Backsourcing as definied by Wikipedia is the process of bringing jobs previously outsourced back under the roof of the company to be performed internally.

Backsourcing has been increasingly discussed as companies decide to cease outsourcing operations, whether because of the issues outsourcing agreements encounter, because of pressure to bring jobs back to their home country, or simply because it has stopped being efficient to outsource a given task outside of a company. Backsourcing is sometimes substituted and confused with “in-sourcing”, however in-sourcing simply refers to conducting certain activities in-house (whether or not by a third party),while backsourcing refers to bringing previously outsourced activities back in-house.

There is a phenomenon called the “paradox of choice.” It argues that though we want many options, in the face of a large number of possibilities we tend to make decisions more impulsively, or not at all. In other words, too much choice prompts us to be reactive rather than strategic. And that can be the case when faced with the decision to outsource, in-house, or contract for some tasks while outsourcing others, and everything in between.

According to recent reports, backsourcing — also known as insourcing — has been increasing over the last four years. The best-known examples include such companies such as General Motors, JP Morgan Chase and American Airlines.
Computer Economics recently released its survey report, “IT Outsourcing Statistics: 2013/2014” which shows a trend towards a decline in outsourcing.
According to these statistics, outsourcing is down from an average 11.9% in 2012 to 10.6% in 2013. http://www.computereconomics.com

There was a time when outsourcing was the standard go-to answer. For about 15 years, 90% of businesses in North America favoured outsourcing first and foremost — albeit, it was its perceived cost-saving factor that drove the trend.

But as every technologist knows, in our industry change is the only constant. Today, outsourcing is no longer the obvious or simple solution. It has become far more complex given the explosion of mixed sourcing models, such as staff augmentation, managed services, out-tasking, project-based consulting and cloud service providers. Some firms felt the total lose of control which held them ransom to business and exposed them in front of their competitors. E.g. a large company in mid west could not launch their life saving production platform due to delays by their outsourcing provider and went into bankruptcy while their competitor had insourcing arrangement to fill the gap.

That said, outsourcing of IT is still predicted to continue to be a major part of IT budgets. Certainly, outsourcing can be a magic bullet in some cases. But in others –not so much. every firm needs a different type of outsourcing model, this is perhaps the bane, many firms make the mistake of choosing a wrong model or going with just single model merely looking at the cost savings.

More and more IT leaders say they are learning this fact the hard way – hence, the rise in backsourcing. A Forrester study conducted last year shows 32% of 1,000 IT professionals who had been using third-party service providers plan on ending the relationships and bringing the work back in-house.
The main reasons listed for their change of heart include:

1.Poor quality of service.
2.Savings were not as high as expected.
3.Geo political disturbances
4.Outsourcers were lagging behind in technology.
5.Their companies had grown to the point where in-house made more sense
6.Poor management by outsourced partner or decline in performance use to M&A activity

Interestingly, a 2012 Deloitte survey of 111 decision-makers shows 79% of those who backsourced were “happy” with the results. The rest were neutral – adding up to a dissatisfaction rate of zero, which is rare. Also note that back sourcing has strong leadership given the stakes are high in bringing it back.

Reversing the decision to outsource can be professionally uncomfortable for the sourcing initiative’s leaders, and the dismantling of relevant in-house capabilities often makes in-sourcing infeasible in many cases and cost prohibitive as well. Their point drives home the need to think strategically, and long-term, in the face of an elastic list of options. Flexibility for IT is now as critical a factor as cost. Certainly, in the short term, outsourcing may appear more affordable but the key question in our hyper-competitive fast-changing market must be, Does it make business performance better?’ Does it make you a better competitor?

Again, the need for agility for and within business are driving the IT trends whether it involves insourcing, the development of “rogue applications” by the business without governance or building an in-house IT service bureau for the organization.

Lately companies are realizing how the cost factor has moved up from where they started earlier. rapid outsourcing meant the hubs had to deal with high cost of wages besides geo-political situations that hindered its growth. Competitors also meant dropping quality in the outsourcing hubs which in turn reflected in performance for the clients.

Backsourcing starts where failure of outsourcing begins mostly. while some companies have selectively backsourced others have gone for 100%. The situation is not dire but there is a possibility it can come become if the same trend continues with lack of adequate ROI on outsourcing besides of course all the hindrances it poses.