Insourcing is a big strategic decision to do work using in house teams, the opposite of outsourcing. What’s involved in getting your business ready?
Every business is different, each process is unique, yet the general approach to insourcing is consistent across industries.
This article examines three areas. The first are the metrics to keep an eye on when developing your plan. Next are the pitfalls that might affect your plans. Finally some opportunities you might avail of as you proceed.
No one knows your business better than you but a few sense checks never hurt.
- The numbers
- Making the most of change
- Wrap up
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Whats in the name?
There are two postfixes here “-sourcing” and “-shoring”. The -sourcing is which company is doing the work. The -shoring relates to which country does the work.
- Insourcing: Deciding to give the work to an internal department.
- Outsourcing: Giving the work to another company to do.
- Backsourcing: Refers to bringing previously outsourced activities back in-house.
- Remote insourcing: Work in-house but from remote facilities / virtual facilities / home
- Offshoring: Outsourcing to a company in another country.
- Onshoring / backshoring / reshoring: Bringing work back from overseas to give to either do by insourcing or outsourcing but in the same country.
- Offshore insourcing: Creating a business unit as part of the company but basing it overseas. Potentially cheaper surroundings yet total control.
Strategic decision making
Deciding where your work will be done for the next three to five years is a massive decision and potentially the make or breaking of your business.
Being able to make clear, rational, emotion free decisions requires help.
That help comes in the form of numbers. Cold hard metrics which enable your discussions not facilitate your feelings.
With insourcing there are two separate discussions to be had. Each is separate and distinct.
- Sourcing. From the business perspective which company, internally (insourcing) or externally (outsourcing) is going to facilitate the delivery of our product or service best?
- If you are insourcing, you’re creating effectively a new company, so treat it as a new company and examine the setup with the same eye.
From the first perspective you treat the process as if you were outsourcing the project.
The second requires experience and resourcefulness as starting a department / service company is quite an undertaking.
The primary metrics
How metrics help
The primary metrics help influence your decision.
If you already use a model for outsourcing then outsourcing will always be more cost effective than starting from scratch.
Finding a very strong argument for insourcing of a mature business process which has been previously outsourced can be difficult.
Yet if you have a number of resources already available thanks to other departments or previously delivering work inhouse then you can save a fortune in time and resources getting started.
The primary project metrics
- Cost: Firstly and primarily, even if it’s wooden dollars, the shareholders deserve the best return for their investments.
- Cost models: Which billing / account practice works best for your business work volume? This also gives you an idea of how much work you currently have to do.
- Time: What time window do you have to make all this work?
- Resources: People, equipment, location. What have you got and what do you need to buy? Getting effective costings requires good contacts.
The operational metrics
- Control: With it inhouse you should have total control but could the right outsourcer give you that access?
- Location: Where are you setting up and does it matter? Working from home is that an option? Location also greatly affects, tax, minimum wage, security and compliance considerations.
- Satisfaction: How the customers view this move? Asking the board and senior management their opinions doesn’t hurt either. Existing staff are predominantly going to be unhappy regardless as large scale change is afoot. Whilst future staff will be delighted to find a new role.
- Support: Depending on the size of the teams and the types of work being considered your business may be eligible for tax breaks, grants, funding and other state aid. It is important to include this thinking as it can radically change the cost calculations.
There are tools to help you assess every aspect of your decision making. Getting this information in a timely fashion is the challenge. There are tools to help in every area, don’t ignore them.
Outsourcing vs. Insourcing
Capex and Opex
In the short term, an outsourcer will have invested in their solution and have covered the capital expenditure (capex) to buy all the tools they need.
Insourcing faces that initial cost and will always lose on a pure capex basis unless there is usable kit already in the business.
Operational expenditure (opex) is where over a number of months / years, the capex costs can be redressed. As insourcing can be more cost effective with less management overhead costs.
On a capex + opex over 36 to 60 months including state aid / tax support basis you can compare like with like.
Don’t forget to include salary increases and bonus structures when insourcing. You’ll also need to put a cost on staff churn and training.
Whatever you choose write it down. This forms your strategic plan. The plan then enables everyone to work towards the goals you’re setting.
People will get distracted with lots of change going on, the plan will help them return to what’s important.
If you business operates in silos, i.e. each department works in isolation from the other then you’re perfectly set to insource or outsource.
In contrast if this is a new departure for your business, there is a massive change about to hit the business.
Finding ways of optimising inter-departmental communication and operational communication is key.
The single easiest solution is to investigate and invest in an ERP (Enterprise Resource Planning) tool which can facilitate your entire business.
Whilst this is a simple sentence to trot out getting everyone to change is going to be a challenge. Communication and a clear plan is key.
If you are insourcing you’re going to have to find people.
Depending on your volume of work, that’s going to be some or a lot of people.
Consequently working this out is a challenge.
It’s also not just the workers, you’re going to need management and support operations. Everything down to cleaners and maintenance.
You’re going to have to develop a strong Human Resources – Recruitment process.
Then couple that with a training / career pathing plan. If the business doesn’t have an ESS you should strongly consider adding it before you recruit new staff.
Quality management will probably go in last, as you’ll want to get it up and running and then worry about making it work better.
Therefore you need to plan for this as early as possible.
You’re deciding to do it all yourself but will everyone you hire / work for you know what to do?
Also, the right software platform reduces the amount of disparate approaches and centralises documentation and thinking.
Keeping everyone up to date all the time is challenging even when the operation is going smoothly.
The most effective tool I’ve seen in work is a company noticeboard, rather than emails. Using tracking you can ensure people are keeping up to date.
Surveys, questionnaires and a tracking system for feedback allows you to enumerate thoughts and ideas.
You don’t have to do everything by meeting as there are more effective ways to communicate especially when things are evolving.
Making the most of change
If you’re changing the people, the opportunity to fix, improve or create new processes is now. The mindset of everyone is change.
As a result, examining your processes if you have any, or working to refine what is already outsourced is a sensible strategy.
Also, using quality processes and procedures can quickly help you to vastly improve your products and services.
If you have the capability you should consider including gamification and motivation for the staff especially in times of change.
This might be the best time to invest in a data warehouse and take advantage of data capabilities.
Letting customers know what you’re doing is a massive marketing opportunity.
An upsell and benefit for your customers is a marketing sand box to play in.
Coupling that with self help tools through publicly accessible resources is the prime way of helping everyone through change.
Don’t just meet expectations, exceed them by giving your customers more than you currently deliver.
You’re investing the time in change, why not maximise it?
The project management related to insourcing is like building a company almost from scratch.
Are you bringing a process back inhouse? You will probably have tools and shared resources available. Consider they’re already doing work for other departments. The project is best served as if managed like you’re building from the ground up.
There is help available and there are teams who can do a lot of heavy lifting for you, internally and externally, especially if time is a key factor.
If I can help, please don’t hesitate to get in touch.
For your consideration in various areas, the people I’d turn to for a conversation and ideas are:
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|VigiTrust||Eleven||bxp software||Ultracomms||Eagle Point Partners|
|Rowan Fogarty||Albert Keating||Nick Wheeler||David Cooke||Ronan McDonnell|
|Linked In||Linked In||Linked In||Linked In||Linked In|
|Tax and accounting||IT and Support||Office fit out||Contract Cleaning|
|Contracting PLUS||IT Solutions||S&S Office Interiors||East Coast Contract Cleaning|
|Jimmy Sheehan||John Finnegan||Alan Spain||Vik Soorkia|
|Linked In||Linked In||Linked In||Linked In|
If there’s anything in this article you’d like to chat to me about you can contact me here or on social media.