What is it called when a business function is outsourced to a third party outside of the organization?

The term used to describe when a business function is outsourced to a third party outside of the organization is "Outsourcing." This process involves contracting external organizations to handle tasks or services that were previously performed in-house, allowing the original business to focus on its core competencies while potentially reducing costs and increasing efficiency. Outsourcing can encompass a wide range of activities, including IT services, customer support, payroll, and many other functions.

In contrast, delegation often refers to the process of assigning responsibility to a subordinate within the same organization rather than engaging an external party. Co-sourcing implies a collaborative relationship where the organization works jointly with an external provider on certain functions, rather than fully outsourcing them. Divestiture involves selling off a business unit or section of the company, which is different from the act of outsourcing a function to improve operational efficiency or reduce costs.