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n. The transfer of a business function to an external service provider. vb. (present participle of outsource English)


In business, outsourcing involves the contracting out of a business process (e.g. payroll processing, claims processing) and operational, and/or non-core functions (e.g. manufacturing, facility management, call center support) to another party (see also business process outsourcing). The concept "outsourcing" came from the American Glossary 'outside resourcing' and it dates back to at least 1981. Outsourcing sometimes involves transferring employees and assets from one firm to another, but not always. Outsourcing is also the practice of handing over control of public services to for-profit corporations.

Outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring (relocating a business function to a distant country) or nearshoring (transferring a business process to a nearby country). Many people confuse outsourcing and offshoring – however they are different. A company can outsource (work with a service provider) and not offshore to a distant country. For example, in 2003 Procter and Gamble outsourced their facilities management support, but it did not involve offshoring. Financial savings from lower international labor rates can provide a major motivation for outsourcing or offshoring. There can be tremendous savings from lower international labor rates when offshoring.

The opposite of outsourcing, insourcing, entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via vertical integration. However, a business can provide a contract service to another organization without necessarily insourcing that business process.

Usage examples of "outsourcing".

The permanent floating meatspace party Manfred is hooking up with is a strange attractor for some of the American exiles cluttering up the cities of Europe this decade not trustafarians, but honest-to-God political dissidents, draft dodgers, and terminal outsourcing victims.

What is more, by taking on the rigors of systems development itself instead of outsourcing it to third parties, as did most every other retailer, Wal-Mart brought to bear its compulsive pursuit of cost advantage to a vast new area of chain-store management.

Walton returned from a swing through Central America in 1984 worried that the outsourcing trend had gotten out of hand.

In the politically correct world of the twenty-four-hour news cycle, outsourcing gave CIA deniability.

In a mall world, outsourcing gives companies manufacturing capacity without capital costs or labor problems.

And outsourcing reduces costs by forcing suppliers to compete for contracts.

Content creators can thus concentrate on what they do best: content creation, and reduce their overhead by outsourcing the functions of distribution and relationships management.