To insource or outsource? That is the question for your business
From maintaining cultural ownership to focusing on core business objectives, the debate between insourcing and outsourcing in business can be tricky to navigate. 4xi’s insight report explores both sides
Different organisations have different needs. Each business comes with its own core competencies and a series of support services it requires to operate. The dilemma comes when considering which to manage yourself versus hiring external partners and expertise.
Insourcing and outsourcing are methods of dispersing work among different departments internally or with different companies externally. Insourcing is typically done solely from within the organisation’s own operational infrastructure, while outsourcing leverages external expertise and infrastructure to perform specific tasks. One leans on internal resources, the other on external expertise.
A recent edition of Industry Insight by workplace consultants 4xi examines the differences between insourcing and outsourcing, and highlights the opportunities for organisations to make an informed decision on which is the best route.
Identifying core business
Outsourced service providers exist for a reason, but the selection of the right provider, the right relationship based on trust, and the parameters of engagement are the critical elements for success.
The report identifies that the biggest dilemma for organisations is understanding what is core to the business. This may seem fundamental but an important point to understand. What are the essential elements of your organisation that are required to run, grow, develop and thrive for the long-term?
One way to calculate this is in a matrix format where organisations can list all those activities that are essential today, those that are important, and those that are necessities. Somewhere between essential and necessary are the road signs for the path to insourcing versus outsourcing.
Alongside your matrix, highlight all those functions that are high risk to the business performance, low risk, and leave those that are neither blank. This will add a further layer to the analysis of the activities which should probably remain internal.
The seven steps for success
The report concludes by identifying seven key steps to success when considering what activities to keep in house or export:
1: Understand the risks and opportunities that come with each activity
2: Plot activities on the matric to understand what activities are core to the business
3: Identify the cultural and human impact of change
4: Understand the financial implications of change
5: Test the market for innovation and cost
6: Analyse total cost, quality and impact
7: Revisit the idea of outsourcing every three years to see if there are any areas to improve upon or yield external expertise on.
Read a copy of the full Industry Insights report here.
