The difference between outsourcing and hiring from within is the assigning of labor to either an outside company or someone within the company. Outsourcing is typically seen as a cost-cutting action but it is not always the right method. Determining whether to outsource or hire from within involves considering three factors: cost, control, and location.
A company that hires from within must use their own resources and/or rework their company to fit a new business model. This is where outsourcing looks like a less-expensive choice. An outsourced company already has the resources, trained employees, and the business model to handle the task at hand. Plus, the costs are straightforward to induce.
When a company outsources, they are not using their own resources such as time, money, and employees. Replacing or converting resources can be costly. But if the resources are not being utilized effectively, hiring from within can be more cost-effective than outsourcing. Hiring from within allows a company to use dead weight in ways that outsourcing can’t solve. Understandably, this scenario is more reflective of a large company than of a small business.
The second aspect to consider is a company’s ability to control a project. When a company outsources, it loses out on the ability to control the project. It may have some control but not to the same degree as if the company were to hire from within. Depending on the needs and desires of the company, losing control may not outweigh the savings. If a company’s reputation is on the line, outsourcing may not be the best route. But if the project is something in which an outsourced company could improve upon, relinquishing control could in fact improve a business’s reputation and be in its best interest.
The final factor is location. It may not always be realistic to use in-house resources to complete a project, especially if distance increases costs. Outsourcing can lighten the burden of in-house resource usage if a business uses what is already available in the area. Hiring from within is typically best for in-house operations.
Determining whether to outsource or hire from within is a balancing act between cost, control, and location. Larger companies may have the luxury of being able to use current resources at hand while small businesses with tighter budgets and smaller task forces could be more prone to using outsourcing companies. The decision is reflective of what a company has on hand and is willing to give up to complete a project.