Outsourcing Vs Insourcing in Indian HR Operations

Outsourcing Vs Insourcing is a subject usually associated with Information Technology. Often, we assume it happens only abroad. In India we have gone the outsourcing route for a long time. Some of the most common processes which do get outsourced are Security; Canteen; Facilities maintenance etc. In the HR perspective we outsource parts of certain processes such as recruitment sourcing; benefits administration etc.
There is a lot of scope for outsourcing. However, it is important for us to make comprehensive analysis of the process before we take a decision on whether it can be insourced or outsourced. The following steps are a recommended guideline to follow while making a decision on outsourcing Vs Insourcing

1. Is the process core to the business? Core businesses require close monitoring and control. It is recommended that core business processes are insourced. For example, candidate selection and making an offer is core to HR function and hence it is recommended to be insourced. Similarly compensation administration process is core to HR function and it is preferred to be insourced. If the process is not core to the business then we can consider the same for outsourcing. For example, background verification and benefits administration processes are not core HR function and hence they can be considered for outsourcing.


2. Is the process standardized? This is an important question to be asked whenever we start looking at outsourcing as an option. Process standardization is key step for consideration. It is recommeded that non standard process should not be outsourced. 80% of the processes in HR function can be standardized. The function should always strive towards standardization because it reduces resource dependency.


3. Is the process documented? This is the most important aspect before we start seriously exploring the option of ourtsourcing. Often we find this step being missed. Documentation is essential for knowledge share and right process execution consistently. This is a must do step from the point of view of the outsourced vendor. If we diagnose the reasons behind non functioning of the the outsourced process, we find lack of documentation as the main reason. Outsourced vendors, in their eagerness, to get the order, do not really get into the details of step 2 and 3 and as an end result, customer (HR function) would suffer. The function should ensure to have proper documentation of the standardized process before proceed on the outsourcing direction

If we follow the above steps diligently, the decision on insourcing Vs outsourcing will be arrived logically. The framework below would provide the guideline while making decisions on whether the proces has to be insourced or outsourced.