The Concept Of Insourcing

I had watched a webcast of Tom Friedman's talk on Globalization (Pulitzer prize winning author and an international affairs columnist for the New York Times) and heard of a concept called insourcing (new to me). One of my friend's blog has the details of this talk if you're interested. But my research gave me different flavors or definitions for insourcing.

Variant #1 (Friedman's definition)- Sub contracting:
According to Friedman, many big corporations, sub-contract their internal logistics to companies like UPS, this he terms as insourcing. The favorite example he quotes is the one where a person buys a Toshiba laptop and finds it broken, the warranty instructions tells him to go to an UPS station and package it back. The laptop leaves the local UPS station and goes straight to the Louisville Aiport in Kentucky where a person wearing funny brown shorts (an UPS employee) repairs the laptop for you in a clean room within the airport hanger. Toshiba employees do not even sniff the laptop that they sold, because all the support operations are "insourced" to UPS. The same is the case with Ford Motor company where the companies internal logistics are insourced to UPS. Nike does the same thing too for their online shopping section. Placing an order with www.nike.com, dispatches the order to an UPS employee who picks up the shoes, packages it for you and delivers it at your doorstep. Similarly, your favorite Papa John's pizza truck is driven by a person in funny brown shorts whose colleague usually drives a brown truck. So insourcing is sub-contracting an internal production step or process to an external entity who specializes in the process.

Variant #2 - Harnessing "foreign" intelligence:
An article I found on the web talks about this second variant of insourcing. According to this definition, a company that opens overseas operation is supposed to be insourcing if it doesn't open the center for cost efficacy, but for harnessing diversified intellect from the foreign land. We have seen this trend in the recent past where companies like Google and Microsoft have opened research divisions in India and China, where there is no dearth for research talent. Lot of research funding goes into these centers and they are not treated as second-class centers anymore because of the potential markets these countries could offer in the near future.

Variant #3- Antonym of outsourcing:
Outsourcing can be defined as the migration of the parent company's jobs to a foreign company that fulfils the job requirements offshore and generally does that at a lower cost. Insourcing, according to this definition, is the development of new jobs in the native land because of acquisitions or new ventures by foreign companies in the native land. The proponents of this form of insourcing argue that the number of jobs in the native land increases because of this. In fact, this is an ongoing debate in the US with Diamler's acquisition of Chrysler and is used in the defense of outsourcing where jobs are lost to a foreign land. But there is always apprehension of colonization especially when basic necessities (like utilities) or infrastructure development is insourced or the foreign company takes interest in the political situation of a country. This kind of insourcing was how colonization was started before the 19th century. If we take India as an example, The East India Company is nothing but an insourced company.

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