This is a pretty ignorant generalization. Companies often outsource because they do not want to employ the full time in house employees year round needed to perform that work. This is especially true for game studios that ramp up for releases. It's probably even more true for Microsoft whose universal benefits are likely well above the norm (that's been established numerous times on GAF as an issue in particular for MS game studios). Employing full time staff means a lot of additional costs around benefits, office space, HR, etc.
Outsourcing does not in and of itself mean that they are getting the modelling work done for any cheaper and in fact looking at only the hourly cost of the modeling work, it's entirely possible it costs more than it would in house -- it's just the cost of maintaining a full time staff to do it outweighs that. To maintain the Forza 2 year dev cycle without outsourcing Turn 10 would have to maintain a far larger staff year round and that becomes pretty damn expensive. So yes it is likely cheaper overall but you have no idea what the quality of work may be compared to in-house without knowing what level of in house staff would be employed, what companies are outsourced to, etc. It's entirely possible they are getting higher quality work especially on their shorter dev cycle.
Of course, Polyphony gets around all this by having a much longer dev cycle and far fewer cars. It's not rocket science.
The bolded at the end it is because it is cheaper.
Why companies started the homeoffice movement? It is cheaper.
Why companies started the outsourcing? It is cheaper.
The cost to maintain a employee full-time in house is big... so big that companies had to find better options (cheaper) and that is why homeoffice and outsourcing to become a thing wide used by companies.
Money move companies.
Why it is cheaper to Turn 10 outsource?
- They don't need physical employees.
- They don't need physical space and machines for these employees.
- They don't need to pay all the beneficies to employee these companies usually does.
- They don't need to hold the employee doing nothing after the work is done.
- They don't need to pay the rights to employee when fired him.
- They contract cheaper countries 3rd outsourcing that is way way cheaper.
What they do?
- Pay for the model to be made to a 3rd company.
It is cheaper... that is the goal of outsourcing.
Of course this is another talk for another thread.
Edit - 2 seconds on google the first result:
http://jobs.lovetoknow.com/Pros_and_Cons_of_Outsourcing (everything I said is there lol)