Business Strategies

Collaboration via Insourcing

Written by Clayton Reeves for Gaebler Ventures

Learn about a new phenomenon known as insourcing. It is a snapshot of something big that is happening worldwide and will soon impact your small business.

Most people have heard of outsourcing, which is the act of sending work to another country for cheaper, more efficient completion.

One of the more obvious examples of outsourcing is call centers in India. This is the cheapest and most efficient way to get call centers up and operational for most American companies.

When people started to complain about unqualified, non-English speaking technical support, the Indian workers responded by requiring Midwestern accents and ongoing technical training. Now, it is difficult to tell who is actually from New Delhi when dealing with call centers.

Ask your next technical support operator, and you might be surprised at how American they actually sound. Some operators are trained to have different accents depending on the company that they work for. Now that is some impressive collaboration.

The other form of foreign involvement is called offshoring. This usually gets the worse reputation of the two. Offshoring is the process of moving an actual operation that makes goods to another country.

This could be an entire factory, with workers, managers and supplies all moving to the cheaper labor market. Most people have a negative connotation with offshoring because of the immediate impact it has on jobs and cities that lose entire factories. During the manufacturing era, entire cities were built around major operations, and workers that have their jobs offshored usually have some pretty intense feelings.

Another more positive revelation in the new collaborative economy is the concept of insourcing. This is something new that hasn't really evolved to maturity yet. Thomas Friedman talks about insourcing in his book, The World is Flat.

It is the process of horizontal integration of services between big companies and small companies. A company that has five people can often purchase services that it would not have the resources to build themselves.

Horizontal integration has been a flattening force in the world for some time. However, with the general movement away from manufacturing to a service oriented economy in the United States, things like supply chain management have become much more important, even to small companies. That is why insourcing is so important.

Everything from information technology, marketing, advertising, manufacturing and distribution can now be sourced to another firm. A company will soon be an organization that contracts with other companies to perform certain functions. The key will be how companies optimize their operations to sustain a competitive advantage over others. In the retail industry, Walmart has been able to do this, but Sears and Kmart haven't.

Take, for instance, UPS. They offer services to small companies for supply chain management. These services can range from simply shipping and tracking to absorbing the entire customer experience, from order to delivery to follow up. Small companies can act big with integrated solutions. This is how the entrepreneur will function in an evolving economy; as a creative force and innovator in the practice of tying together companies in creative and value adding ways.

When he's not playing racquetball or studying for a class, Clayton Reeves enjoys writing articles about entrepreneurship. He is currently an MBA student at the University of Missouri with a concentration in Economics and Finance.

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