Retrosourcing

What Does Retrosourcing Mean?

Retrosourcing is changing back from outsourced operations to in-house operations.

Retrosourcing is usually the result of contract expiration or termination. However, the process often involves a reinstatement of technology and business principles and possibly re-hiring personnel formerly utilized when the operation was done in-house.

Techopedia Explains Retrosourcing

Having a plan for retrosourcing is especially important when an organization is first involved with outsourcing. This is recognition of the possibility that the outsourcing relationship may falter. The involved remediation steps cost time, money and resources.

Jerry E. Durant, founder of the International Institute for Outsource Management, lists seven stages for retrosourcing in a 2008 white paper entitled "Retrosourcing – A Safety Net for Outsourcing Engagements." These are summarized and paraphrased below:

1. Recognize the Problem: Decide that it cannot be resolved without incurring unacceptable risks and events causing major business disruptions.
2. Terminate Contract/Agreement: Use a non-renewal or contract curtailment clause in the contract or agreement.
3. Plan for Return of Power: Establish a team to assume in-house responsibility for the outsourced operations, or consider using another service provider. The object must be to return the operation back to a level of normality.
4. Separate Completely: End the outsourcing arrangement completely. Do not leave the relationship open. Doing otherwise would only consume valuable time and resources and present false hope that the past business relationship will prove beneficial.
5. Engage: Full and intimate participation in the formerly outsourced operation is required, which will be difficult. Durant estimates this may require up to 25 percent of available resources to bring the operation back in-house.
6. Root-Cause-Analysis: Determine all causal factors and conditions. Anticipate that both the company and the outsourcer may be culpable.
7. Resume the Operation(s): Resume operations but do not expect to resume normal operations, as this often takes years. Sometimes normal operations never occur again.