseyourcompany’sexpenses,outsourcingwillgreatlytrimdownyourcosts. #2:CanIadjustmyorganization’sstructure? Outsourcingwillrequireyoutomakeadjustmentstoyourorganizationalstructure.Sinceyou’lltechnicallybeaddinganewarmtothecompany,youmayrequireatotalrevampandprepareforbigchanges.Withinsourcing,it’llbeeasiertomakeadjustmentssincethingscanbehandledinternally. #3:Whatarethemainrequirementsofmyproject? Askyourself,whichskill-setsandpracticeswillIneedtoconductthisproject?Ifyourtasksrequirecertaincompetenciesthatdon’tfallintoyourcompany’smainskillset,it’sbesttolettheexpertshandlethings. #4:Aremyneedsurgent? Ifaprojectisurgent,outsourcingwillgiveyouaquickandeasyoption.But,ifyouhavetheluxuryoftime,insourcingwilleventuallyproveitselfasalucrativeinvestment. #5:HowdoIseethingsinthelong-term? Outsourcingisthebestoptionforrelativelynewbusinesses.Inthelongrun,thebestcourseofactiontotakeistopartnerwithanotheragencyuntilyou’rereadytotransitiontoinsourcing. Photocredit:FreestocksviaUnsplash LeaveaReplyYouremailaddresswillnotbepublished.Requiredfieldsaremarked*Comment*Name* Email* Website Δ Nextpost› ‹Previouspost Haveyoualreadyreadthese? 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