Advantages & Disadvantages of Insourcing
If you insource a task, project or business initiative, you'll do the work within your company rather than outsource it -- or contract it out -- to a third party. For example, if you want to design a new software system, you must decide whether it's better to have your IT department handle the build or whether you should use an external specialist. Understanding the advantages and disadvantages of insourcing may help you make the right decision.
One of the primary advantages of insourcing is control. If you keep a process, project or facility in house, you and your staff have complete control over it. If you outsource, you pass some of this control to the supplier. Keeping control by insourcing has its downsides, however. You may need to increase staffing and resources, and your management team may have to spend time managing insourced projects rather than concentrating on core business activities.
Using existing employees, resources, business skills or equipment to do a job may be cheaper than outsourcing it. This works best if you already have the ability or capacity to do what you need internally or if the benefits outweigh additional overhead costs. If not, insourcing may be more expensive than outsourcing. For example, if you want to create a new call center, the startup and operating costs could be significantly higher if you try to do it internally instead of outsourcing it to a third-party provider.
Your employees already understand your business and how it works. This can work to your benefit if you choose an insourcing solution. You'll protect jobs and boost employment in the local economy if you hire new workers to add to your skills base. However, employees may become stressed or less efficient if you add to their existing responsibilities. You may not always get the best results if your employees do not have the necessary experience or skills; bringing in external specialists may be more effective in such cases.
Insourcing can have customer satisfaction and reputation management benefits. You may find, for example, that consumers view your company more favorably if you employ U.S. workers to provide services or goods. Many people prefer call centers to be based in the home country rather than elsewhere in the world, and manufacturing products in a domestic plant may appeal to customers. Many major companies are shifting toward insourcing for that reason. For example, General Motors announced it was bringing its call center back to the U.S. in 2013 to improve customer satisfaction. The downside here might be the additional costs associated with insourcing production and customer service tasks.