Information Technology
An ecommerce company decides to develop and support their own systems, applications and websites internally. They do this because they consider technology their core business. In other words, this is an area where they want to build and sustain competitive advantages.Marketing
A marketing team initially outsources digital advertising campaigns as they don't feel they have enough internal capabilities in this area. With time, internal staff begin to have more confidence with digital advertising platforms and the decision is made to bring the function back in-house with the help of a consultant.Manufacturing
A German fashion brand starts up by using contract manufacturers. As the brand grows they want to control quality and reduce costs, so they build their own factory in Malaysia.Customer Service
An ecommerce retailer initially outsources customer service functions to a domestic partner. As the firm matures it decides that taking customer service in-house is critical to providing customers with a positive and unique customer experience.Insourcing vs Outsourcing
Insourcing means that you choose to manage work directly. Outsourcing means that you choose another firm to execute processes, functions or projects as a service to you.Insourcing vs Onshoring
Insourcing means that you choose to do work in-house. This doesn't mean the work will occur in your home country. For example, building a factory in a foreign country that you operate and control can be considered insourcing. Onshoring is insourcing or outsourcing work in your home country.Advantages of Insourcing
Insourcing can have several advantages:Competitive AdvantageInsourcing allows you to build unique competitive advantages. If you outsource something, you will get the same service that other firms receive. Trade SecretsInsourcing allows you to control information such as trade secrets more closely. Organizational CultureIn some cases, relationships with outsourcing partners can become negative due to different organizational cultures. A firm may benefit from uniform norms and expectations by doing things in-house.CostThere is usually significant overhead in selecting and managing outsourcing partners. On top of this, the outsourcing partner is taking a profit on you as a customer. Generally speaking, you can do things cheaper if you can do it yourself with the same level of competence in the same country as an outsourcing partner.Direction & ControlManagement has complete control over internal functions such that they can measure, improve and innovate. For this reason, core business functions are usually kept in-house.Disadvantages of Insourcing
Insourcing has several potential disadvantages as compared to outsourcing:CostsIf labor costs are high in your home country, outsourcing may be cheaper. Particularly if you lack the capabilities to run your own facilities in a less expensive country.CapabilitiesInsourcing requires you to develop more capabilities. For example, a restaurant that doesn't outsource accounting functions needs to employ staff who understand accounting.FocusInsourcing may distract you from your core business. If you are a design company, dealing with things like accounting, human resources and information technology may not add much value to your core business such as impressing clients with your designs.| Overview: Insourcing | ||
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Definition | Performing functions, processes or projects with internal resources. | |
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