Insourcing vs outsourcing: which is the most suitable choice for your IT business?

Insourcing

You must have heard the term “Outsourcing” before, right? Simply put, it is the act of hiring third-party packages and utilizing it. The outsourcing industry is blooming day by day, and is estimated to worth $481.37 billion in 2022. But before Outsourcing came into practice, developers preferred the traditional way: “In-house” recruitment. To put it another way, it is “Insourcing”.

What are the differences? Which one is better? Which one is more common? Today, ArrowHiTech’s devoted team will deliver a detailed comparison on Insourcing and Outsourcing!

What is Insourcing and Outsourcing?

Insourcing is the act of directly employing staff to fulfill a particular role in your business. On the other hand, Outsourcing allows you to work with freelancers or other firms to perform a specific function. To illustrate, here is an example: imagine that you are the owner of a clothing shop.

  • Insourcing: You recruit employees in sales or distribution department
  • Outsourcing: You hire ArrowHiTech to help you create an appealing website to attract clients

IT Outsourcing: Key benefits and drawbacks that you should know

There you have it, the definitions are simple as that. Now, how to decide which is better? It’s time to look at some key criteria!

How to choose between Insourcing or Outsourcing?

Main Function

It all comes down to your demand. Similar to our example, Insourcing is much more suitable when the role is a core business function. Otherwise, for a non-core role or just an addition, go for Outsourcing companies.

To optimize, you need to plan out every possibility before recruiting. A common mistake that most big businesses make is that they list IT as outsourcing. For big brands, online transactions take place most of the time. Therefore, investing a little in an Insourcing IT team is worthwhile in the long run.

Cost

Yes, expense is one of the most important points to consider. Different methods mean different types of cost.

For Insourcing, you have to pay for:

  • Salary
  • Tax
  • Pension contributions
  • Office and IT expense
  • Recruitment and training

And when you go for Outsourcing, you just pay for the other firm’s service. We are not saying that it is less expensive. You see, the more complex is your need, the more costly. The Outsourcing expense already covers expert fee, high tech tools, IaaS, SaaS team salary or so. All the associated costs are taken care of until when the contract ends.

In short, regarding your budget, Insourcing is more suitable for long-term needs while Outsourcing fits short-term projects. Keep this in mind as you don’t want to over or under spend your money.

insourcing vs outsourcing
Outsourcing vs Insourcing

Duration

The traditional Insourcing will take much longer time to fully recruit a team. Why? You will need to upload recruitment notice on multiple sites, receive CVs, then hold interviews, and lastly, train them. Sometimes, the process even takes months to accomplish its goal of having an effective in-house team.

Luckily, Outsourcing developers are always there to help you. With the booming figure of IT freelancers and IT Outsourcing agencies, your project can be well-done in no time. 

If you want to know the ultimate ways to find a perfect IT Outsourcing company, check out this article!

Skill requirements

Within an Insourcing team, a criteria that you should put into consideration is the sets of skills – do they align with your existing core team? To make it simple, an insourcing team is like a body part. You need to have the similar, if not, the exactly same cooperating system with other parts to have your body motioned, right? That is why the insourcing skill sets are the top priority.

With the same example, Outsourcing is similar to ‘clothes’ which adds extra functions. The skills required are non-core. In other words, the skills are not essential to the company in the long run. BUT, that does not mean hiring any outsourcing companies you see, you still need to examine each one’s experience.

Risks

So far, you have seen that outsourcing does slightly have an edge over insourcing. But it also comes with more risks:

  • DATA PRIVACY

As the data and information is shared between the parties, the third parties must assure you that all data is safely secured. In fact, they must have the privacy terms in the contract already. When outsourcing, managing risks is what you have to be extra cautious of.

  • QUALITY CONTROL

What is the outsourcing company does not meet your expectations? This is where Insourcing takes the lead. That’s why choosing an outsourcing agency can simply make or break your business.

insourcing outsourcing risk
Outsourcing is a little more risky!

You must have realized by now that Outsourcing is slightly more beneficial than Insourcing. This particular part recaps all Outsourcing pros and cons only so that you can have a deeper insight into it!

Pros

  1. Cost-effectiveness: it saves lots of expense on tools and staffing.
  2. Flexibility: as talented IT Outsourcing experts are numerous, their expert ability and flexibility will lead to outstanding results.
  3. On-time and On-budget outcome: needless to say, they are hired to meet your demand and will do as in the contract.

Cons

  1. Security: the private data is no longer exclusive to your firm.
  2. Control Loss: irresponsible outsourcing agencies can break your business.
  3. Lack of business understanding: because two parties are in charge of two different areas, the outsourcing agency will find it hard to follow your objectives
  4. Unplanned Cost: is rather rare, but it’s still a possibility.
insourcing and outsourcing
About Outsourcing

Is there a hybrid solution? Recap: Insourcing vs Outsourcing

It is wise to think outside the box – how about combining Insourcing and Outsourcing? To answer, it is totally available. After having a core team, you can further train your staff and hire an outsourcing party at the same time.

Outsourcing is more cost-effective and its software development will surely boost profits and sales. For more info, check out our Outsourcing software development article now!

To sum up,

  • Insourcing is better if you need a core team for long-term objectives
  • Outsourcing is better if you need a fast, creative non-core team for multiple projects

Want to find the perfect Outsourcing agency? Contact ArrowHiTech NOW!

If you are still new and still struggling, perhaps hiring an expert is the best option. ArrowHitech has become one of the superior IT outsourcing Vietnam company. We are experienced professionals in the field of  ECommerce, Web/mobile apps, CMS website development as well as Salesforce and Software Consultant & Development.

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