Outsourcing vs Insourcing

John O'Shea

As a B2B business, it’s common to find yourself mulling over the decision to outsource or insource part of your business process. Insourcing and outsourcing are simply methods of distributing your work to a suitable service provider as part of your business’ strategic decisions.

The reality is, both are legitimate ways of tapping into the specialty skills your business needs without bearing the cost of company hires for permanent employees.

In this article, we help you understand the difference between outsourcing and insourcing, types of outsourcing, and the benefits of embracing them for best business practice.

What does outsourcing mean?

Outsourcing refers to the practice of contracting an external organisation or client company that isn’t affiliated with your business to execute specific functions of your business. By outsourcing, your business takes advantage of an externally developed workforce and resources to execute tasks and deliver results efficiently at a fraction of the cost.

Although most B2B businesses cite cost efficiency as a primary reason for outsourcing, there are many other benefits to taking this route. For instance, you can outsource to improve productivity and efficiency.

Some types of outsourcing you can consider for your B2B business processes include:

1. Business process outsourcing
2. Knowledge process outsourcing
3. Information technology outsourcing
4. Offshore outsourcing
5. Domestic outsourcing

What is a good example of outsourcing?

As a B2B business, you may decide to outsource lead generation services from a reputable company like Growthonics to push sales and drive revenue. By engaging an external company, you’re leveraging their skill set and technology to fill your sales pipeline through omnichannel prospecting to gain a competitive advantage over your competitors. This is cheaper than running a full-fledged in-house department.

What is insourcing in business?

Insourcing is the opposite of outsourcing.

When you insource, it means you’re assigning projects to a department or people within your business, rather than hire an external party. This means you’re using the resources within your business to execute important tasks.

Insourcing is expensive because it means placing new processes and operations on site. This may be something like starting a distinct division within the organisation.

What is an example of insourcing?

If your sales and marketing department wants to drive sales, they will work with the product development team to brainstorm new ideas on the best ways to market the products. This way, your sales teams will develop expertise to nurture leads and convert prospects to customers with ease.

Outsourcing vs insourcing: Which is better?

You can already tell the pros and cons of outsourcing and insourcing. While some businesses employ outsourcing, others go for insourcing or a combination of both. As a business, you must examine the benefits of choosing either option before making that strategic decision.

For instance, insourcing is a great option if you have a rich pool of talent or you simply don’t want to deal with some challenges that come with outsourcing like delays in delivery, loss of intellectual property or cultural differences, among others.

Conversely, outsourcing is an excellent option if your business needs to take advantage of the consciousness and clarity of experts from a global pool of talent

Why would a business outsource?

The business case for outsourcing will usually vary depending on many prevailing factors. Some reasons for the motivation to choose outsourcing over insourcing include:

• The need to eliminate costs related to hiring new staff.

• Allow your employees ample time to focus on core business functions as the external party takes care of less critical operations.

• Reduction of workload for your teams internally to avoid burnout.

• Taking care of needs that may arise because of scaling.

What are the advantages and disadvantages of outsourcing?

You may opt to outsource certain functions of your business to access benefits that include:

Better efficiency

Business outsourcing makes it possible for your business to expand temporarily whenever there’s a high demand, so your teams can increase their efficiency by focusing on areas of your business that drive results.

Cost savings

Sales outsourcing is a great way to save by reducing labour costs as you don’t have to factor in costs relating to office space or employee benefits. Businesses will certainly enjoy cost savings by outsourcing operations to locations with a minimum wage.

Access to specialised skills

Although your business may boast of having a robust pool of talent, sometimes retaining them in multiple areas can be costly and impractical. You must bring in specialists to train your teams. This can be unsustainable. You may want to outsource marketing functions by engaging industry experts to fill in the gap by executing the tasks quickly.

Logistical ease

Outsourcing services like shipping or customer support makes more sense for B2B businesses, especially when these services are available outside the normal business hours.

Staffing flexibility

Outsourcing makes it possible for businesses to hire short-term contractors whenever there’s a high demand for more employees, but you can’t afford to afford them all year round.

Unfortunately, outsourcing is not a one-fits-all solution. Introducing third parties into your business operations can give rise to some unpleasant issues that include:

• Security vulnerabilities.
It can sometimes be a challenge keeping up with contractors that have access to your business systems as it’s time consuming.

• Communication/logistical issues.
When you have third party service providers, you’re likely to encounter logistical and communication challenges, especially if you’re working in different time zones.

• Hidden costs.
Some outsourcing services may give rise to hidden costs owing to last-minute changes. In such a case, it can be more costly than hiring someone internally.

Structural instability.

You never have a guarantee about the stability of the outsourcing company. This can create a significant loss for your company.

Over to you

If you’re looking to scale your business and require new processes, then you’re better off considering insourcing as a business strategy to get everything done in-house. On the other hand, although working with an outsourcing company can be advantageous depending on your motivation, you’ll need to analyse the pros and cons of different outsourcing models carefully before making a move.

Learn more about outsourcing your lead generation by booking a call with Growthonics today.