Making the real estate industry more efficient


Outsourcing Vs Insourcing


Over the past couple of months, we’ve posted several blogs on outsourcing and what to look for when choosing an outsourcing partner. We talked about key benefits of outsourcing including how it can help you reduce your operating costs, allow you to rapidly adjust to market fluctuations and help you maintain and improve your competitiveness. Yet, as with most things in life, there are both pros and cons to any decision and deciding to outsource versus insource is no exception. In this post, we take a quick look at some of the pros and cons of both alternatives specifically in the areas of Control, Risk and Results.

Increase Focus on the Core Business versus Surrendering Control

Outsourcing is frequently touted as a cost savings initiative. While this is certainly true, it is also an investment in your management’s time and focus. When back office processes are kept in house they will demand your management’s attention, detracting from the time they can spend focusing on your core business. When these processes are outsourced, the demand on management’s time is removed, allowing them to focus on issues that are more critical to your business.

Though this gain in focus does require management to surrender, to a degree, day-to-day management control. Your outsource partner is a third party and you will not have direct control over their personnel. For the micro-manager, this may be somewhat disconcerting. However, it is important to realize that while day-to-day management control may be surrendered, you are not surrendering control of your business processes. By way of example, at String, prior to commencing a new project, we work closely with our customer to map out and document their exact processes. We then follow this map for every single file we work on. As such, you maintain full control of how your files are processed, even though you are not managing the day-to-day activities of the processing staff.

Enhanced Continuity versus Increase Risk of Data Breaches

Outsourcing can assist you in maintaining business continuity, while minimizing the risk of business disruptions – whether man-made and natural – that only the largest multi-nationals can achieve through insourcing. When you outsource, your geographic footprint is immediately expanded across multiple time zones or continents. A hurricane in Florida that shuts down business for days will have no impact on your outsourced service center in India. Additionally, outsourcing enhances your staffing flexibility, specifically in your ability to rapidly add or eliminate staff, which cannot be achieved through insourcing.

Though the benefits of enhanced staffing flexibility and an expanded geographical foot print will require you to transfer of your data, which may contain Nonpublic Personal Information, to the outsourcing provider. As with any data transfer, there is the risk that your data will be breached, miss-handled or lost. By identifying outsource providers that are ISO 27001 and SSAE16 certified, you can be assured that the partner you choose has an information security maintenance system in place and the appropriate controls, policies and procedures to protect the integrity of your data. Additionally, as we discussed a couple of weeks ago, the use of VPNs, which we use heavily here at String, can further protect your data from potential theft and miss-use.

Cost Savings verse Lower Than Expected Results

As we mention at the start of this post, cost savings is one of the key benefits of outsourcing. And the savings is not just on employee wages but on expenses such as office space, office furniture and equipment, health insurance and vacation pay. Choosing to insource would require you to carry these costs and the resulting negative impact on your profitability.

However, the costs savings you realize is dependent on the efficiency of your outsourcing partner. Providers that do not, or cannot, perform to expectation will minimize the cost savings you hoped to achieve through outsourcing. Working with an outsource provider that is experienced in your industry or, better yet, with the specific processes you wish to outsource, will help you achieve the maximum benefit from outsourcing. It is for this reason that String focuses exclusively on the real estate industry and its unique processes and procedures.

These are just several of the many factors you must consider when determining whether to outsource or insource a back-office process. However, the sheer volume of both onshore and offshore outsource providers does provide evidence that the pros of outsourcing greatly out weight the cons.

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