A Recruiter's Guide to Insourcing vs. Outsourcing Staffing

Outsourcing involves hiring an external organization to complete specific business tasks for the company, whereas insourcing is the process of getting tasks done within the organization by in-house employees. Insourcing does not involve a third party or freelancer and may require hiring new talent or new teams to complete the task. While insourcing relies on the organization’s operational infrastructure, outsourcing uses a developed workforce outside the organization.

It has gained a lot of popularity in the last few decades, and several services and activities are outsourced. Business process outsourcing is popular across various industries such as IT, Healthcare, Recruitment, Finance and Accounting, Human Resources, Manufacturing, and Marketing. Companies are keen on outsourcing a wide range of business functions, including back-office functions, customer support, marketing, and design for higher efficiency and cost savings.

Recruitment Process Outsourcing

The recruitment industry has gone through a major shift in the last decade, and the talent acquisition process is more challenging than ever. Recruitment agencies are under tremendous pressure to improve their service delivery capacity in this ever-changing landscape. The post-pandemic talent shortage has further worsened the situation, and recruitment process outsourcing to offshore RPO companies is gaining popularity. In this article, we will discuss whether recruitment agencies should insource or outsource staffing and what factors should be considered before making a decision.

Outsourcing v/s Insourcing

Comparison Factors	Outsourcing	Insourcing
Definition	Outsourcing is the process of assigning core or non-core business functions to external service providers.	Internal sourcing of business operations. It involves allocating resources within the organization and assigning business functions to in-house employees.
Cost	Outsourcing to offshore RPO companies results in substantial cost savings. The staffing agencies also benefit from economies of scale as outsourced service providers already have a robust infrastructure and work for many clients within the same industry.	The cost is low if existing resources are used. If new infrastructure is required or a new team is to be hired, costs may increase.
Location	Outsourced business functions are carried out at external locations outside of the company-owned premises. Outsourcing companies are often located at low-cost offshore delivery centers.	Insourced activities are carried out in-house, within the company-owned premises.
Control	Outsourcing results in a lack of control over the operations and activities of the offshore team.	Insourcing gives full control over the employees, activities, and operations performed in-house.
Confidentiality	Data security may be at risk if the outsourcing company fails to maintain data privacy.	A high level of data privacy can be ensured as sensitive and confidential information stays in-house.
Benefit	Cost savings is the most important objective for outsourcing. It also allows more time and resources to focus on core business functions.	Insourced business activities facilitate greater control and oversight by the company management.

Insource or Outsource Staffing? Five questions to decide what your business needs.

The pandemic has pushed the economy towards a recession, and inflation is at an all-time high, increasing business costs and forcing companies to rethink their strategies. The labor market is under stress due to skills shortages. Recruitment and staffing agencies are challenged to find optimal solutions to keep their business thriving despite inflation and find ways to cut overhead costs. Given the current economic scenario, is it better for recruitment agencies to outsource staffing and other administrative activities to RPO companies? Here are the five factors to consider before deciding.

What’s the core business?

If your core business function is not staffing related, outsourcing recruitment services and projects may be a great option. Often the driving force behind a decision to outsource your staffing functions may not be the cost of outsourcing alone. If a business needs to focus on its core services, getting an extended complimentary team through outsourcing can help. Having an in-house team for staffing or its management could leave less time for core functions.

What is the cost involved?

The cost of employing full-time staffing professionals includes more than just the salary. You must consider the costs involved in training the staff, benefits such as gratuity or pension funds, insurance benefits, paid time off, basic infrastructure and tools required, and the cost of recruiting the employees. Comparing the cost of hiring in-house staff to the cost of outsourcing it to offshore service providers is often one of the main factors driving the outsourcing decision.

What is the work requirement?

The size of the business and project requirement often becomes a driving force in deciding whether you need to insource or outsource staffing. Ask yourself if the requirement is for a few days a month or a full-time project. The business size often dictates the need to outsource or insource. A staffing company with limited resources or technology support could find it cost-effective to outsource to offshore RPO companies with the expertise and infrastructure to carry out such projects.

What are the functional requirements?

Decide what level of expertise is required both tactically and strategically. As the business grows, it requires strategic expertise, and hiring an experienced professional in-house may help. Mid-sized firms can hire or outsource depending on what kind of support is required. Do they need technological support, server backups, employee tools, training, or other resources?

Can you go Hybrid?

Staffing companies can extend their in-house team with an outsourced offshore team to help them with specific projects or new business opportunities. Outsourced offshore recruitment agencies will have the right experience and expertise to deliver clients’ staffing requirements and use the latest technology and business outsourcing models to deliver what the staff expects. The hybrid model allows the flexibility to scale up or down based on the business requirements.

Choose Between Outsourcing and Insourcing

The best question to help you decide whether you should outsource or insource is to think about what will get the work done better, faster, cost-efficiently, and without impacting the company’s goals. If an external RPO company can perform certain business functions more efficiently than completing in-house, outsourcing is the better option.

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Originally published Sep 30, 2022 12:09:47, updated Feb 05 2024

Topics: Outsource Staffing Services, Recruitment Process Outsourcing