I’ve spent three decades in the world of analytics —initially as part of or leading an internal analytic team and recently as an out-sourced resource for those seeking analytic consulting services and products. I’ve lived on both sides of the insourcing/outsourcing question. If today I were faced with the task of bringing analytics into an organization devoid of the talent, I would give serious consideration to the out-sourcing option as a viable alternative. Here are a few big things to consider in making this move:

• People Costs: Good analysts are hard to find and in high demand. You need to pay top dollar for the skill sets to attract talent, regardless of the experience level. The timeline to fill positions is often difficult, even with a tight job market.  Training times to get people up to speed are excessive. Workloads fluctuate significantly making staffing levels challenging – under-staffing leads to outsourcing and/or delaying priorities and over-staffing is costly and can lead to dissatisfaction with workload content for analysts. You’ll also need a variable set of skills to align with those of the anticipated projects.
• Overhead & Maintenance Costs:  Analytics requires software and hardware, often above that already in place or used elsewhere within the organization. Historically, firms have made large investments with long-range commitments to create an analytic environment. The upfront risk is great. Fortunately, there are now ways to minimize the technology costs with the advent of cloud computing and less expensive, web-based software packages. However, there will always be costs involved which might not be relevant to others in the company.

These are these factors and more to consider in bringing an analytics function in-house. On the other hand outsourcing may be attractive to you for these reasons:

• Minimizes Risk. You lower the upfront cost and commitment by hiring outside help.
• Immediate & Relevant Resources. You get analytic support now, not later. You usually can draw from an analyst pool to retain the right fit to the task.
• Predictable Expense. You are able to better budget and forecast costs.
• Equivalent Investment. In many cases, the long range cost is comparable between developing your own capabilities and outsourcing. The only way the internal option is more cost effective is if you can beat the odds regarding recruitment, training, and maintenance of personnel.
• Pay for Use. You can pay for only what you need and when you need it. This includes getting the skill sets and experience required at that time for the project at hand.
• Scalable Resources. You can ratchet up the support level to fit the internal demand much more quickly.
• Collaboration. You can outsource analytics, yet retain and develop internal expertise. Insourcing and outsourcing need not be dichotomous. Outsourcing with an eye to developing some internal capabilities is not only possible, but strongly encouraged. Many analytic projects require experts to initially setup and solve, but then become easily transferable, repeated tasks learning by internal staff.

The above arguments led to me to the conclusion that outsourcing analytics produces the quicker payback with smallest risk. For those exploring the analytics initiative within their company, this is the best path to pursue in most cases.

About Randy Erdahl
Randy is an analytic marketing champion and is Clario’s Executive Vice President, Optimization Solutions and co-founder. As the executive leader of optimization solutions, he provides vision and direction for Clario Stream Solution development, as well technical leadership for sales, marketing and direct client interaction.