Insourcing vs Outsourcing

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Written by admin

July 29, 2016

Insourcing vs Outsourcing

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Overseas outsourcing promises fast work that is significantly cheaper than what may be around you. Many businesses are already making use of the cheaper costs that outsourcing offers. However, outsourcing has it’s own challenges too. A recent survey found that 62% of offshore IT contracts cost much more than businesses expected. You will need to speak the language or find someone you can trust to speak on your behalf. You will not have as much oversight as you would if you were building it yourself, so quality of the product becomes an issue. You have to worry about trusting the outsourced company in handling your confidential information. You also have to worry about international laws. If you are not clear with your directions you will almost always end up with a project that takes a longer time than you planned. A survey found that 77% of IT staff say their outsourced invent work for profit. These items, and many more, need to be thought through and addressed when making the decision of whether or not to outsource your business.

    The many benefits companies find from outsourcing come from the rising costs of business within the states.  If you look at some of the tech companies in San Francisco, you’ll realize you may never be able to do business with them because the cost is prohibitive. This holds true for not just Silicon Valley, but for almost all tech companies on either coast. The overhead costs for their business determine the rate a business has to charge to make a profit. It’s simple business math. 

There is another option that is more recently being looked at and that is  insourcing within the Midwest. Insourcing allows a company to use it’s own relationships and resources to build their products without the cons of outsourcing but with some of the same benefits companies find from outsourcing their business. All the things that raise business rates/costs on the coasts are cheaper in the Midwest. Projects can be done for less but still with the same amount of work and effort to achieve the same product. You would need $3,615 in Kansas City to maintain the same standard of life you would have in Los Angeles with $5,300 according to numbeo.com. Because of this consumer prices in Kansas City are 14.11% lower than in Los Angeles. It is because of costs on the coasts that drive businesses to charge more for the same product. An example of this would be coffee. The same cup of coffee, same size, same brew, same add-ons will cost you more on the coasts than it would in the Midwest. It is because of these costs of doing business on the coasts that the rates/costs are higher.

    In conclusion, you may find what appears to be cheap options while outsourcing but you take big risks. Many benefits come from insourcing from the Midwest, but it is important to weigh all your options.