Outsourcing/ In-sourcing

Choosing between the outsourcing and In-sourcing its really hard for me to decide. But let’s us see what will be my stand after discussing this topic. Let’s me first define in-source and out-source. The Second, advantages and disadvantages of both for me to decide weather I stand in outsourcing or In-sourcing,
What is Insourcing?

The opposite of outsourcing can be defined as in-sourcing. When an organization delegates its work to another entity, which is internal yet not a part of the organization, it is termed as in-sourcing. The internal entity will usually have a specialized team who will be proficient in the providing the required services. Organizations sometimes opt for in-sourcing because it enables them to maintain a better control of what they outsource. In-sourcing has also come to be defined as transferring work from one organization to another organization which is located within the same country. In-sourcing can also mean an organization building a new business centre or facility which would specialize in a particular service or product.
Organizations involved in production usually opt for in-sourcing in order to cut down the cost of labor and taxes amongst others. The trend towards in-sourcing has increased since the year 2006. Organizations who have been dissatisfied with outsourcing have moved towards in-sourcing. Some organizations feel that they can have better customer support and better control over the work outsourced by in-sourcing their work rather than outsourcing it. According to recent studies, there is more wok in-sourced than outsourced in the U.S and U.K. These countries are currently largest outsourcers in the world. The U.S and U.K outsource and in-source work equally.

To make it shot, in-sourcing is a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems.

What is Outsourcing?

Outsourcing began in the early eighties when organizations started delegating their non-core functions to an external organization that was specialized in providing a particular service, function or product. In outsourcing, the external organization would take on the management of the outsourced function.
Most organizations choose outsourcing because outsourcing offers a lot of advantages. When organizations outsource to countries like India, they benefit from lower costs and high-quality services. Moreover organizations can concentrate more on core functions once they outsource their non-core functions. Outsourcing can also help organizations make better use of their resources, time and infrastructure.
In outsourcing, the outsourcer and the outsourcing partner have a greater relationship when compared to the relationship between a buyer and a seller. In outsourcing, the outsourcer trusts the outsourcing partner with vital information. Outsourcing is no longer confined to the outsourcing of IT services. Outsourcers in the US and UK now outsource financial services, engineering services, creative services, data entry services and much more.
Most organizations are opting to outsource because outsourcing enables organizations to access intellectual capital, focus on core competencies, shorten the delivery cycle time and reduce costs significantly. Organizations feel outsourcing is an effective business strategy to help improve their business.

Outsourcing is an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house.


The Advantages of outsourcing:

• Outsourcing your non-core activities will give you more time to concentrate on your core business processes

• Off shoring can give you access to professional, expert and high-quality services
• With outsourcing your organization can experience increased efficiency and
• Productivity in non-core business processes

• Outsourcing can help you streamline your business operations

• Offshore outsourcing can help you save on time, effort, manpower, operating
• Costs and training costs amongst others

• Outsourcing can make your organization more flexible to change

• You can experience an increased control of your business with outsourcing

• Your organization can save on investing in the latest technology, software and infrastructure as your outsourcing partner would be investing in these

• Outsourcing can give you assurance that your business processes are being carried out efficiently, proficiently and within a fast turnaround time

• Off shoring can help your organization save on capital expenditures

• By outsourcing, your company can save on management problems as your offshore partner will be managing the team who does your work

• By outsourcing, you can cater to the new and challenging demands of your customers

• Outsourcing can help your organization to free up its cash flow

• Sharing your business risks is possible with outsourcing

• Outsourcing can give your business a competitive advantage as you will be able to increase productivity in all the areas of your business

• Outsourcing can help your organization to cut is operational costs to more than half.

In addition to the above mentioned benefits on outsourcing, I have here some to take on consideration:
• Ability to focus on core competencies. By handing over noncore activities to a trusted third party, a company can concentrate on activities central to its value proposition and increase its competitive positioning.

• Faster and higher-quality service and improved efficiency. Vendors’ economies of scale, combined with service level guarantees, translate into increased operational efficiency for a company. For
Example, outsourcing vendors typically offer service level agreements (SLAs) for availability of at least 99.9%, and many include financial penalties for downtime. Along with higher-quality service, many
Outsourcers claim to reduce cost of management by up to 25%.

• Access to new skills and technology. Outsourcing gives a company access to resources not available internally, such as modern, up-todate technology and skilled human capital.

• Greater flexibility. The flexibility gained through outsourcing helps a company react quickly to changing market conditions, fluctuating demand cycles, and increased competition.

• Staff reallocation. Personnel whose job responsibilities are reduced or eliminated by outsourcing can be reassigned to other, more strategic tasks.

• Lower long-term capital investments. In a typical IS outsourcing contract, the vendor takes ownership of and responsibility for managing all or part of the client’s IS operations or infrastructure, thus eliminating the client’s ongoing investments in computer equipment. The capital funds previously allocated for computer equipment are freed for spending elsewhere.

• Improved predictability of costs. Outsourcing provides a company with predictable yearly costs for the management of all or part of the IS infrastructure.

• Assistance with organizational changes. A third-party IT service firm can help build new infrastructures or merge two existing infrastructures during or shortly after a merger, acquisition, or
joint venture.

• Assistance with globalization. A company looking to move into international markets can rely on a global outsourcer for assistance in broadening infrastructure and operational reach.

The Disadvantages of Outsourcing
• At times, it is more cost-effective to conduct a particular business process, rather than outsourcing it

• While outsourcing services such as payroll processing services and tax preparation services, your outsourcing provider will be able to see your company’s confidential information and hence there is a threat to security and confidentiality in outsourcing

• When you begin to outsource your business processes, you might find it difficult to manage the offshore provider when compared to managing processes within your organization

• Off shoring can create potential redundancies for your organization

• In case, your offshore service provider becomes bankrupt or goes out of business, your organization will have to immediately move your business processes in-house or find another outsourcing provider

• The employees in your organization might not like the idea of you outsourcing your processes and they might express lack of interest or lack of quality at work

• Your outsourcing provider might not be only providing services for your organization. Since your provider might be catering to the needs of several companies, there might be not be complete devotion to you and your company

• By outsourcing, you might forget to cater to the needs of your valuable customers as your focus will be on the business process that is outsourced

• In outsourcing, you may lose your control over the process that is outsourced

• Outsourcing, though cost-effective, might have hidden costs, such as the legal costs incurred while signing a contract between companies. You might also have to spend a lot of time and effort in getting the contract signed

• With outsourcing, your organization might suffer from a lack of customer focus

• There can be several disadvantages in outsourcing, such as, renewing contracts, misunderstanding of the contract, lack of communication, poor quality and delayed services amongst others.

The advantages of in-sourcing:

Low risk is perhaps the primary advantage of insourcing: Direct control over the resources doing the work permits better control over the results. An internal LPM directly coordinates and manages each activity with resources that can be in nearby offices. In this model, the people doing the work also directly coordinate it.

Direct control over the localization resources can produce noticeable cost savings. At one point when employing the total out-sourcing model, we discovered we were paying for as many as six levels of management and coordination on a project—the files, instructions, and other information passed through six other people on the supplier end before reaching the linguist
doing the translation. One can easily understand why messages were so different by the time the worker received them. Direct control of the resources also allows greater flexibility over such factors as resource utilization, staff selection, and labor cost. For example, paying a higher
wage to linguistic resources may result in lower workforce turn-over, higher quality, and a greater ROI (return on investment).

Factors to consider include:

• Reduce recurring costs associated with managing a Help Desk including staffing and training
• Improve service levels and increase professionalism among Help Desk staff
• Realign your staffing as necessary
• Take advantage of existing Help Desk infrastructure and recent call management software implementation
• Predictable monthly service charge for service

• Scalable
• Company retains control
• Company owns technology and data
• Direct knowledge transfer of best practices to your company
Pros
• Scalable
• Company retains control
• Company owns technology and data
• Direct knowledge transfer of best practices to your company
• Allows 2nd Level Support to focus on more difficult technical problems


The Disadvantages of In-housing

A potential major disadvantage is the sheer volume of personnel needed to meet the localization requirement. This model can be perfectly viable when localizing into
just a few languages but becomes less so—if not economically infeasible—when localizing products into many languages.

Factors to consider include:

• Work frequency in each language – in-house personnel must have enough work on a regular
basis to remain cost effective.
• Infrastructure – in-house personnel need offices, computers, telephones, office supplies, and so forth to function properly. The key to success is keeping these resources utilized on value-add activities. Under-utilization means excess capacity that can quickly consume the savings that insourcing provides over out-sourcing.

• Will require significant staff changes
• Must invest time in management of insourcing company
• Investment in technology and process
• Facility and technology must be provided and managed by your company

Cons
• Will require significant staff changes
• Must invest time in management of in sourcing company
• Investment in technology and process
• Facility and technology must be provided and managed by your company


What is best for our organization?

Here are some tips for us to be able to decide on what to choose: insource or outsource.

• If your organization has a number of non-core processes which are taking plenty of time, effort and resources to perform in-house, it would be wise to outsource these non-core functions. Outsourcing in this case, would help you save on time, effort, manpower and would also aid you in making quicker deliveries to your customers.

• If you require expertise services in areas which do not fall under your core competency, then outsourcing will be a good option as you can get access to expertise services. For reducing costs and making faster deliverables, outsourcing is again a good option.
• If your work involves production, then it would be more ideal for your organization to opt for insourcing, as you can save on transportation costs and exercise a better control over your project.


Hybrid Model

As I had doing my researches with this topic I had discover that we can do three approaches to project resourcing; out-sourcing (using external agencies), insourcing (using internal resources), or a combination of the two, we can called the hybrid model. Intel IT has adopted a hybrid model that combines the advantages of both out-sourcing and in-sourcing. But Intel IT uses this approach for large corporations whose documents require localization.

This approach may not applicable to our school as it stated above it is used in large corporation or big organizations or companies. But I just want it to include to this topic.


Hybrid Model

Historically, large corporations often vacillate between total out-sourcing and total in-sourcing. While these shifts may seem appropriate based on changing economic factors, constant switching adds costs and delays the return on the investment each time it occurs. Intel IT has adopted a successful hybrid approach that has helped break this cycle.

A hybrid model combines in-sourcing and out-sourcing and is configured to meet the localization project’s specific needs. We constructed the Intel Linguistic Services (ILS) as part of our localization effort. ILS consists of a large,
worldwide network of freelance linguists covering over 30 languages. ILS also maintains a few in-house linguists for the core (high demand) languages. Translators, editors, desktop publishers, and so forth populate the freelance base according to language specific needs. Most freelancers reside in the target countries to ensure their work conforms to the latest vocabulary and cultural adaptations.

The small number of in-house linguists provides overall direction, consistency, consulting, and advanced expertise in their respective languages.

Advantages

Advantages to this hybrid model include:

• High resource utilization – freelance base works on an as-needed basis, avoiding the possibility of large amounts of excess capacity sitting unused.
• Competitive cost – freelance base is PPV and allows us to directly contact the workforce, saving middle-man costs.
• Managed risk – direct access gives us greater control of the quality and timeliness of our deliverables.

We use a simple database to track all of these efforts. Our LPMs use the database to access individual name, language, contact information, quality rating, and other data. For payroll issues, we hire individual freelancers through sponsoring suppliers that handle most of the payroll activities.

Disadvantages

Managing individual assignments for so many workers is certainly more effort for the project manager than under a total out-sourcing model. Internal localization teams are responsible for understanding and handling such factors as individual availability and the no-work holidays of specific countries. This duty requires a more intensive ability and overall discipline to organize and track data than out-sourcing requires. Managing a network of freelancers also requires in depth skills in mass communication and management. At times, style guides, encryption keys, and other kinds of non-project specific information must go out to the entire network.

In a large corporate environment, a company has three models for completing its localization projects. Intel IT developed and adopted a hybrid model that combines in-house linguists with a worldwide network of freelance
resources. This combination optimizes risk management, resource utilization, and cost savings. Depending on the scope of work and number of target languages, this model may be well suited for implementation at other large companies whose content requires localization.

My opinion:

There is a big debate going on at the moment and people are constantly arguing whether or not it is better to outsource or to in-source. Even me I still get confuse with is best and preferable to apply in our school. We can mention a lot of good reasons and bad reasons for both at the end of the day what is important stand in our own personal needs.

If I have to look above In-sourcing is gives a lot of benefits to the company but let us look or defined what kind of organization that we are trying to criticize. The University of Southeastern Philippines (USEP) is a state university owned and controlled by the Philippine government. Meaning the USEP is a centralized organization. They can not decide or easily approved the budget for their system. In outsourcing although it is so expensive but in the long run they can save in outsourcing.
For me the best way for the USEP is to outsource their system. It’s hard for the faculty and Staff of the IC to program at same time teaching, If the university will suggest to In-source their system possible for them to add a new employee which to expensive for the government in the long run.
That’s all about this topic. See you guy’s for the next topic…. Thank you for reading!!!

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