Outsourcing is defined as the "the process of transferring an existing business function, including the relevant physical and/or human assets, to an external provider in order to strategically use outside resources to perform activities previously handled in-house.

Outsourcing involves transferring a significant amount of management control and decision-making to the outside supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Likewise, buying services from a provider is not necessarily outsourcing or out-tasking. Outsourcing always involves a considerable degree of two-way information exchange, coordination, and trust.

Organizations that deliver such services feel that outsourcing requires the turning over of management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Many companies look to employ expert organizations in the areas targeted for outsourcing. Business segments typically outsourced include information technology, human resources, facilities and real estate management, legal and accounting. Many companies also outsource customer support and call center functions, manufacturing and engineering. Outsourcing business is often characterized by expertise not inherent to the core of the client organization.

The overhead costs of customer service are typically less where outsourcing has been used, leading to many companies, from utilities to manufacturers, closing their in-house customer relations departments and outsourcing their customer service to third party call centers. The logical extension of these decisions was of outsourcing labor overseas to countries with lower labor costs; this trend is often referred to as off shoring of customer service.