Research

Is Insourcing the New Outsourcing?

Organizations whose financial situation has stabilized may now be revisiting their outsourcing strategy and determining that they can manage operations more efficiently in-house.

By Bill Fowler

A sound financial business case, based on an analysis of existing costs and service quality, is essential to any client organization considering insourcing, and should be applied to assess and navigate various scenarios. For instance:

• If clients believe they are being overcharged by a service provider and seek to remedy the situation through insourcing, a cost analysis is necessary to validate the assumption.
• If the business case analysis demonstrates that a vendor is in fact overcharging, the client organization should consider the option of presenting a "proxy bid" cost analysis based on market rates to the vendor as a negotiating tool.
• In planning for repatriation, client organizations must recognize that the process requires defining a long-term price structure, and identifying the benefits of different strategies. For example, what will be the potential impact of consolidation or offshoring over a period of two to three years? A repatriation initiative should be built around a fact-bases analysis of options and long-term impacts.
• Insourcing requires a thorough assessment of internal skills and management capabilities. Do the necessary capabilities exist? Is the client organization willing to invest the resources to develop the necessary internal capabilities?

Compass expects to see an increase in companies repatriating services over the near term. Ultimately, however, most organizations will pursue a more balanced delivery strategy and take the selective outsourcing routeâ¬keeping some services in-house and outsourcing others.

Bill Fowler directs Compass Sourcing Services in North America. He is based in Chicago.

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