Business Dictionary
Outsourcing
Definition
A business practice in which a company hires a third party to perform tasks, handle operations or provide services for the company.
Deep Dive
Outsourcing is a business practice in which a company hires a third party to perform tasks, handle operations, or provide services that could otherwise be performed by in-house employees or departments. This strategic decision is often driven by a desire to reduce costs, access specialized expertise not available internally, improve efficiency, or allow the company to focus on its core competencies. Common outsourced functions include IT services, customer support, human resources, manufacturing, and accounting.
Examples & Use Cases
- 1A tech startup outsourcing its customer support operations to a specialized call center in another country to reduce costs and provide 24/7 service
- 2A manufacturing company outsourcing the production of specific components to a factory with specialized machinery and lower labor costs
- 3A small business hiring an external firm to manage its payroll and benefits administration, freeing up internal HR resources.
Related Terms
OffshoringInsourcingThird-Party Vendor