Exploring the Outsourcing-Insourcing Debate

Introduction

For a number of businesses, outsourcing activities to low-cost external partners or to different geographical locations is the answer to their resource and budget problems. For other organizations, especially those, that boast a strong internal network; “insourcing” activities is a more preferred option. Insourcing is defined as a process which makes use of existing resources in order to deal with a specific situation or problem. The decision to outsource or insource forms a substantial part of the professional procurement strategy. The final choice is based not only on financial metrics but also on strategic harmony of the decision with the competitive position of the organization.

Critical Analysis

We know that outsourcing has been a popular trend since the past two decades, the basic purpose behind which was to maintain a vital focus on the core activities. Insourcing on the other hand is a relatively new concept which is hindered by a plethora of issues such as recruitment, specialists' identification and training etc. Consequently, with all these issues and their requirements, the costs associated with insourcing too, rise (Computerworld, 1994). The reason why insourcing has gained the attention of a number of businesses currently is perhaps due to the fact that it establishes two-way communication channels for the company.

Analyzing Outsourcing Disasters

While a well managed outsourcing contract can enable an organization to spur its growth, the absence of the same will lead to increase in costs. In some cases, outsourcing will also result in staff being destabilized and increase of costs. A high degree of outsourcing failures is also felt in information systems or in companies that wish to cater to their core competencies only. Outsourcing their data centers to other providers is a critical scenario where the management of sensitive data is far more difficult. A number of cases and incidences have been reported where banal happening have turned into severe emergencies. For example, a mere explosion of a transformer in Los angles resulted in power cut off of some of the major data centers in the same building. With compromised systems, there lies a high risk of employees and hackers into breaking into the network systems to damage or misuse utile data (Castelli, 2009). Problems in outsourcing are no new concept to the realm of businesses. Studies reveal that over half of such contracts are critically re-evaluated and renegotiated. Equally startling statistics are found in contracts being terminated. Outsourcing, if not managed and handled properly will result in increased incidence of litigation and arbitration. A number of companies have to face issues pertaining to failed outsources contracts and agreements thus impacting their overall productivity and processes.

Research suggests that the prime reason outsourced projects fail to bring the desired results to their customers is because the corporate culture tends to view the outside expert with far more reliability and trust as compared to internal partners. This results in a number of projects being “sold high” to the top management levels. Unless a project is evaluated for its feasibility ...