Outsourcing vs In-House: A Comparison Of The Two Approaches For Your SME

The do-it-yourself approach has become very popular in recent years, primarily driven by internet-enabled access to resources and tools. Passing work to experts can be extremely expensive, after all — so why not save money by adding it to the internal workload? Your talented employees can be trained up where needed, no doubt.

This isn’t inherently objectionable, because it makes a lot of sense for many tasks. That said, it has its fair share of flaws, so there’s no cause to recommend keeping everything in-house. It depends not only on the task in question but also on the nature of your business. So what should you focus on? Let’s compare these two approaches to see the pros and cons:

Outsourcing

We’ll start by reviewing the pros and cons of passing tasks to workers outside your company, whether they’re freelancers or staff members of large businesses:

Pros

When you run a business, you hire people to fill specific roles. It wouldn’t make sense to do otherwise: when you’re hiring an accountant, you don’t need the selected candidate to be a skilled audio editor. If they happen to have additional skills, that’s interesting, but not important. Additionally, anyone who has pro-level abilities in several disciplines is likely to expect a larger salary in recognition of that versatility — making them harder to justify hiring.

Accordingly, when the time comes that you need to branch out with a new type of task, it isn’t very likely that you’ll have an employee with the skills to tackle it. If there is someone who might be able to handle it, there’s every chance that they’d do a mediocre job — and the effort in itself would take up valuable time they could (and should) be spending on their regular tasks.

When you outsource a task correctly, you have absolute certainty that the person carrying it out is fully professionally qualified. This should mean that they get the work done fairly efficiently, and will also allow your in-house employees to continue working as normal (even if they don’t dislike disruption, it can still negatively affect productivity).

Cons

Outsourcing can be cheap and risky if you use low-cost freelancers through sites like Fiverr. They can produce great results or terrible results, and you can’t know ahead of time what you’ll get. Alternatively, it can be certain but expensive if you use high-cost freelancers or companies. You’ll get excellent quality, but the price will be high, and you can’t tell how efficiently your money is being used because you don’t have direct oversight over the product.

There’s also the matter of preparing the project materials, passing them along, and discussing the project with the person to whom you’re outsourcing it. This can take up a lot of time and lead to confusion if there are communication issues. Consequently, even though you’ll save time on the bulk of the project, it’s possible for an outsourced project to end up taking longer.

Note: these cons apply to outsourcing tasks to people, not to software. You might consider something like using automated payroll to be “outsourcing” that particular task, but I don’t. That’s a matter of smart automation: using a tool that you manually configure and leave running. Automation is often free, but outsourcing never is, because it always requires human effort.

In-house

Next, we’ll look at the pros and cons of keeping work inside your organisation, trusting that your employees can complete it to a high standard:

Pros

Employees who do the same things day-in and day-out can easily get bored and lose motivation to get better (or even to continue), leading to frustration and reduced productivity. When you keep a task in-house and pass it to someone who doesn’t normally work on anything like it, you give them an opportunity to branch out and try something different. Even if they don’t do a 100%-professional job on it, their long-term productivity could see an uptick as a result.

It’s also a great training exercise if you choose wisely. Employees can change positions in their companies, and someone who starts out as an account manager could end up being far more useful as a web developer. By leaving aside some tasks to pass to your employees, you can support them in bolstering their skills (knowing that they’ll ultimately use them to benefit you).

When you hire a full-time employee to tackle a new type of task, though, the benefit is entirely different. Because you pay them a standard salary, their work should end up being considerably cheaper than if you outsourced it — and you’ll need to spend much less time handling communications, since you can talk to them directly and expect them to give you their full focus.

Cons

In-house management isn’t always as good as it could (or should) be, particularly with the larger SMEs — those that are big enough to have departments. There can end up being a lot of miscommunication between colleagues, and if those turn sour, it can have lasting repercussions (as opposed to a disagreement with a consultant, which can be resolved through simply outsourcing to a different person).

There’s also the danger of failing to fully understand the value of in-house time. When you outsource a task, you can get a clear invoice with all the hours and rates listed. If you pass a task to your team, though, then it might occupy a lot of time between other tasks (or even during them by keeping numerous team members distracted). The cost of employee time can easily stack up, and you might find that you’re losing more money through diverted productivity than it would have cost you to simply outsource the work.

What’s best for you?

Wrapping up, then, deciding what’s best for you has to come down to context. What can you more readily spare at that moment: employee time or company money? Will you benefit from using the work as a training exercise, or does the standard need to be exceptional? Figure that out and you’ll know which approach you should take.

Kerry Fawcett