In a given organization, whether you want to build a product, provide a service, or reach any goal you may set, you need resources to do so.
Those resources could be part of the organization or outside of it. You may refer to the place (physical, organizational, geographical) where the work is done, to define how the work is sourced.
There are different levels for the definition of outside, depending on how you define the previously mentioned “organization”, but here, we’ll define the organization as a private or public company of any size, insourcing as any work done inside of this company, and outsourcing as any work done outside of it.
So how one decision maker would choose between insourcing and outsourcing ?
It really depends on several factors. You must evaluate the risks, the costs and the benefits of either choice.
At the begginning of your analysis, you must have a clear view of how the product you need is builded. You should have defined already the several main steps to produce it and how close those the steps are related to your core business activity. In your core activity, you want keep your customer relationship intact. In order to so, you want to maintain a good brand image, provide good quality services or products, for the right price and so on.
If you build your product inside the organization, it’s interesting because you may increase the experience of your teams, control quality, customize it to make it unique. However, this has the cost and if your company is young, maybe it won’t provide the same quality-cost ratio a senior company is capable of. It’s all a matter of comparison at the end. You must estimate the quality-cost ratio of all the steps required to build your product if it’s built inside the company. Then you should compare this ratio to the one you could expect from one (or several) external provider.
Of course, you should also keep in balance the risk associated to externalized work.
If an external provider builds a part of your product, it means you may not so finely-grained control the quality, and it may increase your final sale price, or decrease the quality of the final product which in the end, could be detrimental for your brand image and the precious customer relationship. There is also a side effect of using an outsourcing partner. You are not the only provider of the given service (if not otherwise stated in your contract terms), and then one competitor or even the provider could offer the same service but with a different and possibly better price. All of those risks means you should ensure to only outsource with a trusty partner with exclusive service rights and of course affordable prices. You can then be sure the incurred costs are limited to a forecastable minimum. With globalization of services providers, it becomes more and more interesting to outsource because with the higher number of providers in the market place comes a higher change of finding some which is at the same time, efficient, affordable, trustable and making quality products. By combining outsourcing with offshore, you could easily find a service provider which produces high quality products at much lesser cost than their local counterparts. That’s exactly what Leoxia is trying to achieve: Providing high quality service with the best possible quality-cost ratio.