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Innovation Management

What You Need to Know About Insourcing

Published By Guest Blogger

Company leaders do a lot of different things to operate lean; it’s the one business goal that never disappears from the agenda. And for the past few decades, outsourcing has been the method of choice for getting things done without blowing the annual budget on a single project. As of 2014, the global outsourcing market amounted to $104.6 billion.

Web design, creatives, manufacturing needs — almost anything can be outsourced. But there’s a catch.

The Age of INsourcing
Handing projects over to vendors requires an extensive commitment to preliminary planning and buy-in. It diminishes flexibility, and can create major bottlenecks for approvals and iterations. It threatens deadlines, and involves an extra layer of risks and requirements. And unless you have a very established brand with a fixed message, you’ll miss out on opportunities for new ideas and iteration based on the experiences and expertise of your employees — i.e., the people who are most familiar with your business.

Many leaders are now turning to insourcing to power up new business initiatives and innovations. It’s an emerging solution that’s exactly what it sounds like: the opposite of outsourcing. But why?

According to Underground Elephant:

  • Insourcing streamlines operations, which helps keep costs down.
  • Keeping work in-house typically results in better outcomes, dramatically increasing competitive advantage.
  • Talent is a precious commodity in today’s “knowledge worker”-based climate, so hiring skilled, full-time employees is a more valuable investment, and adds credibility to the business.
  • Training employees in-house allows organizations to expand their offerings and improve core competencies.

Those are some pretty solid motivators for reducing outsourced projects, but not everyone is completely on board with the switch — like innovation thought leader Ian Cox. “Comparing an eight year-old contract for a diverse range of outsourced services against an in-house service based on new needs and technologies is inherently misleading,” he writes. “…The decision as to whether to outsource or to provide services in-house has to be based on criteria that reflects what is important to the organisation and not on the preferences of the CIO.”

So: business decisions need to be based on just that — the business. But how do you know if insourcing is right for you?

Decisions, Decisions

Outsourcing will probably always be a good solution for some companies that are trying to cut costs. But first, says Jarrod M. Russell, you’ll want to ask yourself some questions: “Is a function essential to your company’s business model? Does the department in question have the potential for innovation? Will it need to adjust as your company pivots? If so, then outsourcing may actually cost more in the long run and cripple [your] ability to adapt.” In other words, if you’re going to outsource, don’t assign your vendors projects that are considered critical to the business.

“Outsourcing reduces an enterprise’s ability to pivot during implementation due to evolving needs or business realities,” says Tom Brister, VP of U.S. Business Services at Mindjet. “It also removes key expertise from the organization, making you dependent on outsourcing partners for those key skills.”

There’s another important thing to be said for looking inward first, and it has to do with something that’s actually quite desirable when it comes to innovation: entrepreneurial spirit. Disruption and competitiveness will always be a core concern for leaders, who typically do a pretty good job of keeping an eye on peer business. But if your own employees feel that their ideas for new business or product innovation aren’t being heard — or if it’s not a part of what they’re working on — the more entrepreneurial of the bunch will move on, potentially even to start new businesses that will disrupt the very industry they currently sit within.

Your employees are smart people — that’s why you hired them in the first place. They know your business inside and out, and are your best resource for coming up innovations that will keep your company competitive. And if you’re concerned about innovation, figuring out how and when to outsource projects can make a much bigger difference than you think.

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Written by Guest Blogger