The practice of contracting external companies or individuals to perform business functions, services, or processes that were previously handled internally. This strategy is often used to reduce costs, access specialized expertise, or focus on core competencies.
Coined in the 1980s from 'outside' + 'sourcing,' though the practice existed much earlier. The term gained prominence during the globalization wave when companies began moving manufacturing and services to lower-cost countries.
While outsourcing can save money, many companies discover hidden costs in coordination, quality control, and communication. The most successful outsourcing arrangements treat external partners like internal teams, not just cost-cutting vendors.
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