A situation to explore
An internal team produces a report that used to be bought externally. The supplier cost is visible. The time spent maintaining data, handling exceptions, managing the tool and reviewing the result may be distributed across budgets and harder to see.
The assumption worth revisiting.
A fair comparison includes continuity, oversight, learning and the opportunity cost of scarce internal attention. It can still favour insourcing. The point is to see the whole economic choice rather than celebrate a removed invoice.
Would this still be attractive if our internal team sent us an honest invoice for the whole service?
Give the capacity a purpose.
Fund a bounded trial of the complete service and decide what capability the business wants to retain. Make the capacity needed to operate it visible to its owner.
How this fits the capacity allocation →
Use AI to challenge your first interpretation
Help me explore this question: Would this still be attractive if our internal team sent us an honest invoice for the whole service? Identify the assumptions in our current approach. Offer alternative explanations, including one that challenges our preferred answer. Separate hypotheses from evidence and suggest what we should ask the people affected.
Treat the answers as possibilities to test with people and evidence.
Go deeper into the evidence.
UK Government Commercial Agency / Government Commercial Function · Official decision framework
The framework compares internal, purchased and mixed delivery using whole-life costs, capability, risks and outcomes.
Public-sector guidance, not evidence that insourcing saves money or a general legal requirement for private companies. Applying the method here is TIP’s interpretation.
Klarna Group plc · Company annual filing; company-reported attribution
Klarna reports a $7m Q1 2024 reduction in external marketing-supplier spending versus Q1 2023 and attributes 37% of that decrease to AI. Named services include translation, production, CRM and social agencies. The filing also describes workforce reduction alongside AI efficiency, cost optimisation and normal-course employee attrition.
Management attribution, not an experiment. Supplier reduction is not proof every service moved in-house. The filing does not establish that every leaver went unreplaced, that there were no layoffs, or that all workforce changes were caused by AI.
podcast
Agentic AI and the future of global business services
McKinsey · McKinsey Talks Operations
A useful prompt to reconsider the boundary of shared services: which decisions and activities could move closer to internal operating knowledge?
Listen or watch for: Would moving more work inside improve the complete process, or simply move a bottleneck?
About this resource
Consultancy examples and forecasts. The episode does not establish that insourcing is always cheaper or that predicted headcount reductions will occur.
Turn the question around.
Your customer’s insourcing opportunity could change your own business model. Explore which part of your offer they could own, and the value they would still want from you.
Explore the commercial risk →How TIP applies this to itself →