IT Outsourcing

IT Outsourcing vs. Insourcing: How to Choose the Right Strategy

Outsourcing – transfer by the enterprise under the contract to the external executor of basic functions of the organization and management of processes.

The methodology of insourcing is the opposite of outsourcing and involves the inclusion in the organizational structure of the company’s own resources. However, turning to outsourcing, the enterprise faces the problem of liquidating its own unit, performing a certain operation, planned to be transferred to an external executor or the need to re-engineer existing business processes. If the internal division is competitive and constantly improves its efficiency, then the enterprise should keep its own insourcing.

Each direction has its positive and negative sides. At the same time, the choice of one of the directions doesn’t at all imply a rejection of the other or a complete replacement of the other. In practice, it is possible to transfer only part of the functions to third-party performers-intermediaries, while retaining the remaining ones, in certain conditions, an optimal combination of outsourcing and the insourcing of individual services is effective.

The enterprise has two areas of process optimization: by its own forces (insourcing) to perform separate operations or by exploiting outsourced resources (outsourcing).

But not always the use of outsourcing brings the enterprise the expected benefits. This is largely due to strategic mistakes in implementing outsourcing, a lack of understanding of its principles or incorrect interpretation of them. A company that intends to outsource must clearly understand the opportunities and risks of its application. Since transferring the performance of certain operations to their external executor, it is crucial to identify not only the positive but also negative consequences of such a decision, its impact on other business transactions that are managed by the company, as well as the increase of dependence on the partner, the problem of coordinating the actions of the participants.

In the conditions of market relations, any organization can decide for itself whether to transfer to contract logistics or independently to solve all the issues related. However, when choosing a business partner, it is absolutely necessary to formulate a number of requirements for the outsourcing company:

  1. A recognized expert in this field;
  2. A customer-oriented and value its customer;
  3. Demonstrate the innovative approach to the work, focusing both on customer satisfaction and on reducing the cost of services provided;
  4. Introduce modern technologies and info tools;
  5. Regularly carry out benchmarking in order to study the experience of other market participants;
  6. Expand the range of services provided and find opportunities to optimize the costs of their customers.

The concept of outsourcing has recently become more widespread in the activities of companies, as it reflects the generally recognized global trends in the division of resources and deepening the specialization of service providers.


Igor Grigorenko

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