Wednesday, June 07, 2006

Out-sourcing vs In-sourcing

Organizations are turning to external suppliers for outsourcing everything from payroll processing to facilities management. The goal is better quality at lower costs, but too often the outsourcing results are disappointing-to-dismal -- simply because many buyers lack a clear outsourcing methodology.

Using the outsourcing concepts in this outsourcing survival site, managers responsible for outsourcing will learn to avoid typical pitfalls and ensure success. Readers learn how to:

1. Determine core competencies that should be kept in-house rather than outsourced
2. Align outsourcing with overall corporate strategy
3. Use outsourcing to support transformation strategies such as restructuring and TQM
4. Evaluate, compare, and select vendors
5. Develop targeted RFPs (requests for proposals), negotiate win-win contracts, monitor how vendors perform, and evaluate financial savings
6. Handle "recompetition" as contracts end.

The opposite of outsourcing, that is, a service performed in-house. It is a reaction to outsourcing that conjures up visions of employees aggressively defending their core competencies against cost-cutting senior managers and third party providers. The act of bringing together a function that was performed outside the organization (outsourced) to being performed inside the organization.

Of course outsource has captured current attention but this is not mean that in-souring is far. In-souring is current trend. What is less well publicized and understood is that "in-sourcing" also occurs in our economy. In-sourcing happens when foreign companies establish jobs in the United States. Conventionally known as foreign direct investment, insourcing has risen in recent years as more foreign firms set up operations in America.

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