If you’re one of those people who wonders whether insourcing vs outsourcing is better, you’re not alone! We get this question a lot, even from business owners who have tried both before. In fact, we wondered this ourselves way back when we first started running businesses!
In this post, we are pleased to present the major insourcing vs outsourcing pros and cons. We’ll name them, give you some examples, and drop a few tips, too. This way, you can start your hiring journey off on the right foot. Spoiler Alert! When you know how to make good hiring decisions, you can succeed with either strategy.
What is Insourcing?
Insourcing has two main meanings in the business world today.
One meaning is looking for people from within your organization to do a task or fill a role. This entails either adding responsibilities to an existing role, promoting someone to a new position, or moving someone to a different role.
The other major meaning is hiring someone to work in-house to accomplish a certain job. This entails getting someone new, not currently employed at your company, ready to work within your office.
Advantages of Insourcing
When you insource, you can benefit from knowing the people you are assigning a project to. In many cases, they have been with you for a while, so you know what they can realistically do. You won’t have to spend any time testing out their skills on paper. The only step would be holding an onboarding meeting to get them integrated into the new role. You also know how they work – their attitudes and the hiring soft skills you already vetted them for. You know they’re a culture fit, so they can get straight to work.
In addition, insourcing vs outsourcing gives you a way to incentivize working with your company. You can present promotion tiers for those who stay on long-term. You can also offer flexibility and growth opportunities for stellar performance.
Disadvantages of Insourcing
Insourcing by pulling people from existing roles or adding to these roles can be stressful. The people you are moving or tasking can find the changes to be burdensome. You can avoid this by making sure that they are not only willing and able but happy to do the new tasks. Incentivization is a powerful tool in combination with proper performance evaluation.
What is Outsourcing?
Outsourcing means looking outside your company for someone to do a certain function for your business. There are two main ways to do this.
You can outsource on your own, which means hiring an agency or individual directly. You can also choose to hire an outsourcing company to provide third-party services.
Outsourcing is our favorite way to bring specialized skills and knowledge into our businesses. That is, if we don’t already have them in-house, or want more affordable options. Hiring overseas is a great way to expand hours in a cost-effective manner while not sacrificing quality.
Advantages of Outsourcing
Whether you hire freelance contractors directly or hire an agency, you can benefit. Because freelancers are business owners and agencies have track records, you can access both greater expertise and broader experience. Outsourcing vs insourcing also opens you up to a much wider talent pool. You can find experts in areas that are not available in your locale. You can also hire experts overseas who you wouldn’t be able to afford locally.
Disadvantages of Outsourcing
Outsourcing vs insourcing has its risks, like not having as much control as with someone working in the office next to yours. Being virtual in nature most of the time, outsourcing is also associated with higher rates of data leaks. These can be avoided, however, with the proper protocols and safeties in place.
For some businesses, like manufacturing operations overseas, the disadvantage is the great distance you must travel to do quality checks. But you can outsource even this, and we actually recommend it, especially when you don’t speak the language. For the most part, however, businesses hire VAs.
Differences between Insourcing and Outsourcing
Insourcing vs outsourcing is not all that different, but we’ll clarify a few vital distinctions here. For the areas that can be a problem for you, we know some workarounds. That way, you can ensure the greatest advantages and limit the disadvantages.
Types of activities that can be delegated
The main difference of outsourcing vs insourcing is simply what tasks you can’t do over the internet. Everything else can be outsourced to anywhere in the world with internet connections that are fast and stable enough. These days, we have so many online tools that were not available before, so it keeps getting easier.
Scalability and flexibility
When you hire in-house, you generally need to sign contracts that guarantee employee benefits. This includes insurance, social security, and termination clauses. With online freelancers, you can hire and let go without any restrictions. You also do not need to pay benefits of any kind. They even pay for their own overhead! This means that outsourcing can cover your changing needs better than any in-house deal.
Quality Control Capabilities
Outsourcing has gained a reputation for instability. We think this is a matter of perspective and taking responsibility.
In terms of worker instability, we like to call this flexibility. If you benefit from someone who will work whenever you want, you have to accept the caveat. They may not always be available because you can’t expect them to sit around waiting for you to call. However, you can always plan and book them in advance. Alternatively, you can look for someone else. The online pool is so great that you can find multiple people for most tasks quite easily.
When you talk about quality control, this is always the responsibility of the company. The leader must set the example and the expectations. Insourcing vs outsourcing is the same when it comes to checks and balances. It’s only the implementation that changes. For example, an in-office worker would get a visual inspection and an outsourced hire would have monitoring software installed.
Cost for the company
Outsourcing is much more affordable than insourcing. Mainly, this is due to location. Hiring from less developed countries gives you an instant minimum wage advantage. When you hire from outsourcing companies or agencies, you can also get bulk discounts. This works great for bigger teams like corporate customer service. It also works for several individuals across different departments all hired from one company.
Sharing information used to be difficult when working with overseas hires. Today, however, we use the internet even for in-house communications. This means that there’s hardly any difference.
If you want to get detailed, you could say that clarifications are easier with in-house persons. Yes, but actually meeting face to face is usually unnecessary. We would further argue that the online tools we have today are more advanced than ever. This is mostly because of the outsourcing needs that pushed for innovation. With such advancements specifically geared towards online work, outsourcing starts looking like the better option, all other things being equal.
The security of your data can be poor whether you have someone working next to you or across the oceans. It all boils down to the safeguards that you have in place on their devices. Of course, we have to admit that hiring overseas makes it harder for you to prosecute. It really doesn’t have to come to that, through, if you’re careful.
How to decide: Outsource vs Insource?
We’ve scattered some tips throughout, but here are some additional ones.
Stage of company
When you’re just starting out, hiring a full staff complement may not be feasible. Even if you have the founding to do it, it’s not generally wise to do so. Hiring freelancers makes a lot better business sense because of the flexibility. As your business adjust and grows, the hiring strategies can flow along with the changes.
Speed of delivery
Hiring in-house tends to be a much longer process than outsourcing to a freelancer. The process of recruiting and doing up contracts alone can take months. Outsourcing gives you so many more people to choose from, and you can do everything online. This means you can find someone faster and get them working sooner.
Industry standard requirements
If you need to meet certain industry standards or follow local laws, insourcing may be your best bet. Foreign individuals and companies, no matter their experience, may not know the local ins and outs. Sometimes you can find a company that specializes in the area you need work in, but it’s not common.
Most often, hiring locally will give you the best chance of getting things done right. For example, you need a local lawyer because of government licensing requirements. You can hire an assistant overseas to help with paperwork, though. You also need a local accountant because they know the updated regulations that your business must comply with. Then you can hire a virtual bookkeeper to prepare the books and other documentation for them. This setup saves on time and money and increases quality.
What Is Outsource School?
Outsource School helps you to unlock the potential of virtual assistants and accelerate your business growth.
Since being founded in 2020, Outsource School has helped 1,000+ business owners hire 2,000+ virtual assistants for their companies.
Free resources you might like:
- Outsource School Case Study: How We Scaled to 45+ VAs and 8 Figures in Revenue
- Free VA Calculator | See How Many VAs You Can Afford
- Free Training on 5 Keys to Working With VAs
- Learn Outsourcing 101 | Guides, Downloads, and Checklists
We hope that our explanation of the main insourcing vs outsourcing pros and cons helps you! If you need more help to determine which option is best for you, schedule a call! We’ll be happy to discuss your needs and assist on your hiring journey.