"Outsourcing" became a popular buzzword in business and management in the 1990s. It was a welcome addition to the business vocabulary because prior to the introduction of the term, the domestication decision involved a decision to either produce inhouse or a decision to produce outside. Introduction of the terms outsourcing and out-tasking gave managers much needed words for outside production.
Outsourcing and out-tasking involve transfering a significant amount of management control to the supplier. Buying products from another entity is not outsourcing or out-tasking, but merely a vendor relationship. Buying services from a provider is not necessarily outsourcing or out-tasking.
The concept started with Ross Perot when he founded Electronic Data Systems in the 1950s. EDS would tell a prospective client, "You are familiar with designing, manufacturing and selling furniture, but we're familiar with managing information technology. We can sell you the information technology you need and you pay us monthly for the service with a minimum commitment of two to ten years." Outsourcing as generally defined by those organizations that deliver such services, requires turning over management responsibility for running a segment of business. In theory, this business segment should not be mission-critical, but practice often dictates otherwise. Outsourcing business is characterized by expertise not inherent to the core of the client organization.
A related term is out-tasking: turning over a narrowly-defined segment of business to another business, typically on an annual contract, or sometimes a shorter one. This usually involves continued direct or indirect management and decision-making by the client of the out-tasking business.