In-House Vs. Outsourcing: A Process for Analysis

Jul 19, 2013

Terry Brokamp
LinkedIn

It’s a question every company faces with any new initiative or strategy shift that may require new or different skills and resources: Should we keep it in-house or are we better off paying someone else to do it? Sometimes arriving at an answer doesn’t take more than two seconds of thought. Other times, more due diligence is called for, and that’s what we’re going to examine in today’s post. I think there are four areas of analysis businesses need to consider when deciding whether or not to keep work in-house or look outside the company: core competencies, personnel, other resources (equipment, machinery, software, etc…) and financial impact/cost.

7-19-13_thumbCore competencies
The first question you need to answer (aside from the main question of this post) ties directly back to the core competencies of your company. Is the new work or initiative you are considering in line with your core business competencies? To put it another way, will it divert the focus of your business and your people away from what they do best? To use an example on an individual scale, it doesn’t make sense for a sales person to spend time designing and building his or her own email marketing tool. That’s time spent not working leads, and no matter how great it would be to have an email marketing program built to 100% custom-fit specifications, it’s just not worth the effort with so many other viable options on the market. That example segues nicely into our second area of analysis…

Personnel
If you keep the work in-house, who has the knowledge and expertise to get the job done? Additionally, who will have the time to commit to the job? The concept of focusing on core competencies plays a role here as well. If you’re going to go the in-house route, you need to follow employees and production closely to ensure the additional functions and responsibilities aren’t detracting from their ability to fulfill their primary duties effectively. The alternative to assigning the initiative to current staff is to bring on additional staff, but more on that later.

Other (non-human) resources
This area of analysis involves assessing your capabilities from a (non-human) resources perspective. What are the demands of the initiative from a software, technology and equipment standpoint? Do you have everything you need or will you need to invest in additional resources to expand your capabilities? This ties back to the personnel perspective as well: If you bring on new software/technology/equipment, does your current personnel have the expertise and knowledge to use it?

Financial impact and cost
This is the biggie (and I’m sure you saw it coming). Cost touches on every previous mentioned area, but is worth dedicating its own, longer section in this post to. From a personnel standpoint, you have to consider the financial burden of training current employees on new skills and the comparatively higher cost of hire and on-boarding new employees versus outsourcing. When it comes to resources, sticker price, long-term maintenance and long-term viability all need to be taken into consideration.

Working in print production, I’ve seen this particular issue in play time and time again from all sides of the spectrum. A company will buy a piece of equipment to do a certain type of printing in-house and in a couple of years, due to advances in technology, that purchase is rendered irrelevant and they’re left with a giant, expensive paperweight that hasn’t paid itself off yet. From the other side of our business, we’ve seen the same hold true with marketing software and technology. A company will invest in coding its own programs, but quickly finds support and keeping up to speed with advancing technology and concepts overwhelming.

So what’s a company to do?
Every case is unique, but these four areas of analysis should give you a jumping-off point when considering keeping an initiative in-house or looking outside the company. Certainly companies have found success and failure in both, so make sure you do your due diligence and consider all of the above factors, including any specific to your unique situation, before you make a decision.

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Tags: Blog, printing, human resources, technology, core competencies, personnel, marketing systems

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