Reasons for Insourcing Outsourced Work
Insourcing is the reverse of outsourcing, insourcing is an effort in which work that would otherwise have been contracted out is performed in-house, and the business, or company wants to bring the performance of this work back in house to be performed by company resources. In addition, insourcing can be a company based in Japan performing work in the United States for the purpose of employing American workers to manufacture Japanese products. From the Japanese perspective, this is outsourcing, but from the American viewpoint, it is insourcing. Hyundai, a Korean automobile manufacturer, has in fact done this. (Nickels William G, 2010) Today many organizations including the United States Government are resorting to insourcing for various reasons. Some of the reasons for insourcing are to gaining control over work performed; the quality of work is not up to standards, to gain the competitive edge over their competitors, control cost and to have one workforce performing tasks. BusinessDictionary describes insourcing as:
Delegating a job to someone within a company, as opposed to someone outside of the company (outsourcing) is a reason for insourcing to occur is if a company had previously outsourced a certain task, but was no longer satisfied with the work being done on that task, so the company could therefore insource the task and assign it to someone within the company who they believe will do a better job. ( BusinessDictionary.com, 2010)
Insourcing should be a systematic process whereby the company assesses if they still have the capability to either hire the current employees or have staff ready to assume outsource work. Insourcing provides a business with f control over the performance of the work that is being performed and protects the business if it utilizes proprietary processes or techniques. Before a company decides to insource work, they should consider whether they have the capacity to perform the work with company resources or if they are going to need to hire staff to accomplish the work. If “remaining in-house resources are not sufficient to complete critical tasks, especially in processes for which resourcing demands vary throughout the lifecycle of a project”(Orbys Consulting , 2010) cautioned should be exercised when contemplating such an option. Other considerations to think about when considering insourcing is does it make sense from a business decision. These decisions should be based on some type of feasibility study to determine the objectives, how long will it take to convert back to in house operations and if there are legal issues, which should be thought through. “Legal issues can be particularly challenging, Mathers says, like working through employment contracts, maintenance agreements, and software licenses.” (Overby, 2010) When considering insourcing think about the objectives the company originally sought to achieve with their outsourcing effort.
The process of insourcing takes time and each opportunity for insourcing is different. "There are about 20 to 30 variables that are unique to each sourcing deal," says Ruckman. "At a macro level, the complexity of an insourcing project must factor in what functions were outsourced and what percentage of the staff is still local to the client."(Overby, 2010)
For example, if the client systems remained in their data center and weren't moved to the sourcing provider's delivery center, the project will be less complex. Plan on a four to six month transition for low complexity transfers, says Ruckman, and nine to 16 months for high complexity situations.
How long it will take to see a return on insourcing is an even greyer area. "I have seen deals reach a positive ROI from insourcing in less than 10 months, and some take ten years," says Strichman. "There are no simple rules. I know that sounds like what a consultant would say, but it's true.(Overby, 2010)
Other considerations to think about when considering insourcing is how will the insourcing assessment be performed by in-house employees or a company that specializing performing in conducting insourcing . There are companies that can assist with this process and there assistance can be invaluable in assessing the insourcing option and tackling the transition. (Orbys Consulting , 2010) “Many consultancies shy away from insourcing because outsourcing is where the money is, and with a multi-year deal, it can keep flowing in. "When we do an insourcing gig, we are essentially working ourselves out of a job--if done right," Strichman says.”(Overby, 2010)
Insourcing is an option, which a company may consider at some point particularly when they want to gain control over work performed or the work or services provided are not up to existing standards and it is taking more company resources to perform quality assurance of the work outsourced. In this case, a company may want to gain control of work or tasks being performed by the contractor “whether it is for what we believe are the negative reasons of supplier factors (complacency, overselling, rising costs, and the like) or client factors (poor rationale, poor sourcing, poor internal management, and so on). (Orbys Consulting , 2010).
The Government is also insourcing worked outsourced to commercial companies. One of the reasons the Government is reverting outsourced work in-house is due to the nature of work being perform. Under the rules put in place for Government insourcing if the work performance