In-House vs. Outsourcing: What Are the Differences?

AdminAssist February 15, 2022
7-minute read
Keyboard key of outsourcing

Did you know that about 67% of global employers find outsourcing a great help in developing their company?

Outsourcing is helpful in process automation and improving customer experience among the rest. In addition, 88% of organizations reduced company costs through outsourcing.

Getting curious about outsourcing and how it's different from in-house? Keep reading for a detailed comparison of in-house vs outsourcing!

What Do We Mean by Outsourcing?

Outsourcing refers to the use of outside talents and their resources to complete a specific task. Note that these talents should be from an outside organization that isn't affiliated with the company. Here, organizations hire the outside organization only for a certain period.

For example, a staffing agency may outsource an agency to do their accounting for them. Hence, the outsourced accounting team will take care of the agency's accounting needs. This includes managing employee payroll, taxes, and filing reports to the IRS.

What Are In-House Services?

In-house services, as the name implies, utilize the talents present within the company.

Managers assign tasks to a department or person instead of outside talent. For example, a telecommunications company will turn to its existing technical support team to upgrade the organization's firewall.

In House vs Outsourcing: Cost

The primary reason why organizations outsource is to save money. Staffing companies must pay their in-house employees a steady wage even if the employees haven't finished their assigned tasks.

Aside from this, employers also have to allot money for employees' welfare benefits. This includes medical insurance, pension plans, and even travel and accommodation allowance.

However, companies can reduce their cost using outsourcing services. This is because, under outsourcing, companies only pay for the service package they asked for.

The outsourced talents are part-time employees. Hence, there's no need to worry about employee benefits and employment taxes.

For instance, your company outsourced your invoicing services. Your company will only pay for completing the task and nothing more.

If you agreed to pay for 200 hours' worth of work, you'd only pay for that 200 hours. If the outsourced talent spent more than 200 hours on the project, that's on them, so there is no need to worry about overtime payment.

Outsourcing also helps remove onboarding expenses. Hiring employees is risky as they may leave the company at any time. This is amidst the money your company spent on training them.

When employees leave, you have to spend time and money training replacements. The cost will pile up and can amount to massive profit loss.

When you outsource talents, you'll only make a one-time payment. However, the money you'll pay includes their training fees.

In House vs Outsourcing: Equipment, Utilities, and Work Space

If a company decides to hire an in-house employee for a specific job, they'll need a bigger workplace. They're then lumbered with the expensive process of renting a bigger office or expanding their current one. Either way, it eats away time and money.

In-house requires placing new operations within the organization, which comes with the need to buy new equipment or upgrade existing ones. There's also a need to create a different division within the organization for in-house sourcing.

Outsourcing a third-party team eliminates these troubles. Often, outsourced talents have an office and equipment of their own. In addition, some outside organizations can also perform their task remotely.

In House vs Outsourcing: Commitment

There are times when companies need a certain skill that their employees lack. Other times, a specific project comes beyond the company's capacity. It's common for companies to need a certain resource for only a short time.

Whatever the case is, commitment is highly involved. For in-house sourcing, you can't fire talents when the task is over. In-house talents require long-term commitment, as they're permanent members of the company.

Meanwhile, one of the benefits of outsourcing is that they require short-term commitment. Once the job is over, the outsourced talents will receive their payment and leave. Thus, outsourcing can help you avoid getting into unnecessary long-term commitments.

For instance, your company needs an invoicing resource for only three months. There's no point in dedicating your time and money to recruiting and onboarding. Instead, it's practical to contact an outside organization that provides the service you seek.

In House vs Outsourcing: Flexibility

Some of the benefits of insourcing are delegating tasks to people who have a deeper connection with the company. The deeper connection an employee has with the company, the more familiar they are with company values. Thus, it's easy for these employees to integrate with the company allowing work efficiency.

Moreover, these inside talents are already on-site. It's easier to connect and communicate with employees in the same time zone and space as you. It reduces misunderstanding and improves teamwork. Being able to connect helps to work effectively and reduce any misunderstandings.

The difference is that in-house employees may not offer the same flexibility that outsourced talents have. For one, in-house employees follow a certain work period. Their working hours, often 40 hours a week, are also stable.

When you outsource, the working hours of your outsourced talents depend on your needs. For instance, you can assign them 40 hours of work this week and 12 hours the next week. If you'll only need their services at the end of the month, only work with them at the end of the month.

In House vs Outsourcing: The Main Difference

The main difference in house vs outsourcing lies in how this approach works. In-house sourcing means assigning work to the employees in your company. Meanwhile, outsourcing means procuring the services of an outside organization.

In-house talents have a fixed salary and have the right to company benefits. While they're always on-site, their working hours aren't flexible. Long-term commitment is prevalent when insourcing.

Outsourcing, on the other hand, is open to short-term commitments. Employers can increase and decrease the workloads of outsourced talents as needed.

Outsourced talents can work remotely and don't require on-site integration. Finally, payments under outsourcing are subject to a fixed one-time payment.

Outsource from Admin Assist Today!

Now that you know the difference between in-house vs outsourcing, are you ready to upgrade your business? Outsourcing talents not only reduce cost but also increases your company's flexibility. Best of all, outsourcing can increase company productivity and, consequently, profit.

Have some lingering questions? Give us a heads up today! Let our team of experts help your company grow the right way.