When to bring experts in-house
At a certain point in your company's growth, it makes sense to have your experts around full time.
Companies usually outsource to save costs and get access to skills and resources they couldn't otherwise afford.
Small businesses often start by outsourcing financial, legal and IT services, and while many large companies also outsource these sorts of services, there comes a time in a growing company's life cycle when the managers might want to bring some business processes in-house.
Companies initially outsource a business process because they might only need it part time or on an ad hoc basis and it doesn't make sense to hire staff and incur a fixed cost. “But as you grow and get bigger you'll find that the fixed cost is becoming less than the variable cost,” says Marc Peskett, a partner at professional services firm MPR Group.
For instance, MPR provides a “virtual CFO” service to carry out finance functions for small business, which can save money compared with hiring a full-time CFO. “But when they get to a certain size they find they need that service full time and paying us at our rates would work out at more than they'd have to pay than if they went and hired someone,” he says.
In-house services can be fully integrated into all of the functions of the business, says Peskett. For instance, an in-house finance person can oversee and have more input into sales and marketing budgets, and more importantly, “from a strategy point of view everyone needs to be on the same page and integrated”, says Peskett.
It can be a good idea to bring roles with a strategic element – such as finance and sales and marketing – in house as a business grows, says Peskett.
There are trade-offs to outsourcing a business process, for instance a graphic designer. “If you get busier or you need more work you're always at the mercy of their schedule,” notes Greg Pritchard, of Dedication Group, which runs technology and change projects for financial services companies.
Sometimes a growing business will have enough work to hire a staffer rather than use an outsourced provider and will want the added convenience. “If you're doing a lot of that sort of work and you're not getting the turnaround times and you're not getting the priority and focus then you want to insource that, by just hiring a graphic designer,” says Pritchard. “You can get them to do what you want when you want.”
Quality and alignment
It's rare that something can be done cheaper, faster and better all at the same time and sometimes a business' needs change as it grows. A business might have wanted something done cheaply when it started out, but might place more of an emphasis on a quality outcome as it grows, says Pritchard.
For instance, a start-up business might do quick and cheap marketing, but as its business and brand reputation grow it might want something more professional.
“Your competitors might have a more cohesive brand message and so forth, and that costs money and you're going to have to hire a brand manager to do it, someone who's on the payroll,” Pritchard says.
Sticking with the graphic design example, it can be easier to employ someone in-house than for a company to have to brief a graphic design agency again and again about its brand and their values.
“It becomes about when you're not seeing the alignment in your outsourcers to what you need," says Pritchard. "You need to think about if you had someone on staff and it makes financial sense to do it then that person is part of your team and understands your vision.”
Andy Zapple, director of the Pitt Crew, a consultancy on IT management and business processes, says companies can sometimes reduce a risk by bringing a process in-house and having more control over it.
“For example, a public health organisation would want to think very closely about having patient records held by an external organisation,” he says. Loss or leaking of patient records would cause significant damage, so the process needs to be carefully monitored.
Many businesses outsource call centres, but Zapple says it can be a good idea to keep customer-facing operations in-house to preserve your company's reputation. Also, it can be easier to send a coherent message and have a uniform customer experience through a business's website, call centre and sales staff if they're all under the same roof.
“Then the ability to provide a single customer view and understand what interactions the customer has with these multiple channels is much easier if it's all maintained in-house,” Zapple says.