Operations · business glossary
What is Outsourcing?
By Shivam Bhandari · Reviewed 31 October 2026 · How we write
definition
Paying an external specialist to handle a function instead of doing it in-house.
Outsourcing explained
Outsourcing is paying an outside company to do work you could do in-house, such as accounting, delivery or manufacturing.
example
A D2C brand outsourcing warehousing and delivery to a logistics partner.
why it matters
It turns fixed costs into variable ones and lets you focus on what you do best.
common mistake
Outsourcing the capability that gives you your competitive advantage.
Frequently asked questions
What is Outsourcing?
Paying an external specialist to handle a function instead of doing it in-house. Outsourcing is paying an outside company to do work you could do in-house, such as accounting, delivery or manufacturing.
Why does Outsourcing matter?
It turns fixed costs into variable ones and lets you focus on what you do best.
What is a common mistake with Outsourcing?
Outsourcing the capability that gives you your competitive advantage.
Related terms
Vendor management
The ongoing process of selecting, evaluating, and maintaining relationships with external suppliers.
Core competency
The specific capability a business does better than almost anyone else, and which its strategy should be built around.
Vertical integration
Owning multiple stages of your own supply or distribution chain, rather than depending on external partners at each stage.