In-sourcing VS Out-sourcing
Many factors influence how an individual makes decisions in a business (Cronin, Catchpowle & Hall, 2004). It is common for controversies arise while making business decisions. Addressing these controversies promptly is always important. In fact, the teams should brainstorm the various decisions made to avoid controversies (Nickerson, 2003). It is unfortunate that people sometimes think running a business is all about jumping into solutions. Making business-friendly decisions involves debates and avoiding assumptions that might discourage creativity and innovation—characteristics of a good business environment. The same holds true for a complex insourcing and outsourcing decision process. The decision to insource or outsource needs important business insight, expertise, and technical skills, ranging from strategic thinking to in-depth analysis. Although outsourcing and insourcing are among some of the facets that bring controversies to an organization because managers never seem to understand which one to use, , insourcing has proved to be the better option in many instances.
Outsourcing is an act of engaging professionals from other firms to give their services for a limited or permanent period (Cronin et al., 2004). It is often preferable when the company does not have a certain skill set within its staff. Outsourcing, according to Cronin et al. (2004), plays a critical role in an organization if it wants to cut the cost allied to a certain project while at the same time enjoying the services of professional experts. Although outsourcing was initially considered an act of the large corporation, it is apparently used in all firms to enable the management concentrate with its core business. Through outsourcing, even small firms can save money. It is, however, crucial for the management to settle of a particular vendor considering the expertise required. This implies that there is need to do some research before settling down to the final vendor. The processes of acquiring the best outsourcing services may require management decisions which many times result in controversies.
Insourcing, on the other hand, involves hiring a person as company’s employee to provide a certain service. It is imperative if the business needs are temporary and the investment required is not significant (Cronin et al., 2004). It proffers a preview into how the outsourcing should operate. If insourcing is done appropriately, it assists an organization to build skilled teams. However, this takes time.
Gayle Abbott, president of the Strategic Alignment Partners, advises that when faced with a choice, one should settle for the option that produces desirable results in the least amount of time (Cronin et al., 2004). The growing number of insourcing advantages leads companies back to developing their skills in-house. Insourcing is comparatively important for a company in a number of ways.
Insourcing becomes more important because the employees understand the modalities involved in a business better than anyone else (Cronin et al., 2004). Therefore, insourcing their services benefit the firm more compared to when the same services are being outsourced. Nonetheless, although insourcing is more expensive, an organization has a better control over everything because the project can be managed and supervised directly, without involving third parties or another layer of management.
Insourcing is a long-term investment to the organization. This is because it keeps the employees updated with what is new in their area of specialization. As a result, when services are insourced, it prepares the workers for the future if a similar need arises. Additionally, in-sourcing saves time and cost. Unlike insourcing, outsourcing requires a company to advertise and interview the incoming team. This will take up time for the committee to prepare and interrogate the applicants (Cronin et al., 2004). Evaluating the employees may also require money as the committee may incur costs, such as sitting allowances. Insourcing will help the company to save time that can be put to good use.
Unlike insourcing, outsourcing also brings insecurity. It is worth mentioning that security is important in a business. In fact, security should be prioritized while deciding whether to insource or outsource. Insourcing provides security in terms of discreteness of the operations. Moreover, outsourcing exposes company secrets to the third parties and therefore putting customer confidentiality at risk. It may also make it difficult to trace mischievous behaviors in business (Post & Anderson, 2006).
Insourcing builds a good foundation for start-up businesses. Starting businesses need to cut costs and workforce. This enables these companies to avoid bankruptcy because they are not established yet. Employees also develop loyalty and a sense of belonging (Cronin et al., 2004). Also, insourcing helps companies train and retain experienced staff.
Having experienced in-house staff prepares a company for new business opportunities, like sub-contracting. Moreover, a company can earn a good name in outsourcing if it understands what services to outsource (Cronin et al., 2004). This implies that outsourcing is not all bad because it also leads to the sharing of ideas to the internal staff. Normally, the professionals being outsourced have a wealth of experience obtained by interacting with the other firms. Therefore, if the internal staff has some knowledge about the services being outsourced, the organization is bound to benefit more when ideas are shared among the two teams (Cronin et al., 2004).
Most importantly, firms that in-source are more competitive comparatively. When employees are in-sourced, they are challenged to work harder. Indeed, the employees feel that their capabilities and talents are valued by the employer. The job security and the considerable amount of freedom within the company encourage employees to grow their skill-set and to explore their abilities in various fields (Davies & Lam, 2001).
Moreover, competitive ideas arise in in-sourcing. Competition is important in that the employees feel the urge to come up with ideas that enable businesses to soar to greater heights. Note that outsourcing kills innovation because ideas are not allowed to grow internally (Contractor et al., 2010). In fact, when services are outsourced, the employees feel that their ideas and skills are undermined. Thus, employees should be involved actively in business decisions and creativity.
Another advantage of insourcing is teamwork. Insourcing allows employees to share their ideas and strengthens their working relationships. Additionally, employees are able to brainstorm ideas and work on them together as a team. This working relationship is not only good for producing short-term results but it also increases productivity in the long term (Cronin et al., 2004).
In conclusion, the decision to outsource should be made after a lot of consideration. Therefore, decision makers should evaluate choices and make appropriate ones. A business-friendly decision does not paralyze the finances, skills, innovations or operations of a business. Wise decisions give businesses the best environment to thrive. Nonetheless, outsourcing should come as the last resort and as a short-term solution only. In-sourcing encourages teamwork and builds a skill set for company employees, thus giving the firm multiple competitive advantages.
References
Contractor, F. J., Kumar, V., Kundu, S. K. & Pedersen, T. (2010). Reconceptualizing the firm in a world of outsourcing and offshoring: The organizational and geographical relocation of high‐value company functions. Journal of Management Studies, 47(8), 1417-1433.
Cronin, B., Catchpowle, L. & Hall, D. (2004, July). Outsourcing and offshoring. In CESifo Forum (Vol. 5, No. 2, p. 17). Institut für Wirtschaftsforschung (Ifo).
Davies, H., & Lam, P. (2001). Managerial economics: an analysis of business issues. Harlow, England: Financial Times/Prentice Hall.
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Nickerson, R. S. (2003). Psychology and environmental change. Mahwah, NJ: Lawrence Erlbaum Associates.
Post, G. V. & Anderson, D. L. (2006). Management information systems: solving business problems with information technology. Boston, MA: McGraw-Hill/Irwin.