Definition
Outsourcing transfers activities to external providers; offshoring relocates activities to other countries (inside or outside the firm) to reduce cost or access skills/scale.

Introduction
Corporations focus on differentiating activities and source the rest from specialist partners—but must guard IP, quality, and resilience.

Explanation

What to outsource

Non-core, standardizable activities with competitive vendor markets (e.g., back-office, certain manufacturing steps).

Make/Buy test

Strategic importance, performance gap, asset specificity, spillovers to other activities.

Contracting

SLAs, penalties/bonuses, data/infosec, change control, exit plans.

Risks & mitigations

Hidden coordination costs → dedicated vendor-management office; single-vendor risk → dual sourcing; geo risk → multi-region.

Re-shoring/near-shoring

Consider when IP risk, logistics shocks, or automation economics shift.

Key Takeaways

Outsource for efficiency, not your crown jewels.

Governance determines realized value.

Revisit location decisions as tech and geopolitics evolve.

Real-World Case
Nike focuses on design/brand while outsourcing most manufacturing to specialized partners under strict standards and audits.
Reference: Company sustainability/manufacturing disclosures.