Outsourcing vs Insourcing: A quick guide for Singaporean firms

Given the rise of small businesses and the growing expansion of big firms, the search for resources and staffing to operate continuously remains to be a significant field in the market. But, do you really know what’s best for your company?

Read on to discover what business strategy you should consider: Outsourcing or insourcing?

Outsourcing vs Insourcing

Outsourcing is the use of outside organizations to perform tasks, provide services, and manufacture products for a company. Cutting back on costs is the major motivation for outsourcing work to another company and it covers a lot of Industries, such as telecommunications, media, finance, and even retail.

Aside from cutting back on cost, companies opt to outsource because they want to focus more on the core aspects of their business. Not only does outsourcing improve efficiency and productivity, but it also optimizes the quality of work.

Through outsourcing, rest assured that experts handle the tasks delegated by the clients.

Insourcing, on the other hand, assigns a task or a whole project to a person or department that is also a member of their own company. This strategy utilizes its own talent and developed resources within the organization to deliver its projects. 

Even if there are new operations and processes on-site, the company would still search within the bounds of their organization to get labor and resources.

In this case, insourcing can be more expensive for a business, because it involves the implementation of new processes to start a different division within the organization. So, new jobs mean a new addition to your expenses.

Why outsourcing?

There is a reason for an insource vs outsource debate, and here are the factors why:

While insourcing lets you have more control, allows your employees to feel more ownership and gives you options for customization and flexibility, outsourcing firms most likely don’t have those abilities.

Realistically, outsourcing firms have tons of clients, especially in countries like Singapore where outsourcing is booming. They might not have the same capacity to respond quickly to change or customize a process just the way your business likes it.

This is why it’s so important to find the right outsourcing firm.

Every outsourcing firm is different. Their processes also differ when it comes to service or product changes. 

When it comes to savings, outsourcing is the go-to. Today, companies of all sizes, from start-ups to large firms, use outsourcing so that they can manage non-core functions while saving a lot of money in the process.

With outsourcing, companies are capable of scaling easier and faster than insourcing because of the number of resources that they have on hand. Another great thing about outsourcing companies is that they specialize in a business process or task, so they usually have expert-level knowledge. 

Hiring in-house might be too expensive, so it makes sense to rely on an outsourcing company that offers that type of expertise. They are also responsible for their own training, so when you need to get something done, you don’t have to assign a new person to a task.

To learn more about outsourcing in Singapore, you can check the outsourcing guidelines published by the Monetary Authority of Singapore (MAS).

Why insourcing?

If you were to hire a new employee to make your accounts payable, you would have much more say in how they were trained. Meaning, you could set guidelines for how they should complete your accounts payable. This gives you more control over the all-over process. 

Upon improving your team’s satisfaction, employees will also get a sense of ownership and control towards their work for the company.

For example, if you have internal employees who do accounts payable, they will also be able to customize the process, and respond to changes more quickly compared to an outsourced personnel.

When your business gets a new client that needs their accounts payable done a specific way, your in-house employee can accomplish the request quickly since they are already familiar with the client’s request. 

However, insourcing also comes with its fair share of disadvantages. The cost of insourcing can be much more expensive than outsourcing. The process of recruiting, hiring, and then training a new employee would take so much money and effort for it to effectively work.

Insourcing might be the practical option when the business requirement is only temporary because the cost, training, and scalability can easily get out of control when your investment grows. 

A well-known Singaporean law firm named Rajah & Tann proudly shares that they have been offering to insource. The firm calls it a “flexible insourcing service” that provides other law firms with in-house counsel on short-term contracts and project-specific duties.

What do you need for your business?

Both options provide benefits and pitfalls, as these two practices would need an ultimate decision that lies in the needs of your company. 

Overall, the advantages of insourcing and outsourcing would have cost savings and the flexibility it gives business owners. The best option depends on the specific needs.

It is important to know your company better: What services do you offer, and are you planning to expand? Would you want to focus on your core operations or other tasks? Can you do this in the long run? Do you need to invest now or cut back in cost later? You fill in the blanks.

Either way, this would matter a lot on how your business will go. Take all key players and factors into account upon deciding as it could be the reason that your business would grow successfully, or it will be the one that could put your company under.