Outsourcing and Inhousing is often described as a curve which over the years continiously move between maximum outsouce and inhouse activities. It sometimes seems, that nobody find the balance between these both areas.
First of all, we need to look at the goals of both types. Outsourcing is often argued by big cost savings and better business focus on companies key business. Because our outsourcing partner want to get payed as well, the savings are calculated with hardware-,licence-, maintainence and headcount money. It is sometimes questionable if we really have these savings, if we don’t follow an outsource really everything path, because if we keep parts inhouse, we still have parts of the costs. The big saving, the headcount cost is a saving which may cost us later even more money – wait and read.
Outsourcing by definition means, that we loose control in our envrionment and let our outsource partner deliver everything to us. This also means, that we build a dependency to our partner.
The simple truth here is, that our partner has the same goal as we have. Earn money.
Outsourcing could be win-win situation, but seing the out-in-curve shows, that this is most likely not the case.
Inhousing on the other site is argued with too expensive outsourcing costs and flexibility issues to react to business requirements. Inhousing normally follow after a couple of years of extreme outsourcing with more and more minor issues. These issues are often started with the fact, that local knowledge has gone and we have nobody left anymore being able to read and understand all details of the initial outsourcing contract. Unfortunately we also have lost the detail knowledge we needed to challenge our outsourcing partner. The frustration is raising and at a point someone opens a calculation explaining, that inhousing is cheaper.
While outsourcing is more linked to cost saving arguments inhousing often happen when the hudge amount of outsourcing costs get realized. At the beginning of an outsourcing effort, potential cost savings have been seen by reducing internal headcount. This is a direct contradiction, which is so easy to see, that it get argued with other reasons and this truth isn’t seen.
Now looking at the terminology of outsourcing we easily find the reason: We have lost control over our environment, because we lost our internal skills.