What is “Insourcing?”

Posted by Jim Stroud

February 6, 2008

Somebody asked me the other day about “insourcing” and had it slightly confused with Outsourcing; so, I thought I would do a write-up on it for those who may be unaware.

From Wikipedia:

Insourcing is the opposite of outsourcing; that is insourcing (or contracting in) is often defined as the delegation of operations or jobs from production within a business to an internal (but ’stand-alone’) entity (such as a subcontractor) that specializes in that operation. Insourcing is a business decision that is often made to maintain control of certain critical production or competencies. An alternate use of the term implies transferring jobs to within the country where the term is used, either by hiring local subcontractors or building a facility.

Insourcing is widely used in an area such as production to reduce costs of taxes, labor (e.g., American labor is often cheaper than European labor), transportation, etc.

Insourcing at United Parcel Service (UPS) was described in the bestselling book The World Is Flat, by Thomas Friedman.

According to PR Web, insourcing was becoming more common by 2006 as businesses had less than satisfactory experiences with outsourcing (including customer support). Many outsourcing proponents responded to a negative consumer opinion backlash resulting from outsourcing their communications management to vendors who rely on overseas operations.

To those who are concerned that nations may be losing a net amount of jobs due to outsourcing, some point out that insourcing also occurs. According to a study by Mary Amiti and Shang-Jin Wei, in the United States, the United Kingdom, and many other industrialized countries more jobs are insourced than outsourced. They found that out of all the countries in the world they studied, the U.S. and the U.K. actually have the largest net trade surpluses in business services. However, some other countries, such as Indonesia, Germany and Ireland have a net deficit in business services.[1]

Insourcing is loosely referred in call centers who are doing the work of the outsourcing companies. Companies that outsource include Dell, Hewlett Packard, Symantec, and Linksys. The callcenters and technicians that are contracted to handle the outsourced work are usually over-seas. Customers may refer to these countries as “Hindu” or “India” technical support if they are hard to understand over telecommunications. These insourcing companies were a great way to save money for the outsourcing of work, but quality varies, and poor performance has sometimes harmed the reputations of companies who provide 24/7 customer/technical support.

ADDITIONAL RESOURCES