What is Insourcing?
In-sourcing is an often ambiguous term which is seeing increasing use in the world of business. In this article, we’ll take a look at two different definitions of insourcing, comparing it with the more well-established concept of outsourcing to assist in its understanding. We’ll also look at examples of insourcing, such as hiring Microsoft Dynamics consultants to help with an organisation’s ERP implementation.
Comparison with outsourcing
Most of us are familiar with the term “outsourcing” — that is, the process of contracting work or a business function to an external provider or “third party”. Businesses outsource for various reasons, but most common among these is that outsourcing is viewed as a means of saving money. Often, outsourcing work is cheaper because businesses can leave the work to external providers of whom they don’t need to provide benefits, and who can usually charge a cheaper rate due to greater focus and fewer overheads.
So is insourcing the opposite?
It would be easy to assume, then, that insourcing is the exact opposite of outsourcing, but this is not necessarily the case. Part of the reason for this is that outsourcing and insourcing are both relatively new terms without fixed meanings; insourcing in particular is quite ambiguous. Indeed, one definition of insourcing does indeed embrace the opposite meaning of outsourcing; in this definition, insourcing simply refers to companies looking at their pool of employees in order to complete certain jobs instead of contracting the work out to an external provider.
In some ways, this form of insourcing can be even cheaper than outsourcing, as the company is drawing on a pool of talent already being paid to perform other tasks; companies can add extra roles or responsibilities to the members of their current talent pool without having to pay them too much more and, in some cases, without having to raise their wages at all. Additionally, insourcing in this way doesn’t have the negative connotations associated with outsourcing; companies that outsource are often seen as not taking care of their own employees, while companies that insource use the “promote from within” ethos as a major means of attracting high-quality employees.
Another use of the term insourcing is somewhat of a hybrid of the outsourcing and the previously discussed insourcing definition. It involves the hiring of contractors who specialise in a certain field or skill set to come and work on-site at the business location. Often, these specialists are used as “consultants” to help advise businesses on best practices moving forward, or perhaps to help train full-time employees on how to use specialised equipment and systems.
A good example of this type of insourcing can be seen in the implementation of customer relationship management (CRM) and enterprise resource planning (ERP) software applications in businesses around the world. CRM and ERP software can help companies make tremendous strides towards streamlining their business, but it can also be quite difficult for employees to wrap their head around the new systems. In these situations, businesses can hire consultants who are certified in the CRM and ERP software to help ease the transition. A company that is using the Microsoft Dynamics AX ERP software application, for example, could benefit from a Dynamics AX consultant.