The action of obtaining services from an external entity. Rather than performing certain tasks and internal functions, outsourcing enables an organization to take advantages of external entities that can provide services for a fee. Outsourcing is often used to obtain best-of-breed level service rather than settling for good-enough internal operations. It can be expensive and increases an organization’s security risk due to the exposure of internal information and data to outsiders.
Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity that is or could be done internally, and sometimes involves transferring employees and assets from one firm to another.
The term outsourcing, which came from the phrase outside resourcing, originated no later than 1981. The concept, which The Economist says has "made its presence felt since the time of the Second World War", often involves the contracting of a business process (e.g., payroll processing, claims processing), operational, and/or non-core functions, such as manufacturing, facility management, call center/call centre support).
The practice of handing over control of public services to private enterprises, even if on a short-term limited basis, may also be described as "outsourcing".
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).
Offshoring and outsourcing are not mutually inclusive: there can be one without the other. They can be intertwined (offshore outsourcing), and can be individually or jointly, partially or completely reversed, involving terms such as reshoring, inshoring, and insourcing.
