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Insourcing or outsourcing for growth? How to choose

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At some stage, all growing businesses need to choose between hiring more employees or outsourcing non-core business functions. Both options have their perks and downfalls, but the bottom line comes down to the scope of your project. Is it a short-term task or is there a long-term need for this type of work? Which solution will produce more savings for your organisation? What skills do you need and how easy/difficult are they to fill? Whether you decide on insourcing or outsourcing there are four major factors to take into consideration - expertise, cost, time and flexibility.

Benefits of hiring staff in-house

More engagement

Face-to-face discussions produce more engagement among employees, which as a result may aid driving progress. Teamwork and brainstorming create new energy, which often leads to bigger ideas.

Upskilling in-house

Knowledge and skills developed by staff are kept in-house and are available for use in the future.

Knowledge of your business

Onsite employees have greater familiarity with your business's objectives and culture, which can be helpful when projects need to be finalised at speed. Having an option to talk to someone in-person can avoid doubling up of work, which can happen when briefing the external contractor.

Control over costs

Building your own operational team generally, gives you greater control over the costs. However, if you are not able to hire the skill levels and expertise needed, you may end up paying more. A salaried employee with potential for growth will also have a greater buy-in to your company.

Confidentiality

It's more likely that Intellectual property will remain confidential. You can protect your business know-how by asking your employees to sign a non-compete contract, preventing them from taking your ideas if they leave the company.

More efficient

Problems can be resolved faster by in-house teams, as they are more likely to shift their work priorities whereas an outsourced provider may have prior commitments they need to follow. Outside investors also tend to be more interested and provide higher valuations to in-house technology and teams. This can be of vital importance for companies looking to grow and in need of additional funding.

When in-house recruitment is right for you

  • You have a distinct work culture which must be evident in everything you do and everyone you work with.
  • Project/activity is a core competency of your business.
  • You are a large organisation with available funds and a robust employer brand.
  • The function involves high confidentiality or trade secrets, which could damage your business if made public.

Benefits of outsourcing non-key business functions

Access to expert opinions

Outsourcing is an ideal option for short-term or one-off projects. This way you can avail of an expert for a defined period to perform a task without a long-term financial commitment. Even if the hourly rate of the project is higher than regular employee's, not having a staff member on your books is likely to produce serious cost savings.

Specialised companies can hire experts with broad experience in various areas. Having access to experts will benefit the quality of your project.

For longer-term needs '� like accounting, HR, fulfilment, customer service or marketing activities'� you gain operational efficiencies and skills that would be difficult to replace in-house.

Easier and quicker process

Finding the right company to outsource to is easier and faster than finding a new employee. Meaning your projects can get completed quicker.

Unless you are working with a small agency, there is guaranteed continuation of work and no down time. You can also avail of competitive rates on various markets when engaging talent from anywhere in the world.

No training or equipment

Having a contract with an external company eliminates the need for the training and payment of an employee, including sick leave and vacation.

Outsourcing also eliminates the need for investment in equipment. If your role requires specialised equipment such as design tools or software, you will need to source these for an employee.

Signs that outsourcing will work better for you:

  • You are a smaller business or a start-up just establishing yourself in the market.
  • You have no certainty that the work will continue as the project finishes.
  • The function is not a core competency of your business.
  • Demand for the position is not full-time; therefore, you can't justify the cost of a permanent employee.
  • Your task is temporary, seasonal, or you need to scale it up or down quickly. Customer service is often outsourced because call centre providers are better equipped to handle high volumes of calls on demand. Other examples include tax preparation or a website redesign.
  • The task is highly specialised and requires expert skills or systems, like payroll, human resource compliance, graphic design, PPC advertising or website development.
  • The function requires a large facility, specialised equipment, or operational efficiencies of scale. Fulfilment operations are frequently outsourced due to the need to stock substantial amounts of inventory and efficient stock management.

Most companies will end up with a hybrid model of both insourcing and outsourcing. You may have marketing experts in-house and work with agencies when necessary, for example, you may outsource technical side of website development but manage your marketing campaigns internally.

There are four vital factors to in-house hiring and outsourcing: expertise, cost, time and flexibility. They should play the greatest role in how you choose between in-house recruitment and outsourcing. Deciding isn't always easy, but above lists of benefits and signs may help you to make a more informed decision.