The contracting or subcontracting of noncore activities to free up cash, personnel, time, and facilities for activities in which a company holds competitive advantage. Companies having strengths in other areas may contract out data processing, legal, manufacturing, marketing, payroll accounting, or other aspects of their businesses to concentrate on what they do best and thus reduce average unit cost. Outsourcing is often an integral part of downsizing or reengineering. Also called contracting out.

Use outsourcing in a sentence

  • To the chagrin of many older Americans, many US based companies are now outsourcing their production to countries in the third world which means that it is becoming ever difficult to buy American made products.

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  • The radiology department started outsourcing all of their jobs, which really angered the union and all of the doctors who had previously worked for them.

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  • By outsourcing all of their customer service jobs to India, the company was able to cut back on payroll costs and use some of the saved money to increase the marketing budget.

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Notable Quotes

  • Outsourcing Will Continue to Grow
    "Outsourcing will continue to grow in popularity over the long term. As transaction costs approach (but never reach) zero, every entity benefits by focusing on their core competencies; that is, whatever they do relatively best. This is analogous to countries which are trading partners and import and export goods based on which goods are cheaper or more expensive for them on a relative basis."
    - Tom Murcko

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