What is Insourcing?

Outsourcing is a familiar term and most people understand it to mean taking part of a company’s work and giving it to another company, very commonly a company located elsewhere where labor may be less expensive. A related practice is insourcing. This term is newer, and has several definitions that aren’t exactly the opposite of outsourcing, which can be somewhat complicated to understand.

The type of insourcing that represents almost an opposite form of outsourcing may be the most common definition. This is when companies look at their pool of employees to find those who may be tapped to do certain needed jobs. They may offer these employees extra training or they may merely find the employees that already possess the skills to take on specialty work.

This form of insourcing has become fairly common as a money saving practice. Hiring new employees can take considerable funds, and being able to redirect a current employee to new work can be much easier. Even if there is financial outlay for special training, a business may still save money, and it doesn’t have the negative connotations associated with many forms of outsourcing. Some companies practice this regularly and may boast to employees that they always promote from within, which can be an attractive point when employees are looking for jobs that will allow them opportunities to advance in their careers.

A different form of insourcing doesn’t utilize current employees but instead temporarily hires specialists to work onsite at a company. Occasionally these specialists help train employees on specialized equipment or methods, and part of this may also involve the leasing of various types of equipment. Even though the temporary employee comes from outside of the company, the fact that he or she is “brought in” means he can be considered insourced.

Sometimes the definition of insourcing is a matter of perspective. When a large company sets up part of their business in a foreign country, that company is outsourcing. However, to the country where the business is established, the new work there may be considered as insourced. This is a less common use of the term, but one that may help demonstrate the differing ways in which outsourcing work is viewed.

Setting up shop in another country, especially one that doesn’t have lower pay standards, (for instance Japanese automakers creating plants in the US) can prove of benefit to the company. Because they have created jobs somewhere else, the company’s products may be perceived more favorably. This may make consumers more likely to purchase products or use the company’s services because they know that part of their payment benefits their fellow citizens.