Insourcing An Interesting Concept

I recently read an article (unfortunately I can’t find the URL) that spoke about a phenomenon called Insourcing. I tried to look it up later, and found a number of pages discussing a variety of things, and even the great-resource-that-is had nothing about the subject.

In short, the article spoke about a different type of outsourcing.

Outsourcing is when you take a specific job or role, and have a third-party supplier provide that service to you. You then integrate the results into your own business, or resell/repackage it for your own clients. This is nothing new. It provides you with a way to provide additional services, at a lower cost, and it easily allows you to switch between providers (i.e. hire people internally to replace the position, or switch to a different supplier). In this method, there’s?a single entry and exit point, and interface is minimized.

Insourcing, on the other hand, requires having another business integrate itself into your own business’s practices so thoroughly, that neither you nor your company can tell that there’s another company involved. This allows each company to better focus on what they do best, while forming a much tighter bond between each of the companies involved, as it requires a more significant commitment from both.

The example that was given was one regarding Toshiba and UPS. When you call up Toshiba for a repair – they tell you that a UPS truck will pickup the computer, and take it to the repair center. What you don’t know is that UPS takes it to their own centre, where Toshiba-trained technicians perform the repair, then return it to you. In this method, Toshiba could take advantage of UPS’s existing systems (providing a faster turn-around time for their clients) and allow Toshiba to focus on product creation, rather than repairs.

There are many more examples of insourcing avaialable online, however from this point, it begs the question: why aren’t more companies trying to provide insourcing services?

The anwers are that it’s difficult to integrate yourself so closely, and it’s time consuming.

However, I believe that if a business made a concerted effort to provide such services, in the north american market, they could do quite well. People are becoming more and more frustrated with the trend to outsource to other countries, and I believe they would be open to stronger “insourcing” relationships here within North America.

Joseph

VP HCM Products at NetSuite and Founder of TribeHR and Lewis Media. Waterloo Region Enthusiast and active volunteer.

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