outsourcing

Contracting out manufacturing frees capital that can then be invested in core activities, such as market research, product definition, product planning, marketing and sales.

sir i want to understand how outsourcing a task to some other entity frees up capital? Because anyway we have to pay the subcontractor a sum equivalent to his selling price. so whether we make a product by ourselves or subcontracts it, there is anyway going to be cash outflow.

So, sir can you help me clarify my doubt?