What is the Definition of Outsourcing in Business?

What is the Definition of Outsourcing in Business?

Daniel Hall 28/02/2023
What is the Definition of Outsourcing in Business?

Outsourcing in business simply means hiring a third party to perform the task you are supposed to do. Meanwhile, outsourcing was unpopular in the 1980s.

It became popular in the 1990s, and most companies started embracing outsourcing. One of the benefits of outsourcing is that it helps your organization earn profit without working so hard. 

Outsourcing became popular when companies realized it was an effective business strategy. However, the downside of outsourcing is that you hire an incompetent company to do your work.

How Outsourcing Works


The dictionary definition of outsourcing is appointing a company to carry out a specific task on your behalf. One of the major reasons for outsourcing your job is to reduce costs and earn more profit. 

Usually, the task to be outsourced is often specific. While outsourcing may seem like a good idea, some still believe it causes loss of work. Companies that engage in outsourcing often do it when they need a specialist to handle a particular task or they are too busy to do it. 

No matter what, outsourcing seems like a win-win for the business world because it reduces dominance and creates opportunities for small-scale businesses to strive. The major downside is outsourcing to an incompetent third party.

Advantages of Outsourcing

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Even though some business experts believe that outsourcing is not good for a company's longevity, it still has a lot of benefits. The pros of outsourcing are:

Focus on Core Business

In addition, outsourcing gives your organization time to focus on its core business objectives. That way, your organization is not distracted, and it helps you focus on your strength while you outsource your weakness to a specialist. Also, it will allow your staff to focus on their main task and future strategy.

Enhanced Efficiency

It is better to outsource the job to a specialist instead of trying your luck and messing up the task. Your focus should be ensuring that the third party is an expert in that field. Don't forget your business partner is mainly after the quality of the job and may not border on who did it.

Save Cost

You will save some cost outsourcing tasks to other companies. For instance, if you have a contract to carry out a task in another state, you can evaluate the cost of carrying out the project. You may have to move logistics to that location and spend money on accommodation and other issues. Based on this, you can outsource to a company resident in that location to save cost.

Competitive Advantage

Most clients don't care about which company did the job so far it meets their requirements. Outsourcing also improves your knowledge and skills. You can learn from the specialist or assign some staff to work with them, and in the process, they will learn the skill.


In business, flexibility is one feature that brings success and longevity. When your clients call you, and you always deliver, then they will entrust more tasks to you. Outsourcing allows you to take up more jobs and not break down.

Disadvantages of Outsourcing in Business

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Despite having many benefits, outsourcing has some cons. Take a look below:

Loss of Jobs by Domestic Companies

Some countries prohibit outsourcing because it takes the job away from local companies. It becomes a challenge when the jobs are outsourced to international companies. More so, local companies will suffer and lose profit.

Low-Quality Work

If you outsource to a company that is not qualified, they may deliver poor jobs. Besides, it may be difficult for the third-party company to deliver a quality job if the pay is not right. 

Delay in Completing the Task

You may experience a delay in the job delivery. Not to mention, the third party may be less concerned about the task because they don't have a relationship with the client. Don't forget; the client wouldn't want to hear about such. 

Types of Outsourcing

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Outsourcing has various types, and they include:

  • Professional outsourcing: Some professional outsourcing includes information technology, legal, and administrative support. These areas are regarded as specialized services.

  • Manufacturer outsourcing: This type of outsourcing is popular in the automobile industry. A car manufacturer may outsource the manufacturing of a particular part to a third party. For instance, most car manufacturers outsource the manufacturing of their car batteries.

  • Project outsourcing: When a company has too many projects, it may outsource some specialized tasks to ease the pressure.


Outsourcing in business is not a bad idea if you do it correctly. For instance, you need to have a firm agreement with the third party if you want to outsource the project. You can read Pareto Blog to learn more about outsourcing. On their blog you will discover the advantages of Pareto vs Fiverr.

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Daniel Hall

Business Expert

Daniel Hall is an experienced digital marketer, author and world traveller. He spends a lot of his free time flipping through books and learning about a plethora of topics.

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