A:

The primary difference between outsourcing and insourcing is the method in which work is divided between various companies or departments for strategic purposes. Other differences between these two business practices include control, costs, location and resources.

Insourcing is a business practice performed within an organization's operational infrastructure. Outsourcing, on the other hand, enlists the help of outside organizations not affiliated with the company to complete specific tasks. As a result, these differences effect cost, location and resource aspects of the organization, which influences decision making.

The cost associated with insourcing is different from the cost associated with outsourcing. Insourcing is typically more expensive for an organization as a result of implementing new processes to start a different division of the organization. Outsourcing uses the developed workforce of an outside organization to perform tasks.

Resources are another major difference between these two business practices. Outsourcing uses the resources of an outside organization for services and manufacturing products. Insourcing utilizes developed resources within the organization to perform tasks or to achieve a goal. For example, an organization may insource technical support for a new product as a result of having technical support setup for another product within the organization.

The organization's control over operations and decision making differs while using outsourcing and insourcing. Organizations that use outsourcing for a particular service or manufacturing process have minimal managerial control over the methods of an outside organization. For instance, an organization that is renowned for friendly customer service does not have the ability to enforce or manage how an outside support center interacts with customers.

Location is another difference between outsourcing and insourcing. Insourcing places new operations and processes on-site within the organization, whereas outsourcing involves an outside organization generally away from the primary organization's operations.

RELATED FAQS
  1. Is there a benefit to outsourcing internationally over outsourcing within the country?

    Understand the benefits of outsourcing internationally and locally for business. Learn why many businesses choose to outsource ... Read Answer >>
  2. When is outsourcing a bad alternative to vertical integration?

    There are many things to examine when considering outsourcing versus vertical integration. One reason to not outsource is ... Read Answer >>
  3. What's the difference between outsourcing and subcontracting?

    Is outsourcing the best choice for your business? Understand the differences between outsourcing and subcontracting to make ... Read Answer >>
  4. When is outsourcing preferable to vertical integration?

    Deciding between outsourcing and vertical integration can be challenging. Understand the benefits of each to make the most ... Read Answer >>
  5. Do nonprofit organizations pay taxes?

    Section 501 of the Internal Revenue Service (IRS) tax code exempts qualified nonprofit organizations from federal taxes. ... Read Answer >>
  6. What is the difference between managerial accounting and financial accounting?

    Discover the differences between managerial accounting and financial accounting. Both work in tandem to make the business ... Read Answer >>
Related Articles
  1. Small Business

    How does Outsourcing Work?

    Outsourcing is the business practice of hiring people outside a company to perform services that traditionally were performed within the company, by the business’s own employees. Companies typically ...
  2. Insights

    The Unintended Consequences of Outsourcing

    The outsourcing of labor overseas is a natural result of globalization of world markets and the drive for businesses to cut costs in order to maximize profits.
  3. Personal Finance

    Most Popular Outsourced Jobs

    The reasons behind outsourcing vary, and can create more efficient processes and products.
  4. Small Business

    How to Outsource Work: 2 Tips for Business Owners

    Small business owner can increase efficiency and profits by outsourcing routine functions such as bookkeeping and payroll.
  5. Taxes

    What IRS Form 990 Tells About a Nonprofit

    Want a picture of an organization's activities? This annual form, open to the public, sums up everything from salaries paid to missions accomplished.
  6. Small Business

    Understanding Organic Growth

    Organic growth is the increase in a company’s revenue and value due to internal operations.
  7. Investing

    Why Organic Food Is So Expensive

    Discover how organic farmers face many obstacles. Learn why your organics cost so much more than conventional foods and if there is any hope for falling prices.
  8. Financial Advisor

    Fiduciary Rule: How Advisors Should Outsource Risk

    The impending fiduciary rule will lead to increased liability for many advisors but there are ways to outsource some of the risk that they take on.
  9. Taxes

    5 Steps To Forming A Tax-Exempt Nonprofit Corporation

    Before you tackle this challenge, know the challenges of forming and operating an official nonprofit organization.
  10. Small Business

    Financial Professionals: The Benefits Of Joining An Association

    Make a name for yourself among your industry peers by joining a professional association.
RELATED TERMS
  1. Insourcing

    Assigning a project to a person or department within the company ...
  2. Business Process Outsourcing - BPO

    A method of subcontracting various business-related operations ...
  3. Knowledge Process Outsourcing - KPO

    A form of outsourcing in which knowledge- and information-related ...
  4. In-House

    Conducting an activity or operation within a company, instead ...
  5. Capacity Cost

    A fixed expense incurred by a company or organization in order ...
  6. Federal Agencies

    Special government organizations set up for a specific purpose ...
Hot Definitions
  1. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  2. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
  3. Fiduciary

    A fiduciary is a person who acts on behalf of another person, or persons to manage assets.
  4. Current Account

    The difference between a nation’s savings and its investment. The current account is defined as the sum of goods and services ...
  5. Liability

    Liabilities are defined as a company's legal debts or obligations that arise during the course of business operations.
  6. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
Trading Center