Think Tank

Insourcing v/s Outsourcing IT Services

Managed services provider

It remains a debate against insourcing and outsourcing IT managed services but, it’s a decision that differs from one organization to another. There are many factors like finance, expertise, or any other aspects that influence to compromise between hiring a third-party vendor or managing the services in-house. In both cases, you must adapt to suit your individual requirements.

Both insourcing and outsourcing have their unique benefits and concerns at the same time. But, pursue a service if it brings benefits to your business. Let’s look at the benefits first.

Outsourcing benefits Insourcing benefits
> Cost savings

> Flexibility

> Can focus on your core business

> Try before you buy

> Security

> Well in control

> Ownership is in your hands

> One extra service on your list

Let’s discuss the benefits of outsourcing first,

Cost Savings

The primary focus of all businesses and a critical reason to outsource to managed services is cost saving. Investing in resources for the expertise which might require occasionally is not a good idea. Also, outsourcing removes the unnecessary downtime periods like sick leaves, holidays, or staffs’ inexperience in a particular service, and so on.

When working with an in-house team, you need to invest in buying hardware, licenses, maintenance, and other associated costs. But you can save a significant economy when paying for a portion of service, and it is less expensive compare to an in-house solution.

Managed services possess experience.

The managed services will have the required tools and expertise to offer a high level of service to their customers. They have committed resources with specialized knowledge to undertake the tasks. Hence, it is not advisable to depend on an in-house solution for an occasional engagement.

Sometimes, a single resource is not enough to complete a critical job. So, a managed service provider with multiple resources is the best option to meet your requirements on time regardless of the problems that occur in the future.


The prominent advantage of hiring managed services is the flexibility of adding or removing your varying requirements at any time. For example, a fashion agency might require an additional capacity during the peak festival season but will not seek for other seasons of the year.

Flexibility might also be helpful when you plan to introduce and test new services. A managed service provider can quickly provide the talents and remove them when it is not required. But the economic flexibility is nearly zero with the insourced environment.

Concentrate on your core business strength

Outsourcing provides an excellent opportunity to concentrate on your core business strength. Suppose, if you are working in the retail or hospitality sector, you possess those skills related to your industry, right? And it will be a wrong approach to have an IT capacity within the organization.

Better stick to what you’re good at and hire managed services for your IT requirement.

Try before you buy

Use the benefits of the trial period from the managed service providers before deciding to outsource the work. Test if they fit your purpose and provide value that is expecting of them.

Trying is impossible with an in-house arrangement. Here, you need to be sure about the rewards before investing in infrastructure and the required software. It’ll be a significant loss if you change your mind.

Investment considerations

Hiring managed services provide an opportunity to save a lot of money. You can get better solutions in an operating expense and preserve the capital expenditure for new services in the future. Thus, you can economize the IT spending while obtaining new capabilities and procure them wisely by classifying the cloud costs.

Risks of outsourcing IT services or benefits of insourcing

Now, the risk of outsourcing IT services becomes the benefit of having an in-house solution. Of course, insourcing has many challenges to negotiate, and it’s not a bed of roses either.

With an in-house solution, there are fewer chances of a severe data breach or reputation concerns. Your data is more secured and confidential within your organization. But, if you outsource your work to an agency, your will be sharing your data and confidential information with a third-party vendor. Though you have signed an agreement with clauses, it can give you anxiety. Since a managed service provider will be controlling your IT service department, you might lose a sense of ownership and responsibility. And, you wouldn’t expect the unplanned extra costs when you outsource your services. So, finding professional businesses which provide appropriate support for niche services is critical.

Outsourcing trends and their growth in the future

The world has already embraced outsourcing. The managed services reshaped the industry by delivering excellent services to the customers with impressive outsourcing strategies.

According to the surveys, the main reason businesses choose to outsource is to increase efficiency. The other reasons include freeing up employee’s time for other tasks, increase available resources, and reduce operating costs. Offshore popularity is rising, and businesses are feeling satisfied with their outsourcing relationships.

The most common outsourced business processes are Accounting and IT Services, with 37% each. Digital Marketing comes second with 34%. Development (App/Mobile/Web) stands third with 28%. And finally Human Resources, and Customer Support with 24% each.

The global IT outsourcing market was valued at USD 333.7 billion in 2019, and it is expected to reach USD 397.6 billion by 2025, registering a CAGR of 4.5%, during the forecast period (2020 – 2025).

Technology advancements and more companies including, the government sector, are investing to moving to the cloud-based working, outsourcing has proven successful.

As most organizations have already migrated their functions and processes to the cloud, the post-pandemic world will be advantageous for managed services. As companies needing to grow and remain competitive in the global market can’t afford to overlook the cost savings and functional benefits of outsourcing.

To conclude

It is not whether to choose between insourcing or outsourcing but, understand if the services are suited to manage in-house or should be contracted to a third party. IT services are prime commodities for outsourcing which comes with the greatest savings.

Aarav Solutions is a global product engineering, Managed Services and IT consulting services provider. Our clientele comes from a broad array of industries – Telecommunications, Banking & Finance, Government, Power and Utilities among various other B2B segments. Our goal is to empower businesses in their quest for digital transformation with our experience, innovation and next generation technology.

We help organizations align business and technology goals.

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