Can you outsource or insource activities to change your business model and achieve a competitive advantage? Outsourcing is a term used in economics to describe the transfer of corporate responsibilities and structures to external service providers. It is a type of external procurement of a previously delivered internal service in which contracts specify the duration and scope of the service. Outsourcing is distinct from other types of partnerships because of this. The reintegration of previously outsourced processes and functions (outsourcing) into the organization is known as insourcing, backsourcing, or reinsourcing.

When and how to apply Outsourcing / Insourcing:

Outsourcing is the process of contracting with a non-affiliated outside organization to complete specific tasks. Insourcing, on the other hand, is a business practice conducted within an organization's operational infrastructure. The primary distinction between outsourcing and insourcing is the manner in which work, projects, or tasks are strategically divided between various companies and departments.

Outsourcing:

Through outsourcing, businesses are able to concentrate on their core competencies. Thus, outsourcing non-core activities can increase productivity and efficiency. In addition, outsourcing can have an impact on customer service, manufacturing, technology, and back office positions.

When deciding between outsourcing and insourcing, the organization's operational and decisional control will vary. Organizations that outsource a particular service or manufacturing process have minimal managerial control over the methods employed by the external organization. A company that is known for its excellent customer service, for instance, is unable to enforce or manage how an external support center interacts with customers.

Insourcing:

Insourcing involves assigning a project to an internal employee or department, as opposed to bringing in a third party. It utilizes the organization's developed resources to accomplish tasks or achieve a goal. For instance, a company may insource technical support for a new product if it already has technical support for another product.

Moreover, insourcing typically involves bringing new operations and processes in-house. Insourcing can be more expensive for a business because it frequently requires the implementation of new processes in order to launch a new division within the organization.

Well-known companies that use this pattern are Burger King and Ducati.