Outsourcing refers to a firm's practice of paying another firm to perform a function or produce a product that could be done or made in-house by the paying firm. It usually involves more information exchange, coordination, and trust than a mere vendor relationship, since a certain amount of management control is transferred to the supplier. Products and services can be outsourced domestically or to a foreign company. Outsourcing is increasingly associated with firms located overseas, where salaries are markedly lower.

Offshoring refers to business processes—as opposed to product production—being relocated to a lower-cost location, usually overseas. Related practices are near-sourcing and out-tasking. Near-sourcing is the relocation of business processes to lower-cost locations that are in close proximity to the United States, specifically in Mexico or Canada. Out-tasking means turning over a narrowly-defined segment of a business to another firm, on an annual...