Outsourcing refers to the practice of contracting non-core or specialized functions to external service providers as opposed to self-performing the activities in-house.
Key Areas Outsourced:
- Information technology and infrastructure services
- Human resources and payroll management
- Finance and accounting functions
- Manufacturing production processes
Example:
A retailer outsources its web development and maintenance to a specialized digital services firm.
Key Benefits:
Outsourcing allows core focus on strategic operations while leveraging external expertise and economies of scale. It can optimize costs if providers compete on quality and pricing. Risks include loss of control and vendor dependence.