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Hiring In-House or Outsourcing: Which Is Right for You?

Inhouse or outsource

Inhouse or outsourceDo you need help in accounting, inbound marketing, or administration?  If so you’ve probably asked yourself whether you should hire someone into your company or outsource the work to an agency.

The difference between bringing an employee on staff and outsourcing the function makes a huge impact on your day-to-day work activities, the outcome of your project, and – of course – your bottom line.

The bad news: there’s no clear cut definition of when to outsource and when to keep the work in-house; each situation is unique and you must assess each decision on its own characteristics to ensure you have the right fit.

The good news: there are clear definitions of the benefits between the two options; so making a decision is merely a process of working out what you need.

Benefits Of Hiring In-house

  • An employee will have greater buy-in to your company
  • Knowledge and skills developed by working on your projects is kept in house and is available for later use
  • An employee has greater familiarity with your organization, simply because they are onsite all the time.  This can be helpful when you need to quickly get a project out.  It can also prevent the doubling up of work efforts that can happen in communication from your employees to the contractor.
  • When you hire someone you have greater cost control.  If a project goes overtime and someone is back after hours, the costs remain the same

Signs You Should Employ Someone In-House

  • You have a specific work culture that must be evident throughout everything you do and everyone you work with
  • This function is a key competency of your business
  • You are a large organization with a strong employer brand
  • The activities involve highly confidential or trade secrets that could damage your business if made public

Benefits of Outsourcing

  • Simpler onboarding process. Finding the right company to outsource to is an easier process than finding a new employee because most companies will want your business.  Instead of managing the training and payment of an employee, including vacation, sick leave and the inevitable raise, an external company is a simple contract agreement.
  • Guaranteed continuation and no down time.  Unless you’re working with a small agency, outsourcing your work guarantees that there are no unscheduled stops like vacation breaks, sickness or scrambling for a replacement on long service leave.
  • Concentrated expertise.  Specialized companies are usually able to recruit experts with deeper experience.  Because they work on a range of projects, they have wider knowledge of the subject which will benefit the quality of your project.
  • No need to invest in equipment.  If the role requires specialized equipment like design tools or software, you will be responsible for sourcing these for an employee.  When you outsource, the contractor carries this expense.

Signs You Should Consider Outsourcing

  • You are not sure that the work will continue after this project or that there is enough work to justify an ongoing position
  • You are a smaller business establishing yourself in the market
  • The function is not a core competency of your business model

To make this a little easier for you, we’ve put together a list of the steps to take to decide between inhousing and outsourcing a function.

1. Identify what areas you can outsource

Before you figure out whether to outsource, you need to identify what areas you can outsource and where you need help right now. Those areas might include:

  • Online marketing, particularly SEO, PPC campaigns, mobile website, and all of inbound marketing
  • Website maintenance and development
  • Virtual administration, through freelancer websites
  • Accounting
  • Software development and programming
  • Call centres / online support
  • IT maintenance

2. Identify all the costs

When you’re considering the financial difference between the two options, remember to include the costs of your time and emotional energy.  While hiring in-house is generally cheaper on paper, there are a host of responsibilities that go along with managing a new staff member. These include ensuring you have enough work on an ongoing basis and providing training and advancement opportunities.  Don’t forget that you will also need to invest in equipment and a place to sit for the new employee!

3. Identify business-critical functions

Some functions that need to be performed by a business are not actually part of the business model; rather, they are part of running the business itself.  For instance, for some businesses, online marketing activities are a key part of their competitive advantage, and their ability to turn over millions of dollars rests on this performance. For others, online marketing is simply what they do to maintain sales, but their core capabilities rest in manufacturing or design.  If the function you need help in is not a core function of your business model, outsourcing will probably create fewer headaches for you.

4. Identify how much culture matters

Do you have a unique culture within your organization that really defines why your customers love you?  Every company creates their own culture, and even if you find a close match in an external agency or freelancer, they will never be 100% yours. You can more easily instill culture in a full-time employee

5. Assess the market availability of skills

There are always market realities to consider.  You may prefer to have someone in-house, but if you can’t find the technical or marketing talent, outsourcing may be in your only option.  When making the decision, you need to consider the scarcity of skills in the market and whether you will get the level of professionalism you need for the budget you have.

Remember, when it comes to making a decision of inhouse or outsourcing you don’t need to choose either/or.  It’s reasonable that one of your projects may be better off with an employee owning it while your another may be better off with an external company managing it.   Even within a particular project, an external contractor could take care of one small part while the rest is managed in house.  Design the solution that works best for your needs and the market realities.

Photo courtesy of Vic.

Jenn Steele

Head of Growth at RecruitLoop. Previously at Amazon & HubSpot. Passionate about growing humans and companies, working out, and wine. Also blogs on leadership at Follow her @jennsteele.

  • Great advice, Jenn! I totally agree that there are a lot of considerations when deciding which way to go. So employers should carefully assess what they need in order for the hiring setup to be productive.

    Mynd Consulting

  • Outsourcing workforce has been a good move for a lot of SMe’s outthere, however there are businesses that are not compatible with outsourcing. When it comes to business it is really good to know first the need of the business and if the solution for this need is parallel to the strategy of the company. It is good that your article gives us a good advice about this. Thanks for this wonderful post.

  • Valeriia

    Another option an employer might consider is nearshoring.

    The main distinctive feature of this type of outsourcing is proximity of an employer and a third-party vendor.

    Here are the pros of nearshoring:

    small (or non-existent) time difference results in smooth communication. None of the parties has to work extra hours or change schedules to arrange meetings and stay in touch,
    similar cultural background reduces the number of misunderstandings and eliminates the need to change work habits,
    short distances make travel between offices easier, faster and more affordable.

    Speaking of cons, that’s what I can think of:

    the number of vendors you can choose from gets smaller once you decide to stick to a certain location,
    at times, nearshore companies may be more expensive than the offshore ones, since you limit yourself to a certain location, where average salaries.

    An example of nearshoring would be a German company hiring a developer, working from Ukraine (e.g.

  • Phuong Thao

    I have recently outsourced a software company to design website and mobile app for my own products. I am very satisfied with the quality of service provided by this company – PowerGate Software Company, located in Vietnam. I rated 4.5 / 5 for the company. For more detailed information, you can visit their website

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