The Advantages And Disadvantages Of Insource And Outsource Essay

The Advantages And Disadvantages Of Insource And Outsource - Essay Example As a small insurance company, there are pertinent functions that the business needs which are not core to either its growth or for gaining competitive advantage. These functions include human resource, payroll, IT and partly financed. Outsourcing here would offer a better choice than insourcing because the company would be able to save on employee compensation, office expenses, and other associated costs. Outsourcing essentially converts fixed costs into variable costs, which will enable the small business to use these resources for investment elsewhere in the business (AllBusiness.com 3). On the flip side, small companies must be very careful when negotiating the terms of service with an outsourcing firm. Knowing the challenge that small businesses face with regards to weighing their cost options, an outsourcing company could trap the small company in terms of service that have numerous hidden charges. However, unless the outsourced services provider has numerous ridiculous charges when it comes to managing costs for a small insurance company, outsourcing offers a better solution than insourcing. On the outset, insourcing does seem like a cost-effective strategy for a company to use because it will simply rely on resources that it already has. This may be true for large organizations that have numerous departments and employees. Small companies are already constrained in terms of staffing, and to manage costs they tend to have employees with flexible role profiles.