Outsourcing vs. Smartsourcing: What's the Difference?

Outsourcing vs. Smartsourcing: What's the Difference?

While outsourcing and smartsourcing are sometimes seen as synonymous when it comes to managing a business, they are two different procedures, each with its own unique benefits and drawbacks. This article will discuss the variations between outsourcing and smartsourcing to provide you with the necessary knowledge to decide which technique is the most suitable for your company.

What is outsourcing?

Outsourcing is an economically viable business strategy in which companies contract external organizations for services and/or products. This approach can help them focus their resources on their core operations. Normally, these agreements are made with third-party vendors or providers who provide their products and services to another business.

The most typical examples of outsourcing include IT, Business Process (BPO) and Knowledge Process (KPO) Outsourcing. IT Outsourcing deals with the contractual use of computer hardware and software services. BPO concentrates on offloading non-critical operations such as HR, customer service, accounting and payroll to an external entity. KPO handles highly technical activities that require expertise, such as analysis and research.

Businesses typically outsource to decrease overhead costs and increase efficiency. By using outside firms, businesses can gain advantages such as lower labor expenses, access to new technology, improved quality of services, greater flexibility and fast response times. Nevertheless, there are associated risks including loss of control, difficulty managing vendors, and potential legal issues. As a result, it's essential for companies to assess their options thoroughly before finalizing any outsourcing arrangement.

What is Smartsourcing?

Smartsourcing is an advanced corporate methodology which blends both internal resources and external service suppliers to accomplish optimal costs, augment productivity, and augment organizational effectiveness. Smartsourcing grants companies with an all-inclusive service, enabling them to take advantage of the most capable assets available at any given moment.

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In essence, smartsourcing is all about possessing the correct resources in the correct location at the correct time. It is an aggressive method that allows businesses to single out the optimal source for their anticipated outcomes, which can encompass both interior and external resources, or even a fusion of both. Consequently, smartsourcing permits firms to make the best use of their existing resources while saving on costs and strengthening operational proficiency.

Contrasting traditional outsourcing, wherein the whole system is handled by an outside vendor, smartsourcing permits companies to keep command over their own assets. This implies that businesses can maintain ownership of procedures, data, and other proprietary information while still profiting from external expertise. Furthermore, smartsourcing grants organizations with increased pliability and control when it comes to managing their resources.

Smartsourcing is a superior method for companies to exploit the best resources obtainable while conserving money and achieving higher operational performance.

The difference between outsourcing and smartsourcing

Outsourcing is a common practice that businesses use to complete business-related tasks or operations with outside resources. It typically involves transferring certain responsibilities or services to an external entity, such as a third-party company, in order to save money and optimize efficiency. Businesses who lack the necessary internal resources to meet their needs can utilize outsourcing to fulfill those needs.

In comparison, Smartsourcing is a more nuanced and calculated approach to outsourcing. It involves employing multiple external providers, such as traditional outsourcing companies, technology vendors, and specialist consultancies. The purpose of Smartsourcing is to select the best provider for each task or project in order to rapidly and cost-effectively scale up or down.

Unlike traditional outsourcing which has set services and predetermined processes, Smartsourcing provides businesses with greater customization by allowing them to identify the external provider best suited for their specific requirements. Through thorough research, businesses are able to accurately choose the right partner to provide the necessary services and solutions.

In addition to offering a customizable solution, Smartsourcing also offers increased flexibility as the business's needs evolve over time. With Smartsourcing, businesses can adjust their external partnerships to ensure they are always collaborating with the most suitable provider. Traditional outsourcing, however, usually requires businesses to commit to lengthy contracts that may not be so easily adjusted.

Also Read: How Does SmartSourcing Work?

The benefits of smartsourcing

Smart sourcing has distinct advantages over the traditional outsourcing model. By combining in-house and outsourced resources, businesses can gain both flexibility and savings. Furthermore, they can keep higher quality standards and assign tasks to the right personnel.

The major benefits of smart sourcing are as follows:

  1. Cost Reduction: Combining both internal and external resources cuts down on labor expenses, as companies do not have to employ a full staff or spend on additional wages. Additionally, businesses save on the overhead expenses linked to outsourcing to third-party contractors.
  2. Productivity Boost: Companies benefit from increased productivity and efficacy by utilizing both in-house and outsourced resources, as they can make use of specialist expertise without devoting time to teaching new employees or procuring pricey contracts.
  3. Enhanced Quality: By allowing firms to focus on their strengths and delegate specialized projects to experts better-suited to them, smart sourcing guarantees the production of top-notch work, thus leading to greater customer contentment and improved profits.
  4. Adaptability: Smartsourcing grants businesses the agility to adjust processes to meet their needs quickly, facilitating the capacity to scale operations up or down according to the ever-shifting market.

The challenges of smartsourcing

The complexity of smartsourcing is its most formidable hurdle. Unlike the direct offloading of work that outsourcing necessitates, smartsourcing necessitates that businesses manage the entire relationship, a task which may prove intricate and prolonged as a comprehensive comprehension of industry, technology, legal necessities, and the business model must be developed. Additionally, amalgamating the efforts of multiple vendors and teams increases the risk of issues such as those involving data security, compliance, and intellectual property. Organizations must take the necessary precautions to shield their data from malevolent parties when dealing with multiple third parties. Additionally, companies must possess the capacity to conform promptly to changing market circumstances. To maintain relevance, the business must have the capability to modify its approach as the services outsourced evolve. For this, an advanced arrangement between internal and external teams, as well as an aptitude to keep abreast of the varying needs of the business, are paramount.

Some case Studies of smartsourcing

One of the most renowned examples of smartsourcing was the one executed by SAP, a well-renowned leader in enterprise software and solutions. As a part of their smartsourcing strategy, SAP built an integrated network of subcontractors, partners, and other necessary resources to procure the required talent for specific initiatives and projects quickly, reducing overhead costs at the same time.

Another exemplary smartsourcing model can be observed in the case of HCL Technologies. They opted for an offshore smartsourcing model, enabling them to obtain specialized abilities at a comparatively lower cost than the global market. Additionally, they also capitalized on the geographical opportunities that allowed them to get access to expertise from countries such as India, where the labor cost is lower than in other nations.

Furthermore, Amazon Web Services is yet another impressive case study of smartsourcing. With the vast collection of services and tools available to businesses to help them build and expand their operations, AWS associates with a broad network of partners and resources to meet the diverse requirements of customers all over the globe. By taking full advantage of its partners, AWS is able to combine the correct set of resources for any initiative.

These case studies exhibit how businesses can benefit from smartsourcing to reduce expenses and optimize their operations. Smartsourcing offers them access to an international array of resources and skills that would be otherwise costly to acquire. When deployed properly, businesses can enjoy improved innovation, productivity, and competitive advantage.


In regards to app development, two main methods are outsourcing and smartsourcing. Outsourcing requires employing a third-party contractor, while smartsourcing is an in-house solution relying on a team of experienced experts. While outsourcing may appear cost-efficient, smartsourcing brings many benefits that can often be worth the investment. It grants organizations a greater level of control over the development process and higher assurance that the end product will be up to standard. 

Moreover, with smartsourcing the development period can be shortened and the management of the project can be done in an efficient manner. Additionally, smartsourcing has the potential to minimize costs in the long-run, as it does not entail the contract costs associated with outsourcing. All things considered, when it comes to app development or Hire Dedicated Software Developers in the UK, businesses should weigh the advantages and disadvantages of each approach to determine which is most suitable for their needs.

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