Despite pronouncements that we live in an age of outsourcing, the prevalence of the practice didn´t increase among Veritude´s survey respondents from 2005 to 2006. While outsourcing remains business as usual for most firms, the stall we detected may signal a shift: Many firms seem ready to pull back in-house some functions they previously handed off to third parties.

More than 85% of our respondents say they are pleased with their outsourcers. These executives believe their outsourcers perform work as well as or better than their in-house staff. So we would expect these firms to be satisfied with the status quo.

But here´s the surprise: Nearly half of our respondents´ companies are considering bringing outsourced functions back in-house. Why go through all that trouble and expense? Part of it may be the quality of the work the outsourcer produces for these respondents: The closer a respondent is to bringing work back in-house, the lower the respondent´s satisfaction with the outsourcer´s quality of work.

But low quality isn´t the only driver. Firms willing to bring work back in-house also show confidence in the quality of their own labor force and in their ability to find more good workers. In general, the firms considering bringing work back in-house have a higher opinion of their employees than do the companies not contemplating such a reversal. Those who doubt outsourcing also are less concerned about finding quality workers.

Outsourcers beware: When a client company believes it can do the work better - that the quality of the outsourcer´s work is low and that the client´s power to find and recruit quality talent are high -the client may drop the outsourcing relationship.