Yes, it is outsourced to a 3rd party.
For my case, I sent my T40 in the afternoon. And the next morning they called me up to tell me my T40 is ready for collection. Apparently my battery went bust and they replaced with a totally new one. They even gave me a carrier IBM canvas bag to carry my T40 out. And the service execvutives were very polite and professional.
Maybe for software issues, they won't be able to troubleshoot so well, as some issues are in nature intermittent. But for black/white cases like hardware failure, they will replace the component for you FOC.