Insourcing and Implementation
Insourcing refers to the internal allocation of business activities within an organization (Schniederjans and Schniederjans, 2005). Thus, the services to be provided are normally done by an internal department in the organization. Organizations choose to insource their business processes when they feel they have the capacity to run their business processes satisfactory and efficiently (Sounderpandian and Sinha, 2007). Additionally, organizations will choose to insource their business process in cases where they want retain certain skills in their organizations. This is especially the case where the skills give the organization a competitive advantage over its business rivals (Sounderpandian and Sinha, 2007). Further, insourcing allows the organization to identify any deficiencies in the business process and find solutions to them to promote better business practices.
Strengths of Insourcing
Business or organizations that require the use of specific skills or specialized knowledge use insourcing owing to the level of effective execution it brings. According to Sounderpandian and Sinha (2007), outsourcing such services may take much of the organizations time and effort and may in most cases compromise the confidentiality of the organization if the business process involves essential knowledge about the organization. Secondly, insourcing will allow the management of the organization to have more control over assets and resources that are used in the various business processes, which may help the organization in cutting costs. The organization can control its production activity. Furthermore, insourcing reduces the risk of an external service provider developing opportunistic behavior. The external service provider may reap benefits at the expense of the organization that has hired it. Thirdly, insourcing is recommended when uncertainty related to the business process is high (Sounderpandian and Sinha, 2007). Further, insourcing reduces the chances of intellectual property rights violation, which is commonly associated with outsourcing. Certain business activities are only best executed through insourcing. In cases where suppliers of services are absent, the only option the business has is to insource their business processes (Sounderpandian and Sinha, 2007).
Weaknesses of Insourcing
Organizations that engage in insourcing find it difficult to compete with organizations that outsource (Schniederjans and Schniederjans, 2005). Further insourcing has a higher level of labor costs relative to the outsourcing competition.
Outsourcing and Implementation
Outsourcing refers to the process where an organization shifts certain internal activities and decisions responsibilities to an outside supplier or vendor (Schniederjans and Schniederjans, 2005). Organizations outsource activities that require expertise and re best performed by outside service providers.
Strengths of Outsourcing
Outsourcing offers the organization several cost related advantages. The outside provider may help reduce the cost of the business processes for the organization based on certain economies of scale that the outside vendor enjoys. Further, the organization saves capital expenditure, which may have been required to invest in new technologies and infrastructure. Further, since the outsourcing contract is offered to several bidders who provide estimates of cost, the hiring organization can be able to have a clearer picture of the amount of cost the outsourcing will cost, and this may be helpful in assessing whether or not to outsource the activity. An organization can choose to outsource certain business activities hence provide more time and effort in focusing on its fundamental functions. Additionally, outsourcing helps in increasing the flexibility of managing the labor in an organization (Sounderpandian and Sinha, 2007). Most of the outsourcing providers apply business models that increase the competitive advantage hence the client organization can reap the benefits of quality service.
Weaknesses of Outsourcing
Possible cost of outsourcing to the client organization is the loss of control of production activities (Schniederjans and Schniederjans, 2005). Further, accounting problems may develop from outsourcing and employees may develop resentments when the activities being outsourced could have been easily handled inside the organization.
Self-Sourcing and Implementation
Self-sourcing refers to a situation where an organization may use its employees to do certain activities that were not in their job description (Gimenez, 2007). Organizations, which engage in self-sourcing, are normally targeting to cut cost of hiring experts to do certain business activities for the organization.
Strengths of Self-Sourcing
Self-sourcing helps an organization to reduce labor costs. Self-sourced business activities may use of the existing technology and infrastructure in the organization hence save on capital expenditure.
Weaknesses
Reduces skilled labor and may reduce the efficiency and quality of service offered by an organization.
Making a choice between Insourcing, Outsourcing and Self-sourcing
Selecting whether to use insourcing, outsourcing, or self-sourcing depends on the organizations strategic importance and relative efficiency of the business process or activity. Insourcing is recommended when the strategic importance and relative efficiency are high (Sounderpandian and Sinha, 2007). On the other hand, when the strategic importance and relative efficiency are low outsourcing is recommended. Additionally the costs of insourcing relative to outsourcing or self-sourcing also need to be considered in cases where the strategic importance and relative efficiency vary.
Comparison of strengths and Weaknesses
Insourcing
Outsourcing
Self-sourcing
References
Gimenez, M. E. (2007). Self-Sourcing: How Corporations Get Us to Work Without. Monthly
Review, 59(7).
Schniederjans, M., & Schniederjans, D. (2005). Outsourcing and Insourcing in an International
Context. New York: M.E. Sharpe.
Sounderpandian, J., & Sinha, T. (2007). E-business process management technologies and
Solutions. Hershey: Idea Group Pub.
