Your Team Could Save Money by Insourcing Work: Here's How

Insourcing is bringing previously outsourced work back in-house to make better use of spare capacity, create cost savings, and build internal capabilities. 

Resource managers are uniquely placed to make insourcing practical and profitable for the businesses they serve. Here’s what you need to know, including a step-by-step guide to insourcing work for resource managers. 

Why would you insource work in resource management?

When businesses outsource work, they rely on external contractors and contingent workers to deliver services that can’t currently be handled by their internal workforce.

For example: 

• A marketing agency might outsource its typesetting due to lack of specialist skills in-house.
• A software development studio may outsource QA testing due to limited capacity.

Insourcing, on the other hand, means bringing previously outsourced tasks back in-house. 

Using outsourced contractors very often works out more expensive over time compared to getting the work completed by salaried employees. In other words, insourcing can be a source of cost savings and improved return on resource investment.

It can also be a catalyst for internal upskilling and higher efficiency – laying the foundation for wider business benefits.

For instance, in our example of the software development studio above, there may be a very reasonable financial case for hiring a full-time QA tester, or redeploying an existing employee to work primarily on QA testing, rather than continuing to outsource the work.

What are the financial benefits of insourcing work?

As a resource manager, you need to keep an eye on the bottom line, helping your organization maintain its margins by making the best use of resources’ time and talent.

Implemented effectively, insourcing can deliver significant financial benefits. Here’s why.

Better resource utilization

Underutilized resources represent both a cost and an opportunity. Salaries are fixed, whether employees are fully utilized or not. 

If your overall resource utilization rate is 60% – for example – and you’re paying to outsource tasks that could be handled internally, you’re paying twice. 

• Once for the external vendor who’s doing the work
• And once for the internal resources who aren’t 

That doesn’t make financial sense and undermines project profitability. 

By insourcing relevant tasks to underutilized internal resources, you can maximize billable utilization and reduce external spend. 

Of course, it’s not as simple as just giving specialist work to whoever has free time. But by reviewing overall utilization and allocations, you may uncover the capacity and capabilities to bring work back in-house. 

Cost savings 

Insourcing can often incur a lower cost than using external contractors, since internal employees’ time is a resource you’ve already paid for (see above).

That said, it’s not always a straightforward comparison. Third-party vendors don’t incur the same costs as employees – payroll taxes, benefits, training, and equipment are all avoided – so their hourly rate isn’t directly equivalent. 

If insourcing would require hiring or equipping new staff, outsourcing may still be the more cost-effective option. The key is to weigh the total cost of delivery, not just the headline rate.

Non-financial benefits of insourcing work 

Insourcing isn’t just financially advantageous. As with all things resource management, insourcing can boost employee skills, engagement, retention, and more – making your organization more productive, resilient, and effective. 

1. Internal capability building

By insourcing and upskilling staff, organizations develop new knowledge, further reduce reliance on external specialists, and potentially open up new market opportunities.

2. Quality control and consistency

Insourcing work can improve consistency thanks to direct control and closer oversight – however, experienced providers may deliver higher quality in the short term.

3. Security and confidentiality

Sensitive data and processes are safer when managed internally, lowering risks of leaks or compliance issues – especially important in sectors that need to protect sensitive data or intellectual property.

4. Employee engagement

Upskilling staff and providing opportunities for professional development can boost engagement, motivation, and loyalty, which reduces staff churn and turnover costs.

5. Responsiveness

Contractors take time to appoint and often work to their own schedules, so insourcing may increase velocity (though experienced contractors may work more quickly than fledgling internal experts). 

6. Reduced complexity

Supply chain management can be complex and wrangling a range of external providers may prove more complex than managing your in house team. 

7. Company culture

Reliance on external expertise over company hires can impact company culture and make it harder to craft the employee experience you strive for – and reinforce company values. 

What’s best for you: insourcing or outsourcing?

All this talk about the benefits of insourcing work might make you think that outsourcing is always a bad move. But that’s absolutely not the case. They’re just different business strategies.

Resource management is about making strategic decisions that meet current and future business needs. Sometimes, agility or accessing specialized expertise will be a top priority, so outsourcing makes great sense. Other times, you might need to prioritize cost control or staff development, so insourcing is a stronger strategy.

It’s about knowing your options and not letting the status quo sway your decisions. Just because you’ve outsourced in the past doesn’t mean you need to now. And just because you could insource, doesn’t mean you should.

Step-by-step guide to insourcing work 

If insourcing is right for your business model and financial goals, a structured approach is essential. Follow the step-by-step guide below to bring work back in-house successfully.

Audit your outsourcing 

Start by understanding exactly what work is being done externally and why.

• Map outsourced tasks – Create a comprehensive list of all vendors and the work they do for you.
• Understand rationale – Speak to vendor contacts to understand why the work is outsourced, particularly if it is due to internal capacity or capability.
• Ask – What would be needed to bring it back internally – such as more skills in-house, access to specialist equipment, or more boots on the ground.
  

Assess internal capacity

Next, look at your internal capacity to look for opportunities to return work to your in house team. 

• Review current utilization rates – Compare workload to capacity to identify where employees are under- or over-utilized. This will reveal potential capacity for insourcing, or could justify continued outsourcing. 
• Check your skills inventory – Look for resources that have the skills and expertise that you currently source from external sources, or who have expressed an interest in upskilling.
• See the big picture – Don’t just look for literal like-for-like swaps from external to internal resources. Look at how scattered pockets of spare capacity could be reallocated to create meaningful space to insource activities. 
  

Build an insourcing business case

Insourcing needs to make financial and strategic sense, so now it’s time to calculate what your business can gain by bringing work back in-house.

• Calculate costs – Work out the overall cost of each task internally vs. externally. Remember, headline costs can be deceiving – consider the full cost of insourcing, including employee training, time to proficiency, etc.
• Factor in non-financial benefits – such as improved efficiency, higher utilization, and internal capacity building vs access to specialized skills and business agility.
• Prioritize people over profit – We know you’ll be laser-focused on staff wellbeing, but others may be distracted by the promise of better margins. Reinforce the fact that insourcing to the point of over-utilization will cost more in the long run.
  

Create an insourcing roadmap

Insourcing is a big change – you should use a change management process to ensure it runs smoothly.

• Plan a phased process – Consider starting with a pilot group or small number of outsourced contracts to test and validate your processes.
• Consult your workforce – Make sure employees understand why tasks are being insourced and how it will affect their roles – especially for the better.
• Start with low-hanging fruit – Such as habitually outsourced tasks where you actually have capacity or core competencies in-house.
  

Strengthen internal capabilities

Having decided which tasks to insource, and who’ll be responsible, it’s time to build internal capacity and capabilities.

• Identify hand-raisers – Some staff will be eager to take on new responsibilities, change roles, or learn something new – use that motivation wherever possible. 
• Upskill staff – Work with relevant departments, such as Human Resources and L&D, to provide the training and mentoring resources will need for their new responsibilities.
• Invest in tools and resources – Secure anything your team members will need to execute their new tasks, such as specialist software licenses or equipment. 
  

Monitor and review 

Insourcing isn’t a one-and-done activity. Your approach needs to be dynamic and reflect the needs of your business and market at any given time. 

• Track savings – Measure financial and other gains against the projections in your business case.
• Monitor staff workload – Ensure insourcing hasn’t led to resource overutilization, and check that new workload is balanced evenly across people and teams.
• Document processes – Record successful processes for future reference, such as how to calculate the cost-benefit of insourcing vs. outsourcing.

Insourcing: final thoughts

Insourcing isn’t about replacing outsourcing as a matter of principle. It’s about making strategic choices that maximize the value of your in house teams and control your costs. 

By carefully assessing capacity, costs, and capabilities, you can bring the right work back in-house:

• Improving efficiency and reducing labor costs
• Building internal capabilities and self-sufficiency 
• Achieving better control of business operations 
  

But do you have capacity to insource? Now, that's a vital question in this equation.

For this strategy to work, you need clear, ongoing and up-to-date visibility into your resource capacity.

And the best way to achieve that? With a capacity planning tool ➡️