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Insourcing v Outsourcing: Which Model Suits Your Needs?
Insourcing v Outsourcing: Which Model Suits Your Needs?

December 21, 2023

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Not long ago, companies viewed overseas talent purely through a cost-savings lens. The strategy was simple – move non-core functions like IT, Finance, and call centers abroad to reduce expenses. 

Today, the motivations and goals around global resourcing have grown far more complex and strategic. Faced with a fierce war for high-skill talent, organizations are now seeking subject matter experts globally that can drive innovation and bottom-line impact, regardless of geography.

Take for example the emerging role of Customer Experience Engineers. These professionals blend deep technical know-how around data and analytics with softer skills like journey mapping to uncover actionable insights from real customer interactions. As companies shift from viewing overseas employees solely as a cost play to a value-added capability play, global teams increasingly influence core products and strategic direction rather than just enable peripheral support functions. 

Diversifying Geopolitical Risks 

The accelerating pace of globalization also serves an underappreciated purpose – mitigating an organization’s exposure to geopolitical and macro-economic volatility. Supply chain disruptions triggered by events like the pandemic, climate change, and armed conflicts underscore the vulnerabilities of concentrating mission-critical operations and talent pools in just one or two geographies. 

Establishing satellite delivery hubs across diverse regions builds organizational resilience. If an unexpected disruption impacts talent access or infrastructure in one geography, alternative locations provide redundancy to ensure continuity of operations and output. Think of it as the talent sourcing equivalent of the old adage “not putting all your eggs in one basket.”

Insource vs Outsource – Finding the Right Balance

When determining overseas delivery and capability models, companies typically choose between two alternatives – insourcing talent by directly hiring employees by building Global Capability Centers (GCCs) in locations such as India, or outsourcing to third-party partners who manage delivery. What’s the right formula? As with most things, it depends on a few key factors.

Insourcing talent in-house enables greater oversight and control. Internal team members understand a company’s culture and standards intrinsically. However, recruiting and training employees globally requires significant upfront and ongoing investments. Outsourced talent offers speed and flexibility to scale up or down to meet project needs. Yet ceding delivery outside corporate walls can present risks around data security, product quality, and brand reputation.

Other factors like cost, productivity, timelines, and risk tolerance also weigh into determining the optimal mix of insourced and outsourced human capital. Rather than an all-or-nothing decision, companies can strike the right balance through a hybrid model. Here are two examples of how that blended approach could work:

1. Launch new projects by outsourcing initial delivery while building in-house capability over time to eventually insource the work. This balances the need for quick access to talent with the control and oversight possible through direct hiring. 

2. Keep high-value activities like product development and customer service in-house while outsourcing back-office functions like Finance and IT infrastructure. This concentrates precious internal resources on the core domain expertise that differentiates the business.

The Bottom Line 

Globalization has clearly entered a new era driven by capability over cost. As access to world-class talent increasingly becomes a competitive advantage rather than just a budget line item, the considerations around organizing your overseas teams grow more complex. Adapting your resourcing models – and striking the right equilibrium between insourcing and outsourcing – becomes vital to winning the escalating war for talent.

 

Read the full blog here: Insourcing vs Outsourcing: The Right Model for Your Business


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Founded in 2002, Zinnov is a leading global management consulting and strategy advisory firm, with a presence in 10 global locations. Over the last 22 years, Zinnov has partnered with Global Enterprises and Fortune 2000 companies across their value creation journeys to develop actionable insights – across revenue, talent, innovation, scale, and optimization. Zinnov enables companies to develop and optimize a global engineering footprint through center setups, technology and functional Centers of Excellence (COEs), portfolio optimization, partnerships, and real-time data/ insights – through its unique GCC Accelerator Platform (GAP) offering. This multi-lever approach helps Zinnov’s clients achieve higher R&D efficiencies, innovation, and productivity via an immersive and highly networked model. Zinnov’s expertise also includes advising global PE firms in asset shortlisting, target evaluation, due diligence, and value creation for their portfolio companies through a globalization lens.

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