What is the practice of contracting external firms for services called?

The practice of contracting external firms for services is termed outsourcing. This process involves a company delegating specific business functions or tasks to specialized external organizations rather than handling them internally. Outsourcing is often used to improve efficiency, reduce costs, or access expertise that may not be available within the company.

For instance, many businesses outsource IT services, customer support, or manufacturing to partners who can perform these functions more effectively or at a lower cost. This strategy allows companies to focus on their core operations while relying on external providers for peripheral tasks.

Subcontracting refers more specifically to a situation where a primary contractor hires another individual or company to fulfill part of their contract obligations, which may occur within the framework of outsourcing. Consulting generally involves hiring experts to provide advice rather than operational services, and freelancing typically refers to individuals offering their services independently rather than a formal arrangement between businesses. Thus, the term that most accurately encompasses the broad act of contracting external firms for various services is outsourcing.