Outsourcing

AAA

DEFINITION of 'Outsourcing'

A practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.

INVESTOPEDIA EXPLAINS 'Outsourcing'

Outsourcing is an effective cost-saving strategy when used properly. It is sometimes more affordable to purchase a good from companies with comparative advantages than it is to produce the good internally. An example of a manufacturing company outsourcing would be Dell buying some of its computer components from another manufacturer in order to save on production costs. Alternatively, businesses may decide to outsource book-keeping duties to independent accounting firms, as it may be cheaper than retaining an in-house accountant.

VIDEO

RELATED TERMS
  1. Fragmentation

    The use of different suppliers and component manufacturers in ...
  2. Right-Shoring

    The placement of a business' components and processes in localities ...
  3. Outside Sales

    The sale of products or services by sales personnel who go out ...
  4. Insourcing

    Assigning a project to a person or department within the company ...
  5. Explicit Cost

    A business expense that is easily identified and accounted for. ...
  6. Opportunity Cost

    1. The cost of an alternative that must be forgone in order to ...
Related Articles
  1. How does Outsourcing Work?
    Economics

    How does Outsourcing Work?

    Outsourcing is the business practice of hiring people outside a company to perform services that traditionally were performed within the company, by the business’s own employees. Companies typically ...
  2. Markets

    Great Company Or Growing Industry?

    Look at the big picture when choosing a company - what you see may really be a stage in its industry's growth.
  3. Here we look at the major fund categories that exist for investors seeking international opportunities, as well as the advantages and disadvantages of these funds.
    Investing Basics

    Broadening Your Portfolio's Borders

    Find out what type of international fund might suit your needs in gaining exposure to foreign markets.
  4. Professionals

    Advance Your Career With A Finance Job Overseas

    Many finance jobs have moved overseas, creating exciting opportunities. Find out how to get in on the trend.
  5. Economics

    Globalization: Progress Or Profiteering?

    Proponents of globalization argue that it helps the economies of developing nations and makes goods cheaper, while critics say that globalization reduces domestic jobs and exploits foreign workers. ...
  6. Economics

    Cashing In On Macroeconomic Trends

    Learn to identify the things that may impact your investments down the road.
  7. Economics

    What Is An Emerging Market Economy?

    Emerging markets provide new investment opportunities, but there are risks - both to residents and foreign investors.
  8. Professionals

    Top 10 Ways To Avoid Burnout In Corporate Finance

    Burnout rates in the corporate finance field are extremely high. Find out some of the most common causes, and how to prevent them.
  9. Delivery duty paid (DDP) is a shipping term.
    Investing

    What does DDP Mean?

    Delivery duty paid (DDP) is a shipping term specifying that the seller is responsible for all costs associated with delivery of the goods to the buyer. It is usually used when goods are exported ...
  10. Fundamental Analysis

    What is a good interest coverage ratio?

    Learn the importance of the interest coverage ratio, one of the primary debt ratios analysts use to evaluate a company's financial health.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center