Outsourcing vs. Insourcing:

I believe there is a place for either and will answer the question generally (so both fixed and mobile) as I think it applies equally to both. Outsourcing could be done based on various factors, for one, you could outsource tasks that you do not see as ‘core business’. This could be the cleaning of your facilities, the gardening around the office or even laundry. Some equipment operators don’t see maintenance as their core business and therefore outsources that, which I disagree with. If your core business is dependent on a reliable fleet (or reliable plant) you should set yourself up to have the right skillset to maintain your fleet as well. If you have to outsource your maintenance, this should be as part of a collaborative agreement, with clear objectives and key deliverables.

Another reason for outsourcing is the to obtain highly specialised skills, for example a Senior Structural Engineer. But, if you have enough work to employ someone full time, you could insource this skill. The risk is that if you only employ one person, you could lose a lot of knowledge when they leave. The counter of this is that if you need a very specific skill but will only utilise it say one day a week, giving that person the opportunity to become your ‘outsourced skill’ will potentially create a far better service to you. That person has the potential to offer knowledge and expertise to multiple companies, broadening and expanding their knowledge and potentially being more productive in their service delivery to you, also bringing a wider range of experience.

I previously worked for a company, where we insourced a specific equipment condition monitoring, due to the perceived risk to the business. This was a great initiative, until we lost the one person that had all the knowledge. 

Another factor to consider for outsourcing, is that a contractor has the opportunity to give you more flexibility in your labour engagement framework. Again, there are multiple cases across Australia and beyond, where an unsuitable labour framework was overcome by outsourcing their activities to a contractor partner. Again, this has both merits and pitfalls. The key to this relationship, in my opinion is to engage your contractor partner in a collaborative style contract. Where both parties stand to gain and lose if the outcomes are not favourable. Again, this should be a truly collaborative contract, and NOT a master-slave arrangement where the ‘contractor’ stand to lose to a point that the agreement is no longer economically viable.

The key to this relationship, in my opinion is to engage your contractor partner in a collaborative style contract.

Often projects are outsourced, and again, if you outsource your project due to the specialised skill require, you need to consider how you engage them. Who develops the scope and what controls are put in place?

As with outsourcing, I believe that insourcing also has its pitfalls. One of the risks you have is that your workforce could become stagnant, complacent and your labour utilisation could lower over time. You are at risk of the age-old pitfall of the ‘this is how we have always done it’ mentality. 

Again, I have been part of an organisation where ‘everything was insourced’, and then we utilised contractors to do the bulk of the work. The highly trained engineering department became overqualified scope writers and contract controllers.

So, what should you do? First, determine what is core business. What is important? Where is your biggest potential risk (ownership vs just service delivery)? Then, consider how you outsource. Collaborative style contracts are not used enough, as it is not well understood, but when applied correctly, it will deliver exceptional results!

 Always remember, the lowest cost solution is not always the optimal solution. A good friend and mentor always said: the race to the bottom (i.e. lowest cost supplier) is a no-win race. At the end, everyone loses. 

Insource vs. Outsource - determine what is important, where your risk lies.