What are the different kinds of outsourcing currently in use in today’s global economy?

Introduction:

Outsourcing is the practice of engaging an external provider to perform services or tasks on behalf of a business. It has become increasingly popular in today’s global economy, with many companies outsourcing various aspects of their operations to reduce costs, improve efficiency, and gain access to specialized expertise. In this article, we will explore the different types of outsourcing currently in use and how they can benefit businesses of all sizes.

Offshore Outsourcing:

Offshore outsourcing involves outsourcing tasks or services to a provider located in a different country. This type of outsourcing is often used to take advantage of lower labor costs in countries with lower wages and higher levels of education. Offshore outsourcing can be done through various means, such as setting up an offshore branch of the company or hiring independent contractors from remote locations.

One example of a company that has successfully implemented offshore outsourcing is Airbnb. The company outsources much of its software development work to Ukraine, where there are many highly skilled developers available at lower costs than in Silicon Valley. This has allowed Airbnb to scale its operations and improve the user experience of its platform.

Onshore Outsourcing:

Onshore outsourcing involves outsourcing tasks or services to a provider located within the same country as the business. This type of outsourcing is often used when businesses need access to specialized expertise or when they want to maintain tight control over their operations. Onshore outsourcing can be done through various means, such as hiring independent contractors or setting up a joint venture with another company.

One example of a company that has successfully implemented onshore outsourcing is General Electric. The company outsources much of its research and development work to the United States, where there are many universities and research institutions with specialized expertise in areas such as renewable energy and aviation. This has allowed GE to stay at the forefront of innovation and maintain a competitive edge.

Nearshore Outsourcing:

Nearshore outsourcing involves outsourcing tasks or services to a provider located in a neighboring country. This type of outsourcing is often used when businesses need to maintain close communication with their providers and have access to a similar cultural and linguistic background. Nearshore outsourcing can be done through various means, such as setting up an offshore branch of the company or hiring independent contractors from nearby countries.

One example of a company that has successfully implemented nearshore outsourcing is Coca-Cola. The company outsources much of its IT support work to Mexico, where there are many Spanish-speaking IT professionals available at lower costs than in the United States. This has allowed Coca-Cola to improve the performance of its IT systems and maintain close communication with its providers.

Shared Services Outsourcing:

Shared services outsourcing involves creating a centralized service center within the business that is responsible for performing various functions, such as finance, human resources, and IT support. This type of outsourcing can be done through various means, such as setting up an internal shared services unit or hiring external providers to provide specialized expertise.

One example of a company that has successfully implemented shared services outsourcing is Johnson & Johnson. The company created a global services organization in 2004 that is responsible for performing various functions across the business, including finance, procurement, and IT support. This has allowed Johnson & Johnson to improve its operational efficiency and reduce costs.

Conclusion:

In conclusion, there are several types of outsourcing currently in use in today’s global economy, each with its own benefits and drawbacks. Offshore outsourcing is often used to take advantage of lower labor costs, onshore outsourcing is used when businesses need access to specialized expertise, nearshore outsourcing is used when businesses need to maintain close communication with their providers, and shared services outsourcing is used to create centralized service centers within the business. Ultimately, the type of outsourcing that works best for a particular business will depend on its specific needs and objectives.