Outsourcing facts for kids

Outsourcing is when a company hires another company to do some of its work. This often happens for tasks that are not the main focus of the business. Instead of doing everything themselves, companies can get help from experts outside.

For example, a company that makes phones might hire another company to handle its customer service calls. This lets the phone company focus on designing and building great phones. Many different types of businesses use outsourcing, like technology companies, banks, and even government services.

Why Do Companies Outsource?

Companies outsource for several good reasons:

• Save money: It can be cheaper to pay another company to do a task than to hire new employees or buy new equipment.
• Find experts: They can get help from people who are really good at specific tasks, even if those experts are far away.
• Get new ideas: Outsourcing can bring in fresh knowledge that the company might not have internally.
• Be more flexible: It helps companies adapt quickly to changes in their business needs.
• Lower labor costs: Sometimes, it's cheaper to hire workers in other countries.

Different Kinds of Outsourcing

There are many ways companies can outsource their work. Here are some common types:

Professional Outsourcing

This is when a company needs special services but doesn't want to hire a full-time expert. They can outsource tasks like:

• Accounting (managing money)
• Legal services (getting advice from lawyers)
• IT support (help with computers and technology)
• Call center support (answering customer questions)

This helps companies manage their money wisely and be more flexible.

IT Outsourcing

Information Technology (IT) outsourcing is very common. Companies can get help with:

• Developing new software
• Creating new products
• Maintaining computer systems
• Providing technical support

Hiring IT experts for specific projects can save money because they are only paid for the time they are needed.

Multisourcing

Sometimes, a company uses both its own employees and outside experts for the same project. This is called multisourcing. The team might be spread out in different places around the world. This method focuses on getting the best results by working together as partners.

Manufacturing Outsourcing

Many companies outsource their manufacturing. This means they pay another company to make their products. They do this to:

• Reduce the cost of making items
• Get help if they don't have enough skilled workers
• Save time and money on production

Business Process Outsourcing (BPO)

BPO is about outsourcing a specific business process. For example, a company might outsource its machinery maintenance to the company that sold them the machines. This is often done when a company needs specialized knowledge that would be too expensive to develop internally.

Process-Specific Outsourcing

This is similar to BPO but focuses on a very specific action. For instance, a company might hire another company just for delivery services. The delivery company would follow a contract about delivery dates and conditions. This helps the main business save money or improve how customers experience their service.

Offshore Outsourcing

Offshore outsourcing means hiring a company in a country far away. This can help reduce costs and open up new markets. For example, many companies outsource manufacturing to China or India, or IT work to countries in Eastern Europe.

Reshoring

Reshoring is the opposite of offshoring. It's when a company decides to bring its manufacturing or services back to its home country. This might happen if the costs of shipping, customs, and managing teams far away become too high.

Nearshoring

Nearshoring is when a company outsources work to a country that is nearby. This could be a neighboring country or one with a similar time zone. It can be easier to work with companies in nearby countries because they often have similar business rules and cultures. For example, companies in Scandinavia might outsource to Baltic countries.

Images for kids

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  This picture shows the importance of making sure outsourcing helps a company and doesn't cause problems.

See also

In Spanish: Subcontratación para niños