Outsourcing vs. insourcing

Shipping & Mailing

Outsourcing vs. insourcing your mail operations.

What should your company do? Revisit the decision on a regular basis.

“Most people today think outsourcing will always be cheaper…Sometimes it is and sometimes it isn’t. That’s why you have to do a good analysis on it.” Mark Fallon
President and Chief Executive
The Berkshire Company

Mark Fallon, president and chief executive of The Berkshire Company, a consulting firm specialising in mail and document processing strategies, says many people harbour myths about whether insourcing or outsourcing is less expensive. "Most people today think that outsourcing will always be cheaper," he says. "Sometimes it is, and sometimes it isn't. That's why you have to do a good analysis on it. When you outsource, someone has to manage that relationship, that company has to make a profit, and you probably have to pay taxes on the service. With internal, it's not just the people. You have to think about the space, the equipment, and the utilities. You have to look at all the overhead."

Another misconception, Fallon says, is the idea that outsourcing can solve all your problems. Not true. “You’ve just moved your problems to an outside vendor,” he explains. “If you’re getting customer complaints about your bill, and you outsource the bill but customers are still unhappy with the way that bill looks, you haven’t solved your problem.”

In fact, says Karim Manassa, National Solutions Consultant for Compliance & Business Regulations at Pitney Bowes, if a company doesn’t choose its vendor wisely, outsourcing mail operations can introduce entirely new problems, including privacy and security breaches involving sensitive information. If a fulfillment house isn’t asked to sign a confidentiality agreement, for example, it might sell a charitable organisation’s list of significant donors. If the donors then receive unwanted solicitations and trace the breach back to the charity, it’s the charity—rather than the mailing house—that will suffer brand damage and the loss of donors’ trust.

In addition to asking vendors to sign confidentiality agreements, companies that outsource their mail operations should insist that procedures are in place to protect sensitive data included in the mailings. A cable company, for example, might want to ensure that no employees at a third-party mailer are able to see their neighbours’ bills. “Organisations that outsource mailings must gain visibility into their fulfillment houses’ practices to ensure that no one is abusing their lists,” Manassa cautions.

Lastly, but perhaps most importantly, companies in highly regulated industries must ensure that outsourced service providers can keep consumer data safe and stay in compliance with state and federal laws protecting the information. “If you’re in a vertical such as finance or healthcare, you either want to bring mail operations in-house, or if you outsource them, you need to really vet your vendor to make sure they have that security,” Manassa says. “If you outsource your mailing to someone, you’re still liable for all the compliance. You can outsource the work, but not the responsibility.”

David Bilodeau, Manager of Product Marketing, Global Mail Creation Software and Hardware, says businesses can gain trust in vendors by learning about their experience—not only the number of years they’ve been around, but the types of clients they’ve worked with. “In sending your list to any sort of outsourcing services, you’re giving an organisation your customers’ data. There’s no way around that. You want to make sure you’re working with an organisation that can be held accountable.”

Fallon notes that, for many organisations, such as utility companies and banks, mailings are the primary way they communicate with customers. For other businesses, such as grocery stores and florists, mailings are secondary to in-person interactions. The more central mailings are to a company’s business model, Fallon says, the more strongly that company should consider insourcing its mailings.

“If it directly supports your business, having people there [in-house] who own that with you means you’re not just a customer,” Fallon says. “It’s an intangible, but I’ve seen the difference.”

For many companies, Manassa says, the best option may not be simply insourcing or outsourcing, but a combination of both. For example, an organisation might decide to perform its day-to-day mail operations in-house, but send out more complex or specialty mails runs. “It’s not always black and white,” he says.