outsourcing
OUT-sor-sing
/ˈaʊtsɔːrsɪŋ/
The business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house.
Focuses on who does the work (an external company), not necessarily where they are located.
The story behind the word. A relatively modern business term that emerged in the early 1980s. It combines 'out' (external) and 'source' (the origin of supply).
Word relationships
- subcontracting: Subcontracting is often for a specific project; outsourcing is often for a permanent business function.
- insourcing: Bringing a previously outsourced function back inside the company.
Commonly confused with
- offshoring: Outsourcing is about who (external); offshoring is about where (abroad).
Word family
- outsource (verb): To obtain goods or services from an outside supplier.
Collocations
- business process outsourcing
- outsourcing contract
- strategic outsourcing
Example sentences
- "By outsourcing their customer service to a specialized firm, the company reduced its overhead costs." Corporate strategy
- "Many startups rely on outsourcing for software development to save on full-time salaries." Technology
Memory hook
Getting your 'Source' from 'Out'side. Outside source.
When not to use
Do not use interchangeably with offshoring if the work is being done by the same company in a different country.
Fun facts
- The first major company to officially use the term 'outsourcing' as a formal strategy was Kodak in 1989 when it hired IBM to manage its IT systems.
Related words
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