When companies are considering whether to manage a project internally (or insource, as is often said these days) or outsource they must first ask themselves where, what, when and why.
Those of you who are frequent readers of my blogs will note that I often draw upon my personal life experiences when weighing in on key business decisions. So, when one of my customers asked me why they should outsource, I immediately reflected back to my childhood. You see, growing up in a large family, being the second oldest of six and the only girl, I learned pretty early on that most things could be created or done without going outside the home. Being raised in an environment where we did most things in-house to save money had its benefits and drawbacks.
To better understand how the only girl in a large family could appreciate the benefits of insourcing and outsourcing, let’s first define what these two terms mean. According to BusinessDictionary.com, insourcing means delegating a job to someone within a company as opposed to someone outside the company. Outsourcing means the contracting or subcontracting of noncore activities to free up cash, personnel, time and facilities for activities in which a company holds competitive advantage.
Insourcing can look like a straightforward option, especially when you need a task executed on a temporary basis or if the task requires little operational overhead. I would offer the argument, however, that insourcing can help companies build a team of skilled people who are focused on company-specific objectives and initiatives while more effectively promoting the company’s core values.
When I was 9 years old, my parents were both in college getting their master’s degrees in psychotherapy and working full-time jobs. We didn’t have the money to hire a nanny to come in and help us prepare meals, do laundry and help with other things, such as checking homework. Instead, my parents chose to “insource” these tasks to me. The benefit for me was that I learned key fundamental life skills that also promoted our household’s specific objectives and initiatives (i.e., cooking, cleaning, homework — the fundamental yet important life skills needed for all individuals) early and in turn was able to teach my five brothers the same life skills without ever having to spend a single dollar.
Now, I suppose if you had asked me back then if I realized and appreciated all these lessons, I would have unequivocally told you, “No.” At the age of 9, these tasks were of no interest to me, but now as a mother of four young children, I appreciate the in-house investment I was brought into as a child. It has allowed me to streamline my own processes and procedures in a more efficient way while passing these lessons on to my four beautiful children who will most definitely appreciate the investment (when they are older), too.
While the in-sourcing element did a great job in getting and keeping me focused on the skills and core competencies required to run an efficient, cost-effective and well-organized household, outsourcing for me is the obvious winner for many reasons. But, again, I go back to my childhood.
As I mentioned, I was raised in a larger family. One of the tasks I wished my parents would have outsourced was haircuts. You’ve all had a bad haircut at some point, right? To save money, my mom would cut our hair with tools that were not specialized for the job. On a Sunday, all six children would sit lined up and ready for our haircut with the shavers that were used on our dogs the weekend before. My brothers knew the pain it was going to inflict as the clippers pulled their hair and inevitably got clogged up. Not a good customer experience!
In my case, it was the scissors that I dreaded. They were regularly used for a plethora of other tasks such as cutting paper, plastic, shrubbery, and, oh yes, my hair! Needless to say the whole experience was not always comfortable, and, frankly, our hair was not always even (sorry, Mom!). Again, not a good customer experience!
Bottom-line: Sometimes you need to know when and how to recognize that certain tasks are better left to the experts and when a call to the local Cuts-R-Us is in order.
So, bringing it full circle, outsourcing allows businesses to cut operational costs while leveraging the expertise and best practices that outsourcing offers. In addition, outsourcing gives you access to specialized skill sets, resourcing, and processes and procedures that insourcing cannot match — helping to maximize your customer’s experience.
Finally, outsourcing allows you to focus your company (or household) core competencies and more effectively and efficiently achieve your key strategic goals and objectives. Now that outsourcing is used by businesses of all sizes, it has opened a world where we can leverage best practices, evaluate opportunities and, in the end, make it easier for our customers to do business with us, which, in turn, drives revenue.
So should you insource or outsource? There’s no easy answer, but remember, although you may be the most skilled person out there armed with all of your life lessons, if you don’t properly leverage talent both inside and outside of your company you may inflict unnecessary pain on yourself or your customers, ultimately resulting in being “hair” today and gone tomorrow.