By Peter Chai

As the global outsourcing industry gains further traction, an increasing number of outsourcing customers are revisiting their strategies and bringing back selected services in-house.

The trend towards insourcing, defined as the use of in-house personnel or an internal department to meet an organisation's need for selected services, is growing not only among high value services such as software development and product design but also among non-core operations such as customer service and technical support.

Undoubtedly, companies that have been burned by unsatisfactory relationships with contractors would consider insourcing an option, but this is not the key driver. Insourcing is taken into account when business circumstances render the services being served by outsourcers inadequate.

Research firm Gartner believes that, apart from company-specific drivers, insourcing is driven by an organisation's desire to increase control, protect intellectual capital or enhance competitive advantages.

In general, companies with more mature IT organisations tend to have a more sophisticated and granular outsourcing model compared to less sophisticated organisations that apply outsourcing to a single class of services. Service granularity helps companies identify certain key pieces of services that could be brought back in-house.

The experience of 3Com is a case in point. Three years ago, the company started outsourcing technical support and some professional services to third party companies offering 24x7 global customer and channel support from Canada.

However, as it increased its product portfolio and its focus on the enterprise market, 3Com found that the majority of its customers and channel partners wanted to speak directly to 3Com engineers. This has been particularly challenging in Asia, where geographical distance gets in the way of speedy call resolution.

It was difficult for the current outsourcing model to support these needs, and the company decided last year to restructure the service and support organisation by bringing technical support inhouse. This resulted in more personal attention to its Asia-Pacific customers.

The approach taken was a hybrid one, selecting services that could be insourced while maintaining an outsourcing relationship with key contractors. Some US$12 million was invested in new systems and staff worldwide, beefing up the support team in 3Com's Sydney office to complement the Asia-Pacific field-based engineers. A new call centre team was set up comprising Level Two technical support engineers and Level Three escalation engineers providing services in several Asian languages.

While this was happening, the company continued to maintain its existing outsourced call centre operation that handled non-technical support.

The result has been phenomenal. A third-party research commissioned by 3Com saw the overall customer satisfaction level increased to 91 per cent from just over 60 per cent 18 months before. This would never have been achieved had it not decided to insource its critical customer facing processes.

This exercise has helped us at 3Com see even more clearly the value of staying close to customers. More importantly, it has taught us that improving customer service requires better control of our service organisation.

Should you decide to transition to insourcing, bear in mind that bringing service back may be riskier and more complex than initial outsourcing or switching service providers. Make sure you have your objectives, methodologies, timing, plans and teams in place before taking the plunge.

Here's an outline of some of the concerns and actions companies must consider to help them in their insourcing decisions.

Firstly, business buy-in is important because insourcing is a business decision, it would help to get the business owners of the services involved every step of the way.

After all, they are the ones who understand how insourcing could add efficiency, provide enhancement or support innovation. Make sure they are aware of the risks and share decisions on how you can mitigate them. For example, if you want to retain a consulting company during the transition, make sure that you have the business buy-in.

Secondly, identify the knowledge and skills required. Business knowledge is priceless - it is your intellectual property and competitive advantage. When you insource, make sure you identify the people who hold this knowledge and design the processes you intend to insource to match their roles, knowledge and skills.

Thirdly, you must adapt your organisation. Build an organisation that supports the insourcing team, integrate them in the organisation and manage them differently. A change management programme may be necessary to ease the transition. The beauty of this is, since you have more control of the process, you can drive the implementation of whatever changes you think the company requires.

Fourthly, revisit your architecture. Keep track of your architecture and use it as a reference to find out what you require against what our service providers offer, find out how and when they will be available.

Lastly, remember to focus on the people. Never overlook the most important part of the transition - people.

Communication is critical in any change management programme as it involves dealing with different parties, including business, IT, people in transition, service providers, clients and suppliers with different perspectives, so miscommunication is expected. You can reduce the risks with a well-designed and managed communication programme.

The writer is vice-president and general manager, 3Com Asia Pacific

This article was first published in The Business Times on September 15, 2008.