What is 'outsourcing' in a business context?

Outsourcing refers to a business strategy in which a company contracts out services or functions to external third-party providers rather than handling them in-house. This approach allows businesses to focus on their core competencies while leveraging the expertise and resources of specialized providers for other operations such as customer service, human resources, or IT support.

By outsourcing, companies can potentially reduce costs, access new capabilities, and increase flexibility in operations. This strategy is particularly beneficial for tasks that do not require direct oversight or tasks that can be more efficiently managed by external experts. It also allows businesses to scale their operations up or down without the challenges associated with hiring or downsizing staff. Thus, the choice that identifies outsourcing as a method to contract services is the most accurate representation of the term in a business context.