No, you're really paying your developers to build domain/business knowledge and familiarity with the codebase. Then when you need a bug fixed or a new feature, it's a snap. You're also paying them so the competition can't hire them. Remember the value of any company engaged in IP is not in the stuff it owns and not even in the stuff it's already done: it's in its ability as an organization to identify and solve new and commercially relevant problems. The value of such an organization is quite literally in the heads of its people. Without those people what is it? A brand?
Contractors, no matter how individually talented they are, can't do any of this. You can outsource payroll and catering; you can't outsource IP creation and survive.
Software companies that are primarily software companies can't.
Companies that are primarily not software companies can and thrive on it. Content companies using tools, factories creating tools, etc.
Businesses are also their relationships. You can have plenty of those with very little ongoing development to support what you have already
The types of businesses YOU'VE been in, the IP creation is that important, however the types of companies that often hire out aren't software companies, they're other companies adding a piece of software to their process/infrastructure/product line
These are all valid points, but I think you're overstating the case a bit. Certainly, IP creation should not be routinely outsourced, but it can be outsourced in limited cases to the benefit of the organization.
I think there's a common misperception that outsourcing firms charge higher rates because their resources are (supposedly) more technically proficient. But, at least at my company, this is rarely what's going on. Most of my clients have excellent technical staffs. Our clients hire us in part, of course, because we are talented technologists, but the larger part, I believe, is because of our ability to acquire domain knowledge rapidly and our ability to retain that knowledge over long stretches of time when we aren't actively involved in the development process. Finding a comparable resource to hire or contract is so onerous that it doesn't make sense when what the company really needs is to achieve a goal now.
In other words, any product development company worth a damn hires as much for business acumen as it does for technical acumen. Otherwise, what would be the point?
Contractors, no matter how individually talented they are, can't do any of this. You can outsource payroll and catering; you can't outsource IP creation and survive.