Both insourcing and outsourcing are feasible ways of bringing in labor or specialty skills for a business without hiring permanent employees. When it comes to selecting between outsourcing and insourcing, several entrepreneurs cannot decide what is best for them. Before jumping on to the differences between these two business practices, we need to check the definition of the terms.
Insourcing is the practice of assigning a task or function to an individual or group inside a company. The work that would have been contracted out is performed in house.
Outsourcing is the act of assigning a task or function to a third party vendor instead of having it performed in-house.
Differences between Insourcing and Outsourcing
- Insourcing helps to track the development process and puts control over the quality of the work, while in the case of outsourcing, it becomes difficult to trace the quality of work.
- There is very minimal risk in insourcing, as one can have complete supervision over intellectual property (IP). In outsourcing, the entire task is in the hands of an outside third party. In case IP is leaked, it proves awful as investments on research, people and development work go in the vain and outside party claiming the idea as theirs.
- Insourcing helps in evading intermediaries’ costs like fees and commissions. Insourcing also drives to point other cost exponentials such as incorporating and utilizing third-party vendors who offer value-based pricing.
- As insourcing helps in keeping track of task and workforce, it runs hand in hand with development squad which in turn helps in keeping an eye on every move in the business, finding problems and resolving them. While in outsourcing, one lacks to track when the problem arises and how it’s fixed.
- In outsourcing, there are possibilities of miscommunication as the outsourcer and outsource vendor are in different places. The information goes from head management, and then, they commune it to outsource provider’s managers, who will lastly convey it to employees. This arduous and lengthy process has a risk of miscommunications. However, insourcing cancels out such possibilities. The miscommunication aspect is reduced in insourcing, as there is direct communication with employees.
- Outsourcing a project overseas might face a few issues due to the different time zone and cultural factors. A vendor might have varying physical outsources, various techniques, design, and engineering. There is a big chance of communication problem due to different time zone. In insourcing, the assigned team will easily decipher the requirements, design, and engineering to produce a product as per nativity.
- Various projects require complete confidentiality of data, which cannot be outsourced to a third party vendor. In that case, it is feasible to bring in their resources over to the project location, keeping the confidentiality intact while introducing expertise.
Insourcing is more preferrable when the business requirement is for a limited time or temporary or involves little investment. Outsourcing weighs more when businesses need to cut costs while still in need of expert professionals.