Outsourcing and insourcing of IT services have recently become some of the most popular strategies for effective business development. Both are widely adopted by a lot of non-tech businesses, as they provide a well-grounded IT expertise while helping companies concentrate on their key functions. Besides that, insourcing and outsourcing are aimed at saving costs, reducing the amount of work, and allowing access to a greater pool of talents.
If you’re considering whether to hand over some IT tasks to an external company or another department in your company then you need to decide which strategy would bring more benefits to your business. This article will help you make an informed choice as you’ll discover:
- What insourcing and outsourcing are.
- Insourcing and outsourcing pros and cons.
- When each strategy works better.
Defining Insourcing and Outsourcing
Outsourcing is a business strategy that implies transferring a piece of work to an external company that is located overseas or nearshore. This way an outsourcing company provides its services remotely and on a contract basis, which means that an outsourced team will work for you only for a certain period of time.
Businesses usually outsource their non-essential functions and processes while key operations are performed by in-house employees. The most popular services IT outsourcing companies offer are technical support, mobile, web, and desktop software development, software, databases, web hosting management, maintenance, and others.
Insourcing has much in common with outsourcing as it also involves temporary contract works, entailing a temporary partnership. However, the company assigns a part of the tasks and duties to an affiliated company or subsidiary.
IT Outsourcing Pros
Outsourcing is often portrayed as an effective strategy for cutting down the company’s expenses. However, it has to offer much more than that. By hiring an outsourcing IT company you’ll be able to:
- Minimize costs. The cost-effectiveness of outsourcing is based on many factors. For example, you don’t have to pay a full salary and yearly bonuses to your employees as well as to start a whole IT department on-site or invest in sophisticated equipment. Most of the outsourcing providers come from developing countries which means that average salary rates are often much lower in comparison to local ones.
- Get 24/7 technical support. Companies usually work 9-to-5, therefore, your in-house employees won’t provide customer support beyond those hours without extra payment. When hiring an outsourced helpdesk, you can choose a 24/7 support option without paying extra for overtime.
- Extend your company’s working hours by opting for a hybrid business model, mixing your in-house staff with an outsourcing team. This way you’ll have two teams working faster on the same project in shifts.
- Mitigate the risks of data loss and hacking. In an increasingly competitive environment outsource companies strive to provide better service with enhanced safety. Therefore, outsourcing providers take measures to improve data recovery, prevent data loss, and technological downtimes.
- Get a team of highly-skilled workers that will be chosen in compliance with the needs of your project. IT outsourcing companies have a wide range of professionals, trained specifically for a certain set of tasks, therefore, project managers hire people with a particular skill set for every project.
IT Outsourcing Cons
Outsourcing has also its cons, however, they are largely determined by a specific company. For example, a company may provide low-quality service or have some work transparency issues, though it doesn’t mean that every outsourcing company is like that. Therefore, when choosing an outsourcing company you need to do thorough research before opting for any. Here are the possible cons you may expect in some IT outsourcing companies:
- Lack of devotion. This may happen when a company has a small pool of employees and a large number of customers, resulting in a stream of services without getting into your business requirements and specifics in much detail.
- Low-quality service. Bad quality can be also a result of a small team of specialists or a big number of junior workers without strong senior back-up. Moreover, you won’t be able to control the quality of a developed product as deeply as you’d do with an insourced team.
- Lack of communication or language proficiency. As many outsourcing companies come from non-English speaking countries, their employees may have poor knowledge of the English language, which can lead to misunderstandings and lack of transparency.
IT Insourcing Pros
Insourcing has lots of advantages that are often opposite to outsourcing disadvantages. For example, as outsourcing is done remotely you have less control over the processes, but with insourcing, it’s quite easy to guide and evaluate the work quality of an internal team. With insourcing you’ll receive:
- Hands-on service. An on-site team can update and manage not only your software but also handle hardware equipment on-premises.
- Better communication. As your insource team will be able to communicate with all the departments of your business, they’ll understand the business processes at a deeper level, resulting in more accurate identification of possible bottlenecks at work.
- Trained employees for your particular business needs. You can build your IT team of unique specialists formed specifically for the needs of your company, which means that well-trained employees will be prepared for non-standard projects and find solutions faster in their work.
- More workflow control. You can reach your insource team at any time you need them. Also, it’s much easier to evaluate each employee’s work and contribution to a project as well as motivate them, which results in greater productivity and devotion.insourcing and outsourcing pros and cons
IT Insourcing Cons
There are a number of cons in IT insourcing, let’s have a closer look at some of them. With IT insourcing you’ll get:
- Higher costs. Though insourcing is aimed at lowering costs by more evenly distributed workload among employees, it still can be rather expensive as it involves searching, hiring, onboarding, training, salary, and tax payment expenses.
- Headhunting issues. It may be difficult to find the right specialist for a position. What is more, it may be time and money-consuming to upgrade employee skills.
- Indispensability of certain employees. If you have a unique project and valuable specialists decide to leave the company, it may lead to a project halt or even shutdown.
It’s hard to say which one is better for your business. Your choice will heavily depend on your business needs. For example, if you need to develop a mobile application or ensure good customer support then outsourcing partnership is right for you. It’s an option for most small and medium-sized businesses, as these companies mainly need standardized and fast delivered solutions.
However, if your company is involved in the development of an unconventional product, doing some scientific research or you need to have a standalone department that provides support to your core-business throughout its life-cycle, then insourcing is what you need. As it’s a viable option for major businesses or long-term projects that imply large investments.