How does outsourcing differ from offshoring?

Outsourcing is defined as the practice of contracting out certain business functions or processes to third-party companies, irrespective of whether those companies are located domestically or internationally. This means that outsourcing can occur both locally and overseas, making it a flexible strategy for businesses to access specialized services or reduce costs.

The correct understanding of outsourcing encompasses a broad spectrum of arrangements, focusing primarily on the relationship and contracting aspect rather than the geographical location of the service provider. This distinguishes it from offshoring, which specifically refers to relocating business processes to another country, typically where labor is cheaper.

Hence, option C accurately captures the essence of outsourcing by emphasizing the contracting nature of the work, without constraining it to a single geographic locale. The other options suggest misunderstandings about the definitions and implications of outsourcing and offshoring, which can lead to confusion in their applications within business practices.