What's the difference between outsourcing and insourcing? – Investopedia



A:

Insourcing is a business practice performed within an organization’s operational infrastructure.  Outsourcing, on the other hand, enlists the help of outside organizations not affiliated with the company to complete specific tasks. 

Outsourcing vs. Insourcing

The primary variation between outsourcing and insourcing is the method in which work is divided between various companies or departments for strategic purposes. Assigning a project to a person or department within the company instead of hiring an outside person or company to do the work is considered insourcing. Outsourcing is usually done as a cost-cutting measure. It can affect jobs ranging from customer support to manufacturing, as well as technology and the back office. 

Here are the key differences between the two business practices:

1. Cost

The cost associated with insourcing is different from the cost associated with outsourcing. Insourcing is typically more expensive for an organization as a result of implementing new processes to start a different division of the organization. Outsourcing uses the developed workforce of an outside organization to perform tasks.

2. Resources

Resources are another major difference between these two business practices. Outsourcing uses the resources of an outside organization for services and manufacturing products. Companies can use outsourcing to better focus on core aspects of the business. Outsourcing non-core activities can improve efficiency and productivity. Insourcing utilizes developed resources within the organization to perform tasks or to achieve a goal.

For example, an organization may insource technical support for a new product as a result of already having technical support set up for another product within the organization.

3. Control

The organization’s control over operations and decision making differs while using outsourcing and insourcing. Organizations that use outsourcing for a particular service or manufacturing process have minimal managerial control over the methods of an outside organization.

For instance, an organization that is renowned for friendly customer service does not have the ability to enforce or manage how an outside support center interacts with customers.

4. Location

Location is another difference between outsourcing and insourcing. Insourcing generally places new operations and processes on-site within the organization, while outsourcing involves an outside organization often away from the primary organization’s operations.



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