What is insourcing? A definition for this term is rather hard to find, but a close approximation can be made, such as, “an internal division of the company, but one that is run strictly along the commercial lines, handling tasks that would otherwise have to be outsourced”. This insourcing department is a division of the company, but is treated as if it were an outsourcing service provider. For instance, a manufacturing company may “insource” its brochure designing to an insourcing department. It is a new way of cutting costs and boosting profits that a number of US-based companies are opting for.

Insourcing a service is not without its share of drawbacks though. In fact, insourcing a process can at times have more problems than simply outsourcing it. Some of the noteworthy conditions that need to be satisfied in order to make insourcing a process successful are as follows:

1. IT Director must be knowledgeable enough – This one should go without saying. When you are insourcing a process, your IT Director will be in charge of it. Naturally, the Director must be knowledgeable enough to co-ordinate between teams, keep the upper level management informed about the progress of work, and be able to assist in hiring proper candidates, if necessary. Also, it is the IT Director’s task to calculate the funding required for handling the project and communicate it to the upper level management at the beginning, so that he/ she would have a sufficient budget at hand to get the job done.
2. The process must be clear to upper level management – It is very important to keep the upper level of management in the loop about the process. They should be well informed not just about the status of the project, but also the little details, such as the man hours being spent for it, and most importantly, the cost requirement for completing the job successfully. That way, it is easier to get additional funding for the project, should it be necessary at some stage.
3. Arrangement for additional training must be there – It is important to note that all staff members in the insourcing department may not have the same level of technical expertise. There must be arrangements in place to make sure that they can be trained to upgrade their skills, if necessary. This would mean allocating additional money at the starting of the project, in case additional training sessions are required later.
4. Treating the insourcing team as an outsourcing service provider – It is important to always treat the insourcing team like an outsourcing service provider. The management of the department should not be handled by the management that looks over the rest of the company. It is better to have the department managed by a separate IT Director, who will keep the company management in the loop about the status of the projects, maintain communication between the teams involved with the project and request for additional funding if required to finish the project on time.

Thus we can see that insourcing processes does not necessarily mean that outsourcing will be obsolete. The steep requirements that need to be met in order to insource a process successfully may make outsourcing more profitable for companies after all.

With 2009 winding to the 3rd quarter, the question that haunts the whole world—is the worst in global economy over? Hopefully, a number of reports from various quarters seem to suggest that. The Indian offshore industry is in an upbeat mood following strong global cues of recovery. The 3rd quarter recorded an improved performance over the 2nd quarter and this growth in the businesses of Indian outsourcing firms is attributed to improving business sentiments across the globe.

The publication of “Market Vista: Q3 2009”— Everest Group’s quarterly study on global outsourcing gave the Indian BPO and outsourcing sector some real reasons to smile. It has been concluded by the global consulting and research firm that the new captive set ups increased to an 18-month high in third quarter in 2009 compared to the second quarter.

According to “Market Vista: Q3 2009”: “The Indian offshore industry is growing on the back of improving demand and continued advantages of India as an offshore destination. India-centric suppliers are investing in delivery capabilities and setting up new centers,”

To put it simply: in the third quarter of the current year, there has been more business for Indian offshore industry.

The study states that though marginal (10%) there was a decline in the reported global transaction volumes. Of this IT off-shoring activities declined by 8%, whereas volume of BPO transactions decreased by 14%. But despite this, the study says, there were signs of improvement in key geographies and verticals. There has been an overall increase in the numbers of off shoring destinations worldwide and it was an 18-month high in the third quarter of 2009. While during the 2nd quarter 30 new supplier delivery centers were established, in the 3rd quarter, this number was shot up to 36. Additionally, world got her 28 new captives also in 3rd quarter.

The suppliers with strong focus in Indian off shoring witnessed higher transaction activities in 3rd quarter compared to 2nd quarter.

Of 28 new captive centers, 11 new centers were set up in India during the quarter. This happens to be the highest for a single economy. These included companies as big as Standard Chartered, Ingersoll Rand, and Kontron. In addition to this one-fourth of new supplier delivery centers were set up in India.

According to the research firm, all these were possible because Indian cities started to enjoy the cost arbitrage benefits as a result of depreciation of the currency and reduction in operating costs. If India can hold to the current momentum, the arbitrage can be sustained for 20 more years in both ITO and BPO sectors.

In an interview with The Economic Times, Everest Group Vice President-Global Sourcing Amneet Singh said that India will continue to have good growth momentum through the rest of 2009 and also in 2010. “The increase in the number of captive set ups reflect signs of recovery in the overall market. We expect the industry in India to continue this momentum in the last quarter of 2009 as well as in 2010,” said Mr. Singh.

One of the things that can cause a company difficulty is determining just how much money they can afford to spend on training. In fact, for some companies the question is how much they can afford to not spend on training. This is because having skilled staff who knows what they are doing is integral to any developing workforce and having intelligent staff who knows exactly what is required of them is hugely important. Of course, firms have to weigh up the fact that their highly trained staff may decide to leave in the pursuit of bigger wages elsewhere, which can be very damaging to a firm. This means all of that training expenditure has been wasted and the firm needs to start again. This can start a cyclical process where a firm trains up an employee, they become competent and then leave, creating a huge deficiency in the skill set of the firm, creating a larger demand for training and the whole process begins again. Needless to say, many firms are now hesitant or reluctant to spend so much money on training staff up only for other companies to reap the benefits but this obviously causes a problem. How can firms get access to great employees, at the top of their game but not leave them open to the risk of being left bereft of staff who knows what they are doing?

Outsourcing is the most obvious solution to this problem as it will enable firms to have access to skilled staff only when they need them. The costs involved in hiring an outsourcing firm to undertake work or take on a few employees may be higher in the initial process but compared to the endless cycle of training, replacing and training staff, utilizing the benefits of outsourcing can save a company a lot of money in the long-term. Given the economic crisis that is engulfing the world, it is obvious why many businesses have to focus on the short term nature of their financial ins and outs but those that have the capabilities to focus longer term understand the benefits of outsourcing.

Using outsourcing should grant a firm access to a skilled workforce who already has experience in the field that is being worked in. This is in addition to the lower cost of labor that is available from many firms, both internally and from offshore outsourcing. With potential savings with regards to staff with no discernable change in quality or output, the decision to pursue outsourcing comes as an increasingly simple one. Many people may be put off with the initial work having to be done to set up the new business partnership with external agents but there is a lot of information and assistance available on the internet. This means that even if a company has to look internationally for support, there should be no difficulty in obtaining offshore outsourcing solutions to ensure a firm is able to operate as efficiently and as effectively as possible.

Outsourcing is the most obvious solution to this problem as it will enable firms to have access to skilled staff only when they need them. The costs involved in hiring an outsourcing firm to undertake work or take on a few employees may be higher in the initial process but compared to the endless cycle of training, replacing and training staff, utilizing the benefits of outsourcing can save a company a lot of money in the long-term. Given the economic crisis that is engulfing the world, it is obvious why many businesses have to focus on the short term nature of their financial ins and outs but those that have the capabilities to focus longer term understand the benefits of outsourcing.

Using outsourcing should grant a firm access to a skilled workforce who already has experience in the field that is being worked in. This is in addition to the lower cost of labor that is available from many firms, both internally and from offshore outsourcing. With potential savings with regards to staff with no discernable change in quality or output, the decision to pursue outsourcing comes as an increasingly simple one. Many people may be put off with the initial work having to be done to set up the new business partnership with external agents but there is a lot of information and assistance available on the internet. This means that even if a company has to look internationally for support, there should be no difficulty in obtaining offshore outsourcing solutions to ensure a firm is able to operate as efficiently and as effectively as possible.