Insourcing vs Outsourcing: Is One Better than the Other?
Hiring outside entities to handle some of the workload has been a common business strategy since at least the 1980s, but it’s now created a kind of reaction: insourcing. The idea that some of those duties would be better or more cheaply done in-house hit some businesses like a revelation, but others who have been in business long enough to remember when insourcing was just called ‘hiring employees’ were less surprised by its popularity in recent years.
While it is true that insourcing can help businesses reap benefits like added control over the finished product, uniform training, and boost information security, it’s not necessarily the case that insourcing is always going to be the right move in every situation. There are still some arguments to be made in favor of outsourcing, and there are also hybrid modes like our Powerhouse Insourcing that can allow you to take advantage of both.
If you’re considering restructuring the way your business completes its tasks, the most important thing to do is consider the entire chain from the start until the product is shipped or the service is rendered. Just as your final product is unique, so should be the way you get there. Some companies can greatly benefit from offshoring while others will find insourcing much more advantageous.
We’ve handled insourcing for many companies that have complicated processes at the core of their operations and we’ve also helped find creative talent outside the companies for whom the creative department wasn’t central to their product. From icreatives’ wealth of experience on the topic, we’ve constructed this guide to help everyone understand the difference between outsourcing and insourcing so they can decide which one is best for their business.
What is Outsourcing?
As you can tell from this chart based on data from the Organization for Economic Cooperation and Development, there are many countries in the world where salaries are significantly lower on average.
Many companies take advantage of this fact by outsourcing some of their operations that can be done remotely, such as IT. As digital communication platforms and workflow software becomes more advanced, creative jobs like film editing and design have also been outsourced to places where salaries are lower. Some additional benefits to outsourcing are time differences, meaning workers in India can answer phones in a call center at an hour where most of the United States is asleep, and being able to focus on the critical part of business operations.
For example, if a company builds and designs computer software, they may be able to offshore some of their IT workforce. This will likely save money on salaries but it also enables them to have all their developers under the same roof without having to dedicate a large part of the building’s real estate to a call center. In addition, this company could promise 24-hour availability to its customers without having to take on a third shift at their home base.
What is Insourcing?
While it is the opposite of outsourcing in its essentials, insourcing is not a direct negation of outsourcing. We believe it’s important to note that insourcing what used to be outsourced is not a process of simple reversal. Hiring the in-house staff and working out the logistics are the two main steps that need to be taken, but there are other smaller details to look out for as well.
Some of the most successful insourcing we’ve done has been in situations where existing staff can be trained to complete additional tasks, which saves tons of money for the company and gives employees a greater sense of purpose on the job. If at all possible, promoting existing talent and using new hires to cover the duties being insourced is the best way to make the transition.
Variations of Outsourcing and Insourcing
The definitions laid out above are the distilled version of insourcing and outsourcing. Savvy businesses have invented variations on the theme of both types of sourcing with varying levels of success.
In large part for improved image and to bring jobs back from overseas while still getting outsourcing benefits, some businesses have opened satellite offices to take advantage of more business-friendly jurisdictions and tax codes. This method, called Domestic outsourcing, is quite popular in the United States.
Common with larger IT firms or departments, multisourcing is outsourcing to more than one vendor. This enables the company to find the best talent out there and diversifies providers, so if one vendor fails the operation can theoretically still continue.
Many of our client companies have operations that aren’t centered around creative production but nonetheless benefit greatly from having good multimedia professionals and marketing teams to help them promote and explain their product or services. In this case, it’s a huge relief to let icreatives manage their art department or creative teams so they can concentrate on their core business.
Insourcing vs Outsourcing – When Should You Outsource?
Examine your business process to find work that is routine, time-consuming, or both. The admin offices are the most common places to find such tasks, as is the mailroom. There are some businesses that only outsource specific duties while there are others than make outsourcing a key component of their business strategy.
If you notice employees wasting the majority of their productive time doing mundane tasks like answering phones or stuffing envelopes, you might be looking at a great outsourcing opportunity. Present employees will likely be happy to find out that they no longer have to waste time with such tasks, provided their jobs aren’t made redundant by the outsourcing.
Don’t think of outsourcing as simply replacing tasks, though. Outsourcing can also be effectively employed during times of increased demand throughout the year. A company with a returns department might want to have some customer service professionals outsourced for an additional influx of calls around the holidays, for instance.
On the other hand, a company with many departments that are having trouble coming together to make a product or provide a service might want to insource all their talent and give them all the same training so their standards can be uniform across the whole company. Another by-product of insourcing that many companies don’t think about is the significant improvements to the customer’s perception of the business. Employees can have more knowledge about the products and be more helpful to customers. The employees will also be more spirited if they can see their own involvement in the delivery of the final product, which isn’t the case with outsourced workers.
Insourcing and Outsourcing with a Creative Staffing Agency
Whichever way your company is going, whether moving duties to an outside vendor or bringing them back in-house, vetting creative talent will still be at the top of the agenda. It may be that there are some security concerns about outsourcing or perhaps IT solutions for insourcing creative roles are needed. In any case, using a creative staffing agency like icreatives makes the process much more efficient and allows the decision-makers time and space to concentrate on the central business operations.
Communication issues are a common problem with both insourcing and outsourcing, but limiting the number of people who need to touch base directly with one another helps alleviate this problem. Hiring a creative staffing agency is a great way to streamline communication and make sure any necessary roles are fulfilled as effectively as possible.
Insourcing and Brand Intimacy
One of the most important factors in business in the coming decade is going to be brand intimacy, the name given to the emotional connection that customers have to particular companies. Intimacy makes customers way more likely to purchase products and especially purchase upgraded or new versions of products they found appealing in earlier iterations.
Crafting brand intimacy depends a lot on creative work to demonstrate the most positive elements of a brand to its prospective and existing customers. One benefit of insourcing is that it can significantly raise the public perception that a brand is a team effort accomplished by united individuals with a common goal. The messaging is more positive and makes interaction with a brand more personal, creating more intimacy.
As an example, imagine there is a sandwich shop called Marco’s that bases its brand identity heavily on the proprietor and founder, a man named Marco. Customers may be more endeared to Marco if they discover he bakes his own bread and sources his produce from local farmers than if they find out that he buys sandwiches at the supermarket, essentially outsourcing his sandwich-making, and simply resells them at his shop.
If you expand this analogy, it’s easy to see why consumers will feel more brand intimacy with a company that projects close-knit internal camaraderie. When your company isn’t directly creative, customers might even be happily surprised to find that you make all your graphics and design work in-house.
Outsourcing Creative Work
Communication between creatives and the company they’re producing work for must be clear and open, especially if the core business isn’t a creative endeavor itself. One common problem with outsourcing creative work like design or editing is that goals and ideas may get lost in translation. If you are offshoring creative work like editing, make sure your editors have enough cultural knowledge of your target market to put out a usable and effective product. The onus is on the company to dictate standards and requirements to people outside the company to make sure they get the product they want from outside labor. For many companies, part of the appeal of insourcing is that it makes both communication and the implementation of universal standards easier, but that doesn’t mean they’re impossible to do when you outsource creative work.
While it can be challenging to get used to, if the right communication channels are open between outsourcing vendors and the employees overseeing them, it’s very possible for them to work almost as if they were in the same building. Internet-based chat platforms like Skype and Zoom are making it easier all the time to stay in touch with creative talent no matter how far away they are.
Insourcing Creative Work
If you have sensitive client data and teams of creatives that need access to tailor their products to that data, insourcing could be the safer option. Since everyone is employed by the company, all the communication between them can be on the same platform and even be conducted on Password-protected VPNs, for example. It’s also possible to protect information or whole parts of the internal data system with employee logins so that anytime information is accessed, metadata about who accessed it and when will be created.
One other thing to consider is past work done by creatives. If you outsource or multisource all of your creative work, getting access to old promotional materials or creative products can be difficult, if not impossible. Creating an archive of the company’s creative output is much easier if all the work product is done in-house. Long-term campaigns and design strategies are likely to be easier to implement in-house as well, which will not only take the pressure off the creative staff but will also likely make them feel like they are working toward a common goal, giving them a better feeling about their work overall.
Is Insourcing Better than Outsourcing?
From some perspectives, insourcing will offer lots of benefits that outsourcing does along with a few additional perks of its own. If outsourcing leads to disappointing results and a creative project has to be repeated, then the money saved by outsourcing may be lost. Insourcing is also more likely to lead to a long-term workforce that will be more readily accessible and available for the next project. On the other hand, outsourcing offers more flexibility in terms of hiring and retaining talent and if the right relationship is kept up between the company and the outsourcing vendor then the outsourced talent can possibly be available reliably for many projects to come.
For the many people who see domestic job growth as the greatest good, insourcing will definitely sound better than outsourcing. Offshoring has been thoroughly demonized in some circles although some studies show that it may have “modest positive effects” on domestic job numbers.
Just like the many different types of jobs and structuring strategies, there are creative ways to use insourcing or outsourcing to benefit the company, employees, and customers. There is a risk with outsourcing, especially with offshoring, that the situation may change, and getting labor from a great distance will no longer be practicable. However, that’s one of the things businesses have to learn to adjust to if they want to survive the turbulence of modern markets.
In the end, it’s impossible to say whether insourcing or outsourcing is always the better choice. To take such a dogmatic view would limit a company’s ability to properly respond to certain situations. Limiting risk through multisourcing or mixed-hybrid methods like domestic outsourcing and out In-House Outsourcing tend to be the most effective strategies with the least risk to the company.
Outsourcing Your Insourcing
One of the nicest things about the In-house Outsourcing at icreatives is that it allows companies to take advantage of the cost savings and spare time outsourcing can provide while still being able to have the same level of top-notch talent and company-wide standards that insourcing provides.
There’s no need to wonder whether insourcing or outsourcing is better for your company when you can have the best of both worlds with IHOS. Having a ready pool of vetted and guaranteed creative talent can spare many headaches if a sudden project comes up. The most essential managers will be free to concentrate on the core business with a creative staffing agency supplying top creatives to do the necessary labor.
Retaining your reliable in-house staff and adding qualified creative professionals can make the day-to-day and long term function of your business that much easier. Staff members will be happy to have additional help and everyone will be happy with the savings gained from smarter staffing practices. It’s also much easier for all employees to get the training they need and make sure that training is the same company-wide without having to waste other staff on completing the training.
It truly is impossible to say whether insourcing or outsourcing is a better tactic for a given business. There are clear advantages to outsourcing like cost savings and more flexibility, but having creative talent in-house allows for uniform standards, better communication, and increased security since there won’t be outside staff with access to internal databases or communication systems.
Companies that are strategic about their insourcing can use it to build brand intimacy but there are plenty of huge companies that outsource part of their business and manage to keep intimacy with their base of customers, too. That just goes to show that insourcing or outsourcing can be the better response depending on how it’s handled. With the right strategy and a creative staffing agency to help manage the restructuring, a hybrid mixture of the two is likely to be the best choice.