Nov 21st, 2023
Insourcing vs Outsourcing IT Services: Reviewing Major Pros and Cons
If you have a large project coming up or are struggling to find the resources you need to meet deadlines and manage customer expectations, you may be considering outsourcing IT services some of your needs. But before you do, let’s take an in-depth look at the difference between insourcing and outsourcing.
In this article, we’ll talk specifically about IT insourcing and outsourcing IT services: the pros and cons of each, and why you may want to consider one or the other for your next project.
What are Insourcing and Outsourcing?
Insourcing is the practice of delegating tasks to people already working within your organizational structure. Namely, you assign tasks to your in-house workforce. Insourcing includes setting work for new hires, interns, or temporary employees.
Outsourcing (also referred to as Business Process Outsourcing or BPO) means assigning tasks to people not directly employed by your company. Frequently, this is done through a third-party service or external organization.
There are three types of outsourcing: onshoring, offshoring, and nearshoring. Onshoring means outsourcing to a company or individual in your own country. Offshoring means outsourcing to individuals or companies in countries far away (typically the People’s Republic of China or India.) Nearshoring means outsourcing to people in countries close to yours.
Pros and Cons of Insourcing
While you may automatically assume that outsourcing specific IT tasks is better than insourcing, that is not always the case. Sometimes, insourcing is better. Let’s take a look at the pros and cons.
Pros
- Quality Control – Having direct control over the outcome of a product or project when it is managed in-house.
- Intellectual Property Protection – No risk of leaking sensitive or proprietary IT information when that information remains within your company.
- Communication – More accessible when you are not forced to communicate overseas.
- Brand Image – Establishing a solid connection to your local community by providing jobs gives your company a more positive image.
Cons
- Expense – Hiring and labor costs increase when you increase the workload on your team.
- Time Consumption – Dedicating time to finding and possibly hiring new team members.
- Productivity – Adding to the workload of your team may cause their productivity to decrease as they struggle to accommodate.
Pros and Cons of Outsourcing
If you’ve decided that outsourcing software development is the way to go for your business, it’s important to realize that this approach also has drawbacks. Let’s look at the pros and cons of outsourcing IT services.
Pros
- Larger Talent Pool – Having access to a broader talent pool to find star talent you may not have considered because of limited geography.
- Lower Costs – Saving you hiring, training, and onboarding money. Additionally, offshoring to companies where the cost of living is lower decreases labor costs.
- Streamline Focus – Allowing the outsourced team will allow your in-hours team time to focus on the significant issues without getting bogged down in nitty-gritty tasks.
Cons
- Security Concerns – Sharing sensitive information with outsourcing team can be particularly concerning.
- Communication – Having barriers like distance and time zone differences can make communication slow or difficult.
- Lack of Institutional Knowledge – Your team will always have a better understanding of your business needs than outsourced team.
Should You Insource or Outsource?
Many factors influence the decision to insource or outsource, and there is no one answer to this question. Indeed, an organization may employ both strategies simultaneously or try one rather than the other. Ultimately, the decision to insource or outsource will come down to your circumstances and willingness to work within the pros and cons of each method.
