For any enterprise that outsources, taking services back in house is always an option. There’s no easy answer to the question of whether or not this is a good idea. Not surprisingly, as is so often the case in business, the answer is, “It depends….”
In many cases, insourcing certain functions can make sense. For example, a recent ISG white paper points out some enterprises are maintaining control over IP and executive-level customer service activities. Others have insourced key innovation-related functions.
Regardless of motivation, however, any repatriation initiative involves risks that enterprises often aren’t prepared to address.
Here are four to consider.
- Doing it for the wrong reason: Despite significant market maturation, we still see many enterprises repatriate based in large part on emotion; specifically, a soured relationship leads to a knee-jerk “we-can-do-this-better-ourselves” decision. One obvious problem with this approach is that the business assumes responsibility for functions that are ideally suited to outsourcing, taking critical time and focus away from core competencies and what truly differentiates an enterprise in the marketplace. Many times, the client’s behavior contributes to the problems plaguing the outsourcing relationship—put bluntly, this means that if you can’t manage a service provider, you probably won’t be able to manage operations on your own.
- Forgetting how difficult staffing is: The inability to fill in-demand technical roles is often an important driver in a decision to outsource. Yet we frequently see enterprises take services back in-house without seriously factoring in the staffing challenge. And that challenge is more daunting than ever in today’s environment, where technologies like cloud and automation are fundamentally redefining skills requirements.
- The “how-hard-can-it-be?” syndrome: Businesses that discount or underestimate the time, cost and staff needed to transition services from a provider and then take on management of operations face a significant risk. The devil of transition is in the details, and in managing the significant change that results. Clients tend to lack visibility into all of the moving parts of the relationship and all the specific functions carried out by the provider team. As such, taking services back in-house can be a shock.
- Losing knowledge: One of the most significant risks of repatriation is losing proprietary knowledge during the transfer from a service provider to in-house staff. An effective knowledge transfer requires detailed documentation and process discipline on both sides—and both sides typically fall short. And the risk is compounded when repatriating because the in-house organization is building its documentation processes from scratch.
Bottom line: insourcing isn’t necessarily bad, but before proceeding make sure you think through the implications and cover all the angles.
About the Author
Jeff Augustin offers more than 28 years of experience in the sourcing industry, including five years as the CIO for professional service firms and 23 years providing IT outsourcing services to global fortune 500 companies. His main areas of expertise include building and launching commercial markets and high visibility alliances for innovative products and technologies.