Outsourcing

Outsourcing is the business practice of hiring an outside party to perform services or create goods that were traditionally handled in-house by the company’s own employees. Companies usually turn to outsourcing as a cost-cutting measure, and it can affect a wide range of jobs, from customer support to manufacturing to back-office work.

Outsourcing can meaningfully reduce labor costs, since the outside organizations typically set up different compensation structures with their own employees than the company doing the outsourcing, which lets them complete the work for less money.

Beyond cost savings, companies also outsource so they can focus more on the core parts of the business. Outsourcing non-core activities can improve efficiency and productivity, since another company may simply handle those smaller tasks better than the firm itself.