Is insourcing gaining ground?

Posted at 03/29/2013 10:23 AM | Updated as of 03/29/2013 10:27 AM

MANILA, Philippines - In the last two decades, outsourcing of information technology has gained popularity.
However, a Deloitte survey now shows a small but growing number of companies are bringing back home these IT jobs or "insourcing."

"In recent years, we have witnessed a small but growing reversal of this trend where companies that have previously outsourced functions are bringing them back in-house," Deloitte said in a report "From Bangalore to Boston: The trend of bringing IT back in-house."

In Deloitte's 2012 Global Outsourcing and Insourcing survey, 48% of respondents say they have terminated an outsourcing agreement early for cause or convenience.

While a majority choose to move to a different service provider, 34% said they decided to bring the work back in-house.

"It is worth noting that insourcing has become a viable option, particularly in the event that an outsourcing transaction did not meet expectations," the report said.

Drivers for insourcing

The survey showed that the biggest driver for insourcing is the need to improve customer service and customer experience.

"Voice-based functions, such as call centers, come under direct scrutiny due to issues such as language, accent and contextual familiarity of the call center representatives. Such scrutiny can often lead to real or perceived concerns about the quality of service," Deloitte said.

Another key factor for insourcing was to improve controls on functions previously outsourced.

Cost reduction is another factor for insourcing. "In some cases, organizations may not be able to realize projected economic gains from their outsourcing program. This could be due to several factors, including: the need for additional internal quality control due to poor quality from the outsourcer; and an increase in the true price of service delivery through scope 'creep' and excessive change orders," the report said.

The survey showed that 79% of the respondents were satisfied or very satisfied with their insourcing programs.

"Though insourcing is a small trend compared to the global outsourcing juggernaut, given the maturity of the outsourcing industry we are seeing more and more clients wrestling with the question of whether an outsourcing deal that is not meeting expectations should be re-tendered or insourced," Deloitte said.