What is your approach to a "make (in house) or buy (outsource)" decision?

A business making this decision needs to look at a variety of different factors, as often there are both positives and negatives to either choice. The issues I would consider include:

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  Cost: Even when you can make a product in house, often a firm that specializes in that product or service can do it more cheaply. Also, one must factor in the opportunity cost of using resources to make a product in house versus focusing on your core business. Often suppliers in low-wage countries can make things more cheaply than you can, but you also need to factor in transportation costs, timeliness of delivery, and potential quality control issues.


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  Control: You may wish to make specialized mission-critical products in-house in order to maintain tighter control over quality and delivery schedules. 


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  Intellectual Property: If a product involves proprietary technology, you may wish to keep it in house to avoid theft of intellectual property. Any product or service that needs to be surrounded with high levels of security should be done in-house. You do not want to share proprietary technology or information. 


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  Suppliers: Most businesses buy many common products such as copier paper, toner cartridges, and other common office supplies. For common, standardized products or services (such as customer support call centers) for which multiple suppliers exist, outsourcing makes sense. If only a small number of suppliers exist, and they are either not particularly reliable or are potential competitors, it's better to keep production in-house. 


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  Ethics: With global outsourcing, there are ethical issues involved. First, when you manufacture locally, you build goodwill, which you lose by global outsourcing. Also, you need to carefully vet global suppliers to make sure they don't use child labor or have bad environmental practices, which can be ethical and marketing disasters for your company. Outsourcing may also increase your carbon footprint. Finally, if you deal with suppliers who violate U.S. anti-corruption laws, you may find yourself in a complex legal position.