The search for a better outsourcing model: benefits of Remote Insourcing
2014-15-08, by Diana
Since the 1980s, outsourcing has become a go-to strategy for cost cutting and sourcing talent, especially when it comes to IT and software development services. In the last decade outsourcing has developed a bad reputation for destroying projects and running up high costs instead of reducing them. But there’s a new solution for dealing with the uncertainties of outsourcing – it’s called Remote Insourcing and it’s Chicago’s latest services innovation award recipient.
What is outsourcing?
Outsourcing is a strategic decision by one company to outsource a specific task or project or a part of their operations to a third party provider. Usually the decision to outsource is made because the outsourcing company does not have enough resources in house (such as money, skills and expertise, or available personnel) to complete a given task. The reasons why companies choose to outsource vary widely depending on company’s structure and project goals.
In most simple terms, the outsourcing definition is a way to get the right people or the right processes to complete a project or a task.
The problem with traditional outsourcing models
There are a great number of traditional sourcing models. Some of them are designed to minimize risks, others to minimize costs, but most cannot combine both (minimal risks at minimal costs). Often low-risk options are expensive, and low-cost options are too risky. For a more comprehensive overview of outsourcing models, read this post.
For example, one the biggest risks with outsourcing partnerships is that companies never know exactly who is working on their projects and begin to lose control over their project results (a couple tips on dealing with loss of control here). A decade ago it became common for companies to start cooperation with a third party (often through offshore outsourcing), just to find few months later that the programmer they hired and trained for their project has now been assigned to a new project – and to top it off, they now have to pay for the training of a new remote worker. This approach to outsourcing created cost inefficiency, distrust between outsourcing buyers and providers, and created doubts about outsourcing as a useful strategy at all.
A new approach to outsourcing
When it came to sourcing talent, there was suddenly a need for a better approach to doing outsourcing, not only to assure cost efficiency, but also to satisfy project goals. From the outset, Remote In-Sourcing was created as a model that enabled close cooperation with the client’s in-house employees, while also guaranteeing cost efficiency. Remote insourcing prescribes a way to build custom teams for the client, letting them know exactly who is working on their projects, but also incorporating a remote factor to ensure cost efficiency. Essentially, it allows providers to build custom, specialized teams that perfectly match clients’ sourcing needs, while keeping costs and risks low and talent availability high.
How has remote insourcing improved the outsourcing experience?
The Remote In-Sourcing model delivers more control and risk management than any other traditional outsourcing models while still offering attractive cost benefits. Other models come close to mitigating these risks with comprehensive SLAs, but some risks are hard to describe and assess legally – how do you assess cultural compatibility or employee morale? How do you make sure that no knowledge is lost during the sourcing process? These risks can only be dealt with by selecting the right approach to outsourcing and by ensuring that the right people can intimately cooperate with the client. This helps ensure all knowledge and control is retained, while working remotely and delivering quality results. The Remote In-Sourcing model sets up this sort of collaboration from the outset.
- Better relationship quality & cultural proximity
The remote team is created based on client specifications in order to ensure the most compatibility with the client’s project goals and their corporate culture. It also guarantees that the same people continue to work on the project, minimizing security risks and re-training needs. It also incorporates cultural compatibility controls, where the client can evaluate their remote team members based on whether or not they fit their company culture.
- Cost efficiency
With this model, the remote team that is created for the client can be located anywhere in the world. While the cost per developer services will vary depending on their location, potentially delivering even higher cost savings, the client always saves on the training, operational and logistical costs as opposed to creating their own internal IT department. The provider takes care to train the right people for the job, and make sure they keep working on the same project, while also providing the infrastructure and facilities for the remote team. This allows a 40-60% reduction in operational costs.
- Flexibility & scalability
Finally, the model is extremely flexible and scalable. For example, it allows the client to start with 4 engineers, and if more people are needed, the provider then recruits the right people to add to the remote team – always based on client’s specifications and training standards. It allows the clients freedom in how much people they have working on their project at any given time.
Download this presentation to learn more about how Remote In-Sourcing compares to other models.
It’s been three years since we officially started to operate using the “Remote Insourcing” business model (and since we trademarked this concept in August 2011), and already it’s been nominated as Chicago’s Top 100 services innovations of the year.
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