What is 'In-House'

In-house refers to conducting an activity or operation within a company, instead of relying on outsourcing. A firm uses its employees and time to keep a division or business activity, such as financing or brokering, in-house.

An in-house operation is an activity performed within the same business, using the company’s assets and employees to perform the necessary Outsourcing involves hiring outside assistance, often through another business, to perform those activities instead of using internal assets or employees.

BREAKING DOWN 'In-House'

The determination as to whether to keep activities in-house or to outsource often involves analyzing the various costs and associated risks. How these costs are calculated may vary depending on the size and nature of the core business.

Functional Benefits of Maintaining In-House Services

A firm may decide to keep certain activities in-house, a process that is at times referred to as insourcing, such as accounting, payroll, marketing or technical support. While it is common for some companies to outsource those divisions, a firm may maintain flexibility in those operations by keeping them in-house. Additionally, it may allow the business to exert higher levels of control over the actions of the divisions by keeping the services and personnel under direct control. It may also pose fewer security risks depending on the kinds of data that would have to be supplied to an outside party should the activity be outsourced.

At times, internal employees may have a better understanding of the how the business functions overall, providing them with insights into how certain activities should be handled, allowing them to function with the business’s core vision at the forefront of the decision-making process.

Financial Benefits of Maintaining In-House Services

When dealing with customers, a firm may try to keep the entire transaction in-house. For example, in-house financing is a common practice in certain industries. This form of financing works by using the firm's resources to extend the customer's credit with the firm potentially benefiting from any associated interest payments in exchange for assuming the risk associated with default.

For a brokerage, the firm may try to match a client's order with another customer, creating an in-house transaction. This allows the firm to benefit from both the buy- and sell-side commissions and potentially lowering other administrative costs.

Risks of Outsourcing

Outsourcing involves contracting out certain business activities for completion by a third party. Often, the expectations regarding the third party's performance are outlined within a contract, specifying which tasks should be accomplished along with any associated deadlines.

The primary risks of outsourcing revolve around the involvement of a third party, which is not under direct control of the hiring company. If certain needs are not clearly specified in the contract, the third party may not be liable for the completion of said activities. Additionally, the outside party may also have different standards, such as in the areas of data security, which could put company information at risk.

RELATED TERMS
  1. Business Process Outsourcing - ...

    Business Process Outsourcing (BPO) is a method of subcontracting ...
  2. Insourcing

    Insourcing occurs when a project is assigned to a person or department ...
  3. Operational Risk

    Operational risk summarizes the risks a company undertakes when ...
  4. Key Employee

    A key employee is a staffer who is a stakeholder with a decision-making ...
  5. Research Associate

    A research associate is a person who plans, organizes and conducts ...
  6. Cost Control

    Cost control is the practice of identifying and reducing business ...
Related Articles
  1. 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.
  2. Investing

    Amazon Selling Products Made In-House Under Different Brand Names: Report

    Ever heard of Arabella? Amazon has been busy selling a slew of products manufactured in-house in a range of product categories.
  3. Tech

    Small Endowment Money: A $100B Opportunity

    A shift to outsourced management among small endowments is providing billions in opportunities to capture assets.
  4. 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.
  5. Investing

    Walmart's New Weapon Against Amazon: The Cloud

    Walmart is taking a page from Amazon by building an internal cloud computing server farm.
  6. Personal Finance

    A Look at Entry-Level Careers in Finance

    Learn more about the entry-level career options that are available after a student has obtained their finance degree and is ready to enter the workforce.
  7. Small Business

    Tips For Fitting In At Your Brokerage Firm

    Part of starting a successful career as a broker is finding the right place to work.
  8. Investing

    Uncovering the Securities Firm

    Learn about the various departments of a securities firm and the professionals who work there.
  9. Financial Advisor

    What to Know About the SEC's Third-Party Exam Rule

    The SEC has given a proposal to board members that calls to outsource the advisor exam process to a third party, but the issue currently has no timeline.
  10. Insights

    Economic Trends We Can All Profit From In 2013

    The National Small Business Association may not be optimistic about 2013, but we'll show you a few trends that suggest the economy can grow this year.
RELATED FAQS
  1. 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 >>
  2. What are examples of key operating activities in a company?

    Discover the things that make up a company's operating activities, including examples of some the key operating activities ... Read Answer >>
  3. Can LLCs have employees?

    Discover how limited liability corporations (LLC) can have an unlimited number of employees and the legal steps required ... Read Answer >>
  4. What does a merger or acquisition mean for the target company's employees?

    Learn about the likely impact of a merger-and-acquisition deal on the target company's employees, including their benefits ... Read Answer >>
Hot Definitions
  1. Portfolio

    A portfolio is a grouping of financial assets such as stocks, bonds and cash equivalents, also their mutual, exchange-traded ...
  2. Gross Profit

    Gross profit is the profit a company makes after deducting the costs of making and selling its products, or the costs of ...
  3. Diversification

    Diversification is the strategy of investing in a variety of securities in order to lower the risk involved with putting ...
  4. Intrinsic Value

    Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, and may differ ...
  5. Current Assets

    Current assets is a balance sheet item that represents the value of all assets that can reasonably expected to be converted ...
  6. Volatility

    Volatility measures how much the price of a security, derivative, or index fluctuates.
Trading Center