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The Pros and Cons of Hiring In-House Vs. Outsourcing

Should you hire an employee or outsource work to a freelancer? The answer often depends on so many factors.
January 20, 2017

Hiring in-house talent or outsourcing? Both have perks and downfalls. From my experience as CEO of a full-service online travel company called Wakanow, I've found that the decision comes down to the scope of the project. Is this a short-term project, where the talent is needed only for a few months? Is there a long-term need for the type of work? Is there a willingness on your part to pay medical benefits or match a percentage of a 401(k) plan? At Wakanow, I use a hybrid model where some of my talent is in-house (technical side of website development), and some is outsourced (digital marketing and SEO).

Cost-cutting solutions can be another top consideration of small-business owners, weighed against the hire's expertise and your timeline.

Here are some of the pros and cons of in-house hiring and outsourcing to help you make the decision that's right for your business. 

The Pros of In-House Hiring

  • Face-to-face conversations can offer more engagement between employees on the same project, which may help propel progress. These in-person discussions can help create new energy, which sometimes leads to bigger ideas. Some of the best ideas at Wakanow surfaced this way.
  • Being able to offer a salary and room for growth can make in-house hires less of a flight risk. These employees may also be more vested in the long-term voice of the company.
  • Intellectual property may be more likely to remain confidential. You can also have employees sign a non-compete contract, which can prevent them from taking ideas if they leave the company.

There are three vital factors to in-house hiring and outsourcing: cost, expertise and flexibility.

  • Technical solutions may be resolved faster. In-house talent can direct all attention to a problem that must be fixed quickly, whereas a freelancer may finish a task based on prior commitments using a first come, first served system.
  • Outside investors tend to show more interest and provide higher valuations to in-house technology and marketing teams. This can be great for companies looking to amp up growth and that need some additional funding for goals like hiring more talent.

The Cons of In-House Hiring

  • Finding quality talent can be tough, especially in smaller cities. Most of the top talent may already be employed.
  • Top employees may expect medical and dental benefits, and most likely a 401(k) plan match. Remember these costs can get quite high, whereas you just pay a flat rate to a freelancer.
  • Finding, interviewing and negotiating can take time, and if an employee departs, the process begins again. Onboarding new employees, including training, can be expensive.

The Pros of Outsourcing

  • Most freelancers are pros at a very targeted discipline, such as web design, content creation or paid search media.
  • It can take much less time to find talent, due to agencies like Upwork and Freelancer. This means projects may get completed quicker, and the product can possibly reach the market faster.
  • Outsourcing can be ideal for short-term projects, in which talent is only needed for the completion of a one-off project.
  • Finding talent from anywhere in the world can allow you to use dollar arbitrage to take advantage of different prices across different markets.

The Cons of Outsourcing 

  • Intellectual property may have the risk of being exposed. Try to garner some insights on the talent you freelance. Sites like LinkedIn and Facebook may make it easier to gain insights into who you hire.
  • Fake freelance profiles can exaggerate talent. Check into freelancers through social media channels and review/rating systems. Try to avoid working with someone who doesn’t have ratings or can’t be found online.
  • Different physical locations can have different styles regarding design, engineering and content creation. A freelancer in the U.K. may have a much different idea than a California-based freelancer. Try to choose talent with experience in your country and area.
  • Communication gaps can be likely. Freelancers work in different time zones and have different types of schedules. Be wary of some of the more creative talent, like writers or developers. The best usually take the most time.
  • Freelancers can get quite expensive. Some of the highest rated software engineers, for instance, can cost up to $300 per hour based on the scope of the product.
  • Some freelancers can increase the length of a project depending on other higher paying projects. The higher-paying jobs will most likely be the ones that are completed first.

Remember, there are three vital factors to in-house hiring and outsourcing: cost, expertise and flexibility. These three factors may play the largest role in how you choose between in-house hiring and outsourcing. It may be hard to have the best of all worlds, but this list of pros and cons may help you make a more informed decision.

Obinna Ekezie is the co-founder and CEO of Wakanow, a full-service, online travel company in Africa, and former NBA player. He is also a member of Young Entrepreneur Council (YEC).

Read more articles about hiring and HR.

A version of this article was originally published on January 18, 2016. 

Photo: iStock