Outsourcing is contracting workers outside a business or organization for work duties or services usually performed by in-house employees. The most common interpretation of this, outsourcing often refers to hired labor provided by individuals outside an organization, but only in the U.S.

It is a practice used by many well-known tech companies, including
  • Hewlett-Packard;
  • Amazon.com;
  • Cisco;
  • Comcast;
  • Dell;
  • Google;
  • IBM; and,
  • Microsoft, to name a few.

Offshoring has become synonymous with sending blue-collar or low value-add jobs to cheaper parts of the world. For example, sending manufacturing jobs to southeast Asia or call center functions to India.

Offshoring is no longer just physical. Technology services like Artificial Intelligence (AI) and Machine Learning (ML) are ripe for offshoring. The continued cost advantage makes AI and ML services cheaper for countries with lower labor costs, which offsets the higher cost of capital for edge applications.

The main driving factor behind outsourcing is economics. Many businesses seek to save on labor costs by utilizing cheaper labor available in remote locales. Along with lower wages, specific countries or places haven't mandated as many labor laws or environmental regulations, which can save businesses money. Put them together, and outsourcing can be significantly cheaper.

NAFTA played a prominent role in the increasing popularity of offshoring. U.S. companies were enticed to move their physical manufacturing processes to Mexico thanks to the higher labor cost differential between the two countries.

Outsourcing regulated business services and regulated professions is a debated topic. There have been numerous unsuccessful attempts to address the practice of outsourcing, but to date, there still is no viable legislation governing outsourcing.

Time after time, anti-outsourcing bills and legislation have been defeated.