What does outsourcing refer to in a business context?

In a business context, outsourcing refers to a formal agreement with a third party to perform specific business functions that might otherwise be carried out internally. This practice allows organizations to leverage external expertise and resources, often resulting in cost savings and improved efficiency. By contracting out certain functions, businesses can focus their internal resources on core activities that drive their primary objectives.

Outsourcing can encompass a wide range of services, such as IT support, customer service, manufacturing, and human resources, enabling companies to tap into specialized skills and technologies that might not be available in-house. This strategic decision can help organizations adapt to changing market conditions and ensure operational flexibility.

Other options describe different concepts, such as hiring internal staff, which does not reflect the nature of outsourcing; eliminating in-house processes, which may be a consequence of outsourcing but isn’t the primary definition; and implementing software, which pertains to technological solutions rather than the delegation of business functions.