Define Outsourcing

Define Outsourcing

• A. The internal reorganization of processes
• B. The development of new capabilities through R&D
• C. The integration of suppliers into internal departments
• D. The purchase of a value-creating activity or support function from an external supplier

Answer: (D)

Outsourcing is the purchase of a value-creating activity or support function from an external supplier. Instead of doing the work in-house, the firm contracts another company to perform the process, often to access specialized expertise, reduce costs, or gain greater flexibility. This differs from rearranging internal processes, which stays inside the organization; from building new capabilities through R&D, which focuses on internal development; and from integrating a supplier into internal departments, which resembles closer coordination or ownership rather than outsourcing. Common examples include outsourcing manufacturing to a contract manufacturer or outsourcing IT support to a specialist provider, where the activity is performed by an external party under a contract.

Outsourcing is the purchase of a value-creating activity or support function from an external supplier. Instead of doing the work in-house, the firm contracts another company to perform the process, often to access specialized expertise, reduce costs, or gain greater flexibility. This differs from rearranging internal processes, which stays inside the organization; from building new capabilities through R&D, which focuses on internal development; and from integrating a supplier into internal departments, which resembles closer coordination or ownership rather than outsourcing. Common examples include outsourcing manufacturing to a contract manufacturer or outsourcing IT support to a specialist provider, where the activity is performed by an external party under a contract.