View source for Outsourcing

{{Short description|Contracting formerly internal tasks to an external organization}}
{{distinguish|Offshoring}}
{{use American English|date=August 2022}} <!--i.e. privatization, yet tolerate UK usages such as Centre here and there -->
{{use mdy dates|date=August 2022}}
'''Outsourcing''' includes both foreign and domestic forms of outside contracting. It is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally,<ref name="Brit.Ency103">{{cite web |website=Britannica.com |url=https://www.britannica.com/topic/outsourcing |title=Oursourcing}}</ref><ref>{{Cite journal
  |author1=Ian McCarthy |author2=Angela Anagnostou
  |title=The impact of outsourcing on the transaction costs and boundaries of manufacturing
  |journal=International Journal of Production Economics |volume=88 |issue=1 | pages=61–71 |doi=10.1016/s0925-5273(03)00183-x |date=2004
  |citeseerx=10.1.1.468.9139 }}</ref> <!-- This is a compromise used to make it more human-readable, i.e. not make it mostly machine-readable and also not long scroll-up/down -->i.e. '''in-house''',<ref>Smale, T., [https://www.entrepreneur.com/growing-a-business/in-house-or-outsourced-how-do-you-decide/289844 In-House or Outsourced? How Do You Decide?], ''Entrepreneur'', published 1 March 2017, accessed 24 December 2022</ref> and sometimes involves transferring employees and assets from one [[firm]] to another. The term ''outsourcing'', which came from the phrase ''outside resourcing'', originated no later than 1981 at a time when industrial jobs in the United States were being moved overseas, contributing to the economic and cultural collapse of small, industrial towns.<ref>{{cite book |title=The Global Supply Chain and Risk Management
   |url=https://books.google.com/books?isbn=1631579592 |isbn=978-1-63157-959-2 |author=Stuart Rosenberg |date=2018 | publisher=Business Expert Press }}</ref><ref>Outsource 1979, outsourcing 1981: {{cite book
|title=Organizing Identity, Persons and Organizations After Theory |url=https://books.google.com/books?isbn=1497042151 |isbn=978-1-4970-4215-5  |publisher=CTI Reviews |date=2016 }}</ref><ref>OED</ref> 

The concept, which ''[[The Economist]]'' says has "made its presence felt since the time of the [[Second World War]]",<ref>{{cite web |url=http://store.ectap.ro/articole/734.pdf |title=Outsourcing. The Concept |author1=Adrian Victor |author2=Alexandru Dumitru Bodislav}}</ref> often involves the '''contracting out''' of a [[business process]] (e.g., [[payroll]] processing, claims processing), operational, and/or non-core functions, such as manufacturing, [[facility management]], [[call center]]/call center support.

The practice of handing over control of public services to private enterprises ([[privatization]]), even if conducted on a limited, short-term basis,<ref>{{cite web|url=https://www.jdsupra.com/legalnews/judge-rebukes-government-for-69266 |title=Judge Rebukes Government for Outsourcing Internal Investigation of LIBOR rigging |date=June 28, 2019}}</ref> may also be described as outsourcing.<ref>{{citation |author=Dave Jamieson |url=https://www.huffingtonpost.com/2013/07/01/afscme-public-interest-privatization_n_3530817.html |title=Public Interest Group Challenges Privatization Of Local, State Government Services |work=[[The Huffington Post]] |date=July 1, 2013  |access-date=July 1, 2013}}  {{Cite web |url=http://www.huffingtonpost.com/2013/07/01/afscme-public-interest-privatization_n_3530817.html |title=Privatization Battles Loom |website=[[HuffPost]] |date=July 2013 |access-date=August 26, 2013 |archive-date=December 11, 2013 |archive-url=https://web.archive.org/web/20131211181510/http://www.huffingtonpost.com/2013/07/01/afscme-public-interest-privatization_n_3530817.html |url-status=bot: unknown }}</ref>

Outsourcing includes both foreign and domestic contracting,<ref>{{cite book |last1=Hira |first1=Ron |last2=Hira |first2=Anil |title=Outsourcing America: What's Behind Our National Crisis and how We Can Reclaim American Jobs |date=2005 |publisher=American Management Association |isbn=978-0-8144-0868-1 |pages=67–96 }}</ref> and sometimes includes [[offshoring]] (relocating a business function to a distant country)<ref>Davies, Paul. ''What's This India Business?: Offshoring, Outsourcing, and the Global Services Revolution''. London: Nicholas Brealey International, 2004. Print.{{page needed|date=November 2022}}</ref> or [[#Nearshoring|nearshoring]] (transferring a business process to a nearby country). Offshoring and outsourcing are not mutually inclusive; one can exist without the other. They can be intertwined (offshore outsourcing), and can be individually or jointly, partially or completely reversed,<ref name="DELL.back">{{cite web |url=http://www.nbcnews.com/id/4853511/ns/business-forbes_com/t/dell-moves-outsourced-jobs-back-us-shores |title=Dell moves outsourced jobs back to U.S. shores |author=Elizabeth Corcoran |website=[[NBC News]] |date=April 28, 2004 |quote=customers were not happy with ...}}</ref> in methods including those known as reshoring, inshoring, and insourcing.

==Terminology==
* '''Offshoring''' is moving the work to a distant country. If the distant workplace is a foreign subsidiary/owned by the company, then the offshore operation is a {{vanchor|Offshore Captive|text='''{{slink||captive}}'''}}<!-- safety spacer -->,<ref name="cap">{{cite news |newspaper=[[The New York Times]] |title=Offshore insurers creating concerns among regulators |url=https://www.nytimes.com/1992/10/19/us/offshore-insurers-creating-concerns-among-regulators.html |date=October 19, 1992}}</ref> sometimes referred to as ''in-house offshore.''<ref name=InH.off_CIO>{{cite magazine|magazine=[[CIO magazine]]|url=https://www.cio.com/article/2437922/captive-audience--how-to-partner-with-service-providers-to-improve-in-house-offshore-ope.html|title=Captive Audience: How to Partner with Service Providers to Improve In-House Offshore Operations|quote=a.k.a. internal shared-services centers in low-cost locations|author1=Cliff Justice|author2=Stan Lepeak|access-date=April 1, 2019|archive-date=September 26, 2021|archive-url=https://web.archive.org/web/20210926065909/https://www.cio.com/article/2437922/captive-audience--how-to-partner-with-service-providers-to-improve-in-house-offshore-ope.html|url-status=dead}}</ref>
* '''{{Visible anchor|Offshore outsourcing}}''' is the practice of hiring an external organization to perform some business functions ('outsourcing') in a country other than the one where the products or services are actually performed, developed or manufactured ('offshore').<ref name=Mankiw/>
* [[#Insourcing|'''Insourcing''']] entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via [[vertical integration]].
* '''Nearshoring''' refers to outsource to a nearby country. Usually it takes place across national borders.
* '''{{Visible anchor|Farmshoring}}''' refers to outsourcing to companies in more rural locations within the same country.<ref>Also called domestic outsourcing. {{cite web |url=https://www.oreilly.com/library/view/managing-without-walls/9781583470626/9781583470626_ch05lev1sec3.html |title=Domestic Inshoring and Farmshoring}}</ref>
* '''{{Visible anchor|Homeshoring}}''' (also known as {{Visible anchor|Homesourcing}}) is a form of [[#IT-enabled services offshore outsourcing|IT-enabled]] "transfer of service industry employment from offices to home-based ... with appropriate telephone and Internet facilities".<ref>{{cite web|title=New words |work=Macmillan English Dictionary |url=http://www.macmillandictionary.com/new-words/050530-homeshoring.htm |archive-date=2008-12-05 | archive-url=https://web.archive.org/web/20081205132300/http://www.macmillandictionary.com/New-Words/050530-homeshoring.htm }}</ref><ref>{{distinguish|Small office/home office}}</ref> These [[remote work]] positions may be customer-facing or [[back office]],<ref>{{cite journal | first=Kevin G. | last=Hall | date=December 5, 2006 |journal=[[Knight Ridder]] |title=Homeshoring Grows: Companies Cut Costs by Shipping Jobs to Workers' Homes |url=http://www.itpaa.org/modules.php?name=News&file=article&sid=2062 |archive-url=https://web.archive.org/web/20071020050203/http://www.itpaa.org/modules.php?name=News&file=article&sid=2062 |archive-date=October 20, 2007}}</ref> and the workers may be [[employee]]s or [[independent contractor]]s.
* '''[[Friendshoring]]''' refers developing [[Supply chain network|supply chain networks]] with allies and friendly countries.<ref>{{Cite web |date=2022-08-06 |title=Friendshoring: what is it and can it solve our supply problems? |url=https://www.theguardian.com/business/2022/aug/06/friendshoring-what-is-it-and-can-it-solve-our-supply-problems |access-date=2022-11-19 |website=the Guardian |language=en}}</ref>
* '''In-housing''' refers to hiring employees<ref>{{cite web | url=https://www.forbes.com/sites/forbeslacouncil/2019/09/13/what-are-the-benefits-of-in-housing-versus-outsourcing  | title=What Are The Benefits Of In-Housing Versus Outsourcing? |first=Ben |last=Zimmerman |website=[[Forbes]] |date=September 13, 2019}}</ref><ref>{{cite web
|url=https://www.tulos.fi/blogi/housing-versus-outsourcing-move-digital-marketing-house |title=In-housing versus Outsourcing. Should you move your digital marketing in-house? |author=Aleksandr Simukovic |date=April 15, 2019}}</ref> or using existing employees/resources to undo an outsourcing.<ref>{{cite news | newspaper=[[Advertising Age]] |url=https://adage.com/article/agency-news/ana-report-housing-telling-full-story-4a-s/315353 |title=ANA report on in-housing isn't telling full story, says 4A's |date=October 22, 2018}}</ref><ref>{{cite news |newspaper=[[Advertising Age]]|url=https://adage.com/article/cmo-strategy/in-housing-a-path-to-growth-or-a-distraction/315475|title=In-housing: A path to growth or just another distraction? |date=November 1, 2018}}</ref>
* An '''[[intermediary]]''' is a business which provides a contract service to another organization while contracting out that same service.<ref>{{cite web|title=Delegated authority: Outsourcing in the general insurance market |url=https://www.fca.org.uk/publication/thematic-reviews/tr15-07.pdf |date=June 29, 2015}}</ref><ref>{{cite web |url=http://www.nortonrosefulbright.com/knowledge/publications/67184/binder-and-other-intermediary-agreements |title=Binder and other intermediary agreements |date=April 5, 2012 |access-date=February 21, 2019 |archive-date=February 15, 2019 |archive-url=https://web.archive.org/web/20190215012205/http://www.nortonrosefulbright.com/knowledge/publications/67184/binder-and-other-intermediary-agreements |url-status=dead }}</ref>

===Acronyms===
The following terms are also referred to via acronyms:

{{columns-list|colwidth=27em|
* [[Business process outsourcing]] (BPO)
* {{Visible anchor|Engineering process outsourcing}} (EPO)
* Human resource outsourcing (HRO)
* {{Visible anchor|Information technology outsourcing}} (ITO)
* [[Knowledge process outsourcing]] (KPO)
* [[Legal process outsourcing]]<ref>Also called ''Legal outsourcing''</ref> (LPO)
* [[Recruitment|Recruitment process outsourcing]] (RPO)}}

==Overview==

===Motivations===
[[Global labor arbitrage]] can provide major financial savings from lower international labor rates, which could be a major motivation for offshoring. Cost savings from [[economies of scale]] and specialization can also motivate outsourcing, even if not offshoring. Since about 2015 indirect revenue benefits have increasingly become additional motivators.<ref>{{Cite web
   |title=The Evolution of Sourcing Advisory
   |url=https://avasant.com/insights/publications/the-evolution-of-sourcing-advisory
   |website=Avasant   |date=June 14, 2016}}</ref><ref name=forrester>Forrester Research, Inc. {{cite web
|url=https://www.forrester.com/report/The+Forrester+Wave+Global+Infrastructure+Outsourcing+Q1+2015/-/E-RES118404#
|title=The Forrester Wave: Global Infrastructure Outsourcing, Q1 2015
|quote=cost-cutting is no longer the top goal of outsourcing|date=January 13, 2015}}</ref>

Another motivation is speed to market. To make this work, a new process was developed: "outsource the outsourcing process".<ref name="CIO.97">{{cite magazine
|magazine=[[CIO (magazine)|CIO]] |date=April 1, 1997 |page=12  |author=Abbie Lundberg
|title=Outsourcing: Letter from the editor}}</ref> Details of managing [[DuPont]]'s chief information officer [[Cinda Hallman]]'s $4 billion 10-year outsourcing contract with [[Computer Sciences Corporation]] and [[Accenture]] were outsourced, thus avoiding "inventing a process if we'd done it in-house". A term subsequently developed to describe this is ''{{Visible anchor|midsourcing|Mid-sourcing}}''.<ref>{{cite magazine
    |magazine=[[InfoWorld]] |date=February 21, 2000  |page=14
    |url=https://books.google.com/books?id=WjkEAAAAMBAJ
    |title=Messaging and Collaboration
    |quote= ... will offer .. through .. "midsourcing" model}}</ref><ref>{{cite book
|title=Information Security Management Handbook, Fifth Edition
|url=https://books.google.com/books?isbn=0849319978
|isbn=978-0-8493-1997-6 | author1=Harold F. Tipton |author2=Micki Krause  |date=2003
| publisher=Taylor & Francis |quote=The term midsourcing refers to ... }}</ref><ref>The term "Midsourcing" subsequently became known as contracting a local or regional manufacturing service provider to arrange for the outsourced task(s). {{cite web
   |url=http://sissoncorp.com/2017/10/10/your-source-for-commercial-manufacturing-services
   |title=Your Source for Commercial Manufacturing Services  |date=October 10, 2017}}</ref>

Outsourcing can offer greater budget flexibility and control by allowing organizations to pay for the services and business functions they need, when they need them. It is often perceived to reduce hiring and training specialized staff, to make available specialized expertise, and to decrease capital, operating expenses,<ref>{{cite journal |author=B. Olive
  |title=Outsourcing Growing, Despite Controversy  |journal=Power  |date=2004  |pages=148(4), 19–20}}</ref> and risk.

"Do what you do best and outsource the rest" has become an internationally recognized business tagline first "coined and developed"<ref name=Drucker10>{{cite web |author=Marian Haus
   |title=Best 10 Peter Drucker quotes
   |url=http://pmseed.com/best-10-peter-drucker-quotes |website=pmseed |access-date=26 April 2015  |date=2011
   |archive-url=https://web.archive.org/web/20150416043146/http://pmseed.com/best-10-peter-drucker-quotes
   |archive-date=April 16, 2015}}</ref> in the 1990s by management consultant [[Peter Drucker]]. The slogan was primarily used to advocate outsourcing as a viable business strategy. Drucker began explaining the concept of "outsourcing" as early as 1989 in his ''[[Wall Street Journal]]'' article entitled "Sell the Mailroom".<ref>Drucker, Peter F. (1989), "Sell the Mailroom", ''Wall Street Journal'', accessible at {{cite news
|url=https://www.wsj.com/articles/SB113202230063197204   |title=Sell the Mailroom |newspaper=Wall Street Journal |date=15 November 2005 |access-date=2015-04-27
|archive-url=https://web.archive.org/web/20150522111235/http://www.wsj.com/articles/SB113202230063197204
|archive-date=2015-05-22 |last=Drucker |first=Peter F.}}</ref>

From Drucker's perspective, a company should only seek to subcontract in those areas in which it demonstrated no special ability.<ref name=RightMix.RW>{{cite news | first=Rick |last=Wartzman | title=The Drucker Difference: Insourcing and Outsourcing: the Right Mix | date=February 5, 2010 |url=https://www.bloomberg.com/news/articles/2010-02-05/insourcing-and-outsourcing-the-right-mix | work=[[Bloomberg News]]
|archive-url=https://web.archive.org/web/20150522173550/http://www.businessweek.com/managing/content/feb2010/ca2010024_507452.htm
|archive-date=May 22, 2015 | url-access=subscription | url-status=live}}</ref> The business strategy outlined by his slogan recommended that companies should take advantage of a specialist provider's knowledge and economies of scale to improve performance and achieve the service needed.<ref>{{cite book |author=Gwynne Richards |title=Warehouse Management: A Complete Guide To Improving Efficiency and Minimizing Costs In the Modern Warehouse |date=2014 |publisher=Kogan Page Limited |location=Philadelphia PA |isbn=978-0-7494-6934-4 |page=316 |edition=Second
|url=https://books.google.com/books?id=oimhAwAAQBAJ&q=Do+what+you+do+best+and+outsource+the+rest+drucker+drucker&pg=PA316
|access-date=May 6, 2015
|archive-url=https://web.archive.org/web/20150924053857/https://books.google.com/books?id=oimhAwAAQBAJ&pg=PA316&lpg=PA316&dq=Do+what+you+do+best+and+outsource+the+rest+drucker+drucker&source=bl&ots=rE56Ap5bc9&sig=g4gAp2w9iinUOujS7uJnJFDqqHI&hl=en&sa=X&ei=Iac7VZH3DsKWNvDYgKgI&ved=0CF0Q6AEwBQ#v=onepage&q=Do%20what%20you%20do%20best%20and%20outsource%20the%20rest%20drucker%20drucker&f=false
|archive-date=September 24, 2015}}</ref>

In 2009, by way of recognition, Peter Drucker posthumously received a significant honor when he was inducted into the Outsourcing Hall of Fame for his outstanding work in the field.<ref name=RightMix.RW/>

The biggest difference between outsourcing and in-house provision is with regards to the difference in ownership: outsourcing usually presupposes the integration of business processes under a different ownership, over which the client business has minimal or no control. This requires the use of [[outsourcing relationship management]].<ref>{{cite web |url=https://www.cio.com/article/272355/outsourcing-outsourcing-definition-and-solutions.html |title=What is outsourcing? Definitions, best practices, challenges and advice |website=cio.com |last=Overby |first=Stephanie |date=November 6, 2017 |access-date=July 7, 2022}}</ref>

Sometimes the effect of what looks like outsourcing from one side and insourcing from the other side can be unexpected; ''[[The New York Times]]'' reported in 2001 that "6.4 million Americans .. worked for foreign companies as of 2001, [but] more jobs are being outsourced than" [the reverse].<ref>{{cite news
   |url=https://www.nytimes.com/2004/04/11/business/outsourcing-turned-inside-out.html
   |title=Outsourcing, Turned Inside Out
   |author=Ken Belson |newspaper=The New York Times  |date=April 11, 2004}}</ref>

===Agreements===
Two organizations may enter into a contractual agreement involving an [[Financial transaction|exchange]] of [[Service (economics)|services]], expertise, and [[payments]]. Outsourcing is said to help firms to perform well in their core competencies, fuel [[innovation]], and mitigate a shortage of skill or expertise in the areas where they want to outsource.<ref>Overby, S (2007) [http://www.cio.com/article/40380/ABC_An_Introduction_to_Outsourcing ABC: An Introduction to Outsourcing] {{webarchive|url=https://web.archive.org/web/20070630130752/http://www.cio.com/article/40380/ABC_An_Introduction_to_Outsourcing |date=2007-06-30 }}. CIO.com.</ref>

==History==

===20th century===
Following the adding of management layers in the 1950s and 1960s to support expansion for the sake of economy of scale, corporations found that agility and added profits could be obtained by focusing on core strengths; the 1970s and 1980s were the beginnings of what later was named outsourcing.<ref name="Brief20">{{cite web
|url=https://scm.ncsu.edu/scm-articles/article/a-brief-history-of-outsourcing
|title=A Brief History of Outsourcing|date=June 2006}}</ref> [[Kodak]]'s 1989 "outsourcing most of its information technology systems"<ref name="K89">{{cite news
|url=https://timesofindia.indiatimes.com/business/india-business/Outsourcing-emerged-as-a-new-business-strategy-in-early-1980s/articleshow/6588306.cms
|title= Outsourcing emerged as a new business strategy in early 1980s
|date=September 20, 2010}}</ref> was followed by others during the 1990s.<ref name="K89"/>

In 2013, the International Association of Outsourcing Professionals gave recognition to [[Electronic Data Systems]] Corporation's [[Morton H. Meyerson Symphony Center|Morton H. Meyerson]]<ref>EDS's founder named it for Mort Meyerson</ref> who, in 1967, proposed the business model that eventually became known as outsourcing.<ref>{{cite web
   |url=https://www.iaop.org/Content/23/196/3600
   |title=IAOP Announces Outsourcing Hall of Fame Inductees
   |date=January 8, 2013
   |website=IAOP.org (The International Association of Outsourcing Professionals)}}</ref>

====IT-enabled services offshore outsourcing====
The growth of offshoring of IT-enabled services, although not universally accepted,<ref>{{cite news
   |newspaper=[[Computerworld]] |page=58
   |url=https://www.computerworld.com/article/2555167/the-seven-deadly-sins-of-outsourcing.html
   |title=The Seven Deadly Sins of Outsourcing
   |author= Judy Artunian  |date=May 8, 2006}}</ref><ref>{{cite book
   |title=Outsourcing Information Security  |page=216
   |author=C. Warren Axelrod  |year=2004}}</ref> both to subsidiaries and to outside companies (offshore outsourcing) is linked to the availability of large amounts of reliable and affordable communication infrastructure following the telecommunication and Internet expansion of the late 1990s.<ref name=Telcom.out>{{cite book | title=Managing Projects in Telecommunication Services | url=https://books.google.com/books?isbn=0470047674  |isbn=0-470-04767-4 | author=Mostafa Hashem Sherif |date=2006 | publisher=John Wiley & Sons | quote=(chapter) COMMUNICATION AND OUTSOURCING ... Roche, 1998}}</ref> Services making use of low-cost countries included
* back-office and administrative functions, such as finance and accounting, HR, and legal
* [[call centers]] and other customer-facing departments, such as marketing and sales services
* IT infrastructure and application development
* knowledge services, including engineering support,<ref>{{cite web | url=https://www.mbtmag.com/global/article/13215297/how-globalization-is-reshaping-the-engineering-services-outsourcing-market | title=How Globalization is Reshaping the Engineering Services Outsourcing Market
 | date=June 22, 2015}}</ref> product design, research and development, and analytics.

===Early 21st century===
In the early 21st century, businesses increasingly outsourced to suppliers outside their own country, sometimes referred to as offshoring or [[offshore outsourcing]]. Other options subsequently emerged: [[#nearshoring|nearshoring]], [[crowdsourcing]], [[multisourcing]],<ref>(Q4 2006) [http://www.btquarterly.com/?mc=mandatory-multisourcing-discipline&page=ss-viewresearch Mandatory Multisourcing Discipline] {{webarchive|url=https://web.archive.org/web/20070928142453/http://www.btquarterly.com/?mc=mandatory-multisourcing-discipline&page=ss-viewresearch |date=2007-09-28 }} Business Trends Quarterly</ref><ref>(2006) [http://www.businessweek.com/globalbiz/content/nov2006/gb20061108_738883.htm?chan=top+news_top+news+index_global+business Mandatory Multisourcing Discipline] {{webarchive|url=https://web.archive.org/web/20071119082031/http://www.businessweek.com/globalbiz/content/nov2006/gb20061108_738883.htm?chan=top+news_top+news+index_global+business |date=2007-11-19 }}</ref> [[strategic alliances]]/[[strategic partnership]]s, strategic outsourcing.<ref>See Holcomb & Hitt, 2007 and [[Vested outsourcing]]</ref>

''Forbes'' considered the [[2016 U.S. presidential election]] "the most disruptive change agent for the outsourcing industry",<ref name=Forb2020>{{cite magazine
   |magazine=[[Forbes]]
   |url=https://www.forbes.com/sites/forbestechcouncil/2018/03/21/outsourcing-in-the-new-normal-three-trends-reshaping-the-global-industry
   |title=Outsourcing In The New Normal: Three Trends Reshaping The Global Industry
   |author=Anna Frazzetto |date=March 21, 2018 |access-date=2019-04-17}}</ref> especially the renewed "invest in America" goal highlighted in campaigning, but the magazine tepidly reversed direction in 2019 as to the outcome for employment.<ref>{{cite magazine |magazine=[[Forbes]]
|url=https://www.forbes.com/sites/thomasduesterberg/2019/10/23/has-trump-delivered-on-his-promise-to-revive-u-s-manufacturing/
|quote=Overall employment in the sector grew by almost half a million jobs since Trump took office, after falling by almost 200,000 in the Obama years.
|title=Has Trump Delivered On His Promise To Revive US Manufacturing |date=October 23, 2019}}</ref> In the case of armament acquisition, section 323 of the [[National Defense Authorization Act for Fiscal Year 2014|National Defense Authorization Act for 2014]] requires military personnel "to solicit information from all U.S.-owned [[arsenal]]s regarding the capability of that arsenal to fulfill the manufacturing requirement" when undertaking a make-or-buy analysis.<ref>Congress.gov, [https://www.congress.gov/bill/113th-congress/house-bill/3304 H.R.3304 - National Defense Authorization Act for Fiscal Year 2014], Section 323, accessed 3 September 2023</ref>

Furthermore, there are growing legal requirements for [[data protection]], where obligations and implementation details must be understood by both sides.<ref name=ChiLaw18/><ref>e.g. NYS-mandated cybersecurity standards affecting "all institutions authorized ... to operate in New York..."{{cite quote|date=November 2022}}</ref> This includes dealing with customer rights.<ref>South Korea requires giving digital service even when "the user refuses to give permission for data or functions that are not necessary to the provision of the service".{{cite quote|date=November 2022}}</ref>

[[Government of the United Kingdom|UK government policy]] notes that certain services must remain in-house, citing the development of [[public policy|policy]], stewardship of tax spend and retention of certain critical knowledge as examples. Guidance states that specific criteria must govern the identification of such services, and that "everything else" could potentially be outsourced.<ref>[[Government procurement in the United Kingdom#Government Commercial Function and Government Commercial Organisation|Government Commercial Function]], [https://www.value-match.co.uk/library/government-commercial-function-make-or-buy-decision-outsourcing-guidance-note/ 'Make or Buy' Decision: Outsourcing Guidance Note], published February 2019, accessed 22 August 2023 {{registration required}}</ref>

====Limitations due to growth====
Inflation, high domestic interest rates, and economic growth pushed India's IT salaries 10–15%, making some jobs relatively "too" expensive, compared to other offshoring destinations. Areas for advancing within the value chain included research and development, equity analysis, tax-return processing, radiological analysis, and [[medical transcription]].

===Growth of white-collar outsourcing===
Although offshoring initially focused on manufacturing, [[White-collar worker|white-collar]] offshoring/outsourcing has grown rapidly since the early 21st century. The [[digital workplace|digital workforce]] of countries like [[India]] and [[China]] are only paid a fraction of what would be [[minimum wage]] in the United States. On average, [[software engineer]]s are getting paid between 250,000 and 1,500,000 rupees (US$4,000 to US$23,000) in India as opposed to $40,000–$100,000 in countries such as the U.S. and [[Canada]].<ref name="Gillis">{{cite magazine |id={{ProQuest|203549187}} |last1=Gillis |first1=Alex |title=Digital sweatshops |magazine=This |location=Toronto |volume=34 |issue=4 |date=2001 |page=6 }}</ref> Closer to the U.S., [[Costa Rica]] has become a major source for the advantages of a highly educated labor force, a large bilingual population, stable democratic government, and similar time zones as the U.S. It takes only a few hours to travel between Costa Rica and U.S. Companies such as [[Intel]], [[Procter & Gamble]], HP, [[Gensler]], [[Amazon (company)|Amazon]] and [[Bank of America]] have big operations in Costa Rica.<ref>{{cite news  | url=https://www.bizjournals.com/cincinnati/news/2018/04/03/former-p-g-manager-elected-president-of-costa-rica.html | title=Former P&G manager elected president of Costa Rica | first=Barrett J. | last=Brunsman | work=[[American City Business Journals]] |date=April 3, 2018}}</ref>

Unlike outsourced manufacturing, outsourced white collar workers have [[flextime]] and can choose their working hours, and for which companies to work. Clients benefit from [[remote work]], reduced office space, management salary, and employee benefits as these individuals are [[independent contractor]]s.<ref name="Ross">{{cite book |doi=10.1145/1753846.1753873 |chapter=Who are the crowdworkers? |title=CHI '10 Extended Abstracts on Human Factors in Computing Systems |year=2010 |last1=Ross |first1=Joel |last2=Irani |first2=Lilly |last3=Silberman |first3=M. Six |last4=Zaldivar |first4=Andrew |last5=Tomlinson |first5=Bill |pages=2863–2872 |isbn=978-1-60558-930-5 |s2cid=11386257 }}</ref>

Ending a government outsourcing arrangement poses difficulties.<ref>{{cite news |newspaper=[[The Washington Post]] | url=https://www.washingtonpost.com/wp-srv/politics/documents/crsreportoninsourcing.pdf | title=Insourcing Functions Performed by Federal Contractors: An Overview of the Legal Issues | author1=Kate M. Manuel |author2=Jack Maskell |date=May 5, 2011}}</ref>

==Reasons for outsourcing== <!--- "Personal Offshoring" redirects to Outsourcing#Reasons for outsourcing, based on NYT article -->
While U.S. companies do not outsource to reduce high top level executive or managerial costs,<ref name="CEO.pay">{{cite news | newspaper=[[The New York Times]] | first=Albert R. | last=Hunt | url=https://www.nytimes.com/2007/02/18/world/americas/18iht-letter.4637416.html | title=Letter From Washington: As U.S. rich-poor gap grows, so does public outcry – Americas – International Herald Tribune | date=February 18, 2007}}</ref> they primarily outsource to reduce peripheral and "non-core" business expenses.<ref>Forey, Gail, and Jane Lockwood. Globalization, Communication and the Workplace: Talking across the World. New York: Continuum, 2011. Electronic Book #21-26.</ref> Further reasons are higher taxes, high energy costs, and excessive government regulation or mandates.

Mandated benefits like [[social security]], [[Medicare (United States)|Medicare]], and safety protection (e.g. [[Occupational Safety and Health Administration]] regulations) are also motivators.<ref>Buchholz, Todd G. Bringing the Jobs Home: How the Left Created the Outsourcing Crisis&nbsp;— and How We Can Fix It. New York: Sentinel, 2004. Print 97-118.</ref> By contrast, [[Executive compensation in the United States|executive pay in the U.S.]] in 2007, which could exceed 400 times more than average workers—a gap 20 times bigger than it was in 1965,<ref name="CEO.pay"/> is not a factor.{{citation needed|date=December 2021}}

Other reasons include reducing and controlling operating costs,<ref>{{cite journal |last1=Schmitz |first1=Patrick W. |title=On the optimality of outsourcing when vertical integration can mitigate information asymmetries |journal=Economics Letters |date=May 2021 |volume=202 |page=109823 |doi=10.1016/j.econlet.2021.109823 |s2cid=233629087 |doi-access=free }}</ref> improving company focus, gaining access to world-class capabilities, tax credits,<ref>''[[Carbon Copy (software)|Carbon Copy]]'' accepted tax credits to move software duplication and packaging to Puerto Rico: (''Captive'') {{cite web   | url=https://www.joc.com/maritime-news/tax-benefits-low-labor-costs-lure-microcom-puerto-rico_19890126.html | title=Tax Benefits, Low Labor Costs lure Microcom to Puerto Rico | quote=the third U.S. software manufacturer to select Puerto Rico as a production site for the booming U.S. software market. | author=Larry Luxner |date=January 26, 1989}}</ref> freeing internal resources for other purposes, streamlining or increasing efficiency for time-consuming functions, and maximizing use of external resources. For small businesses, contracting/subcontracting/"outsourcing" might be done to improve [[work-life balance]].<ref>{{cite news  | url=https://www.wsj.com/articles/SB118073815238422013 | title=Outsourcing Your Life | first=Ellen | last=Gamerman | work=[[The Wall Street Journal]] |date=June 2, 2007 | url-access=subscription}}</ref>

==Outsourcing models==
There are many outsourcing models, with variations<ref>{{cite web|url=https://bpoconnect.com.au/define-outsourcing-models-5-forms-business-process-outsourcing|title=Define Outsourcing Models: 5 Forms of Business Process Outsourcing |date=January 29, 2015}}</ref> by country,<ref>{{cite magazine |magazine=[[The Economist]] |url=https://www.economist.com/britain/2018/06/28/britains-outsourcing-model-copied-around-the-world-is-in-trouble |title=Britain's outsourcing model, copied around the world, is in trouble|date=June 28, 2018}}</ref> year<ref>{{cite web|url=https://www.ssonetwork.com/customer-experience/articles/vested-a-business-model-for-21st-century-outsourci|title=Vested: A Business Model for 21st Century Outsourcing |date=May 29, 2012}}</ref><ref>[[Vested outsourcing]]</ref> and industry.<ref>{{cite web  |website=ADLittle ([[Arthur D. Little]])|url=http://www.adlittle.com/en/insights/viewpoints/outsourcing-model-redesign|title=Outsourcing model redesign|date=May 20, 2016}}</ref> Japanese companies often outsource to China, particularly to formerly Japanese-occupied cities.<ref>(discussed in the book ''[[The World Is Flat]]'').</ref> German companies have outsourced to [[Eastern Europe]]an countries with German-language affiliation, such as [[Poland]] and [[Romania]].<ref name="http">{{cite journal |author1=Stephan Manning |author2=Jörg Sydow |author3=Arnold Windeler  |title=Securing Access to Lower-cost Talent Globally: The Dynamics of Active Embedding and Field Structuration
 |journal=Regional Studies |volume=46 |year=2012 |issue=9 |pages=1201–1218 |doi=10.1080/00343404.2011.571243 |bibcode=2012RegSt..46.1201M |s2cid=27458563 |url=http://sro.sussex.ac.uk/id/eprint/86264/1/RA13WP%202012%20RS%20Active%20Embedding.pdf }}</ref> French companies outsource to North Africa for similar reasons. For Australian IT companies, [[Indonesia]] is one of the major choice of offshoring destination. Near-shore location, common time zone and adequate IT work force are the reasons for offshoring IT services to Indonesia.

Another approach is to differentiate between tactical and strategic outsourcing models. Tactical models include:
* Staff augmentation
* Project-based
* To gain expertise not available in-house.

Strategic consultancy includes for [[business process improvement]].<ref>{{Cite magazine |magazine=[[Network World]]|url=https://www.networkworld.com/article/2931822/infrastructure-management/what-outsourcing-engagement-model-is-right-for-you.html |title=Outsourcing Engagement Models|author1=Serhiy Haziyev |author2=Halyna Semenova |date=June 4, 2015 |publisher=IDG |archive-url=https://web.archive.org/web/20180519085407/https://www.networkworld.com/article/2931822/infrastructure-management/what-outsourcing-engagement-model-is-right-for-you.html |archive-date=May 19, 2018 |access-date=February 19, 2019}}</ref>

===Innovation outsourcing===
When offshore outsourcing knowledge work, firms heavily rely on the availability of technical personnel at offshore locations. One of the challenges in offshoring engineering innovation is a reduction in quality.<ref name=Failed4>{{Cite journal |author1=Nils Brede Moe |author2=Darja Šmite |author3=Geir Kjetil Hanssen |author4=Hamish Barney |date=2013-08-29 |title=From offshore outsourcing to insourcing and partnerships: four failed outsourcing attempts |journal=Empirical Software Engineering |volume=19 |issue=5 |pages=1225–1258 |doi=10.1007/s10664-013-9272-x |s2cid=6243809 |issn=1382-3256}}</ref>

===Co-sourcing===
'''Co-sourcing''' is a hybrid of internal staff supplemented by an external service provider.<ref>{{cite web |publisher=hreonline.com
  |url=http://www.hreonline.com/HRE/story.jsp?storyId=80237620
  |title='Co-Sourcing' and More   | author=Andrew R. McIlvaine
  |date=March 16, 2008   |access-date=May 23, 2012
  |archive-url=https://web.archive.org/web/20130513092203/http://www.hreonline.com/HRE/story.jsp?storyId=80237620
  |archive-date=May 13, 2013}}</ref><ref>{{cite web  |publisher=[[informationweek]].com
|url=http://www.informationweek.com/news/6502924
|title=Out With 'Outsourcing' And In With 'Co-Sourcing'   |author=Diane Rezendes Khirallah
|date=September 2, 2002   |access-date=May 23, 2012}}</ref> Co-sourcing can minimize sourcing risks, increase transparency, clarity and lend toward better control than fully outsourced.<ref>Business Dictionary: {{cite web
|url=http://www.businessdictionary.com/definition/co-sourcing.html
|title=What is co-sourcing? Definition and meaning   |access-date=2016-08-18
|archive-url= https://web.archive.org/web/20160819235940/http://www.businessdictionary.com/definition/co-sourcing.html
|archive-date=2016-08-19}}</ref>

Co-sourcing services can supplement internal audit staff with specialized skills such as information [[risk management]] or integrity services, or help during peak periods, or similarly for other areas such as software development or human resources.

====Identity management co-sourcing====
[[Identity management]] co-sourcing is when on-site hardware<ref>{{cite web
|url=https://www.microsoft.com/en-us/p/service-levels-68-success-secrets-68-most-asked-questions-on-service-levels-what-you-need-to-know/fgqpf3h0gvsd
|title=68 success secrets |publisher=microsoft.com}}</ref><ref>{{cite web |publisher=IBM.com
   |title=extending messaging to enterprise collaboration
   |url=ftp://ftp.software.ibm.com/pub/lotusweb/sox/eema05.pdf}}</ref> interacts with outside identity services.

This contrasts with an "all in-the-cloud" service scenario, where the identity service is built, hosted and operated by the service provider in an externally hosted, [[cloud computing]] infrastructure.

====Offshore Software R&D Co-sourcing====
'''Offshore Software R&D''' is the provision of [[software development]] services by a supplier (whether external or internal) located in a different country from the one where the software will be used. The global software R&D services market, as contrasted to information technology outsourcing (ITO) and [[business process outsourcing]] (BPO), is rather young and currently is at a relatively early stage of development.<ref name="news.bbc.co.uk">{{cite news|url=http://news.bbc.co.uk/2/hi/business/6279679.stm
   |title=Globalisation shakes the world
   |date=January 21, 2007 |access-date=April 10, 2019  |via=news.bbc.co.uk}}</ref>

=====Countries involved in outsourced software R&D=====
Canada, India, [[Ireland]], and [[Israel]] were the four leading countries as of 2003.<ref name="news.bbc.co.uk"/> Although many countries have participated in the offshore outsourcing of software development, their involvement in co-sourced and outsourced Research & Development (R&D) was somewhat limited. Canada, the second largest by 2009, had 21%.<ref>{{cite web  |title=UN Information Economy Report 2010  |page=49  |url=http://www.unctad.org/Templates/webflyer.asp?docid=13912&intItemID=5637&lang=1&mode=downloads  }}{{Dead link|date=November 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

As of 2018, the top three were deemed by one "research-based policy analysis and commentary from leading economists" as China, India and Israel."<ref>{{cite web
   |url=https://voxeu.org/article/it-revolution-and-globalisation-rd
   |title=The IT revolution and the globalisation of R&D
   |author1=Lee Branstetter  |author2=Britta Glennon  |author3=J. Bradford Jensen
   |date=August 21, 2018}}</ref>

[[Gartner]] Group adds in [[Russia]], but does not make clear whether this is pure R&D or run-of-the-mill IT outsourcing.<ref name="russoft.org">{{cite web  |url=http://www.russoft.org/docs/?doc=1123  |title=Offshore Outsourcing: Why Russia?  |access-date=April 10, 2019  |archive-date=March 18, 2016  |archive-url=https://web.archive.org/web/20160318121049/http://russoft.org/docs/?doc=1123  |url-status=dead  }}</ref>

==Usability issues in offshore development==
The main driver for offshoring development work has been the greater availability of developers at a lower cost than in the home country. However, the rise in offshore development has taken place in parallel with an increased awareness of the importance of usability, and the user experience, in software. Outsourced development poses special problems for development, i.e. the more formal, contractual relationship between the supplier and client, and geographical separation place greater distance between the developers and users, which makes it harder to reflect the users' needs in the final product. This problem is exacerbated if the development is offshore. Further complications arise from cultural differences, which apply even if the development is carried out by an in-house offshore team.<ref name=GrailComm.cio>{{cite magazine
   |magazine=[[CIO magazine]]
   |url=https://www.cio.com/article/2438045/communication--the-holy-grail-of-outsourcing.html
   |title=Communication: The Holy Grail of Outsourcing
   |author=Gabriel Fuchs
   |date=September 14, 2007
   |access-date=October 11, 2019
   |archive-date=October 11, 2019
   |archive-url=https://web.archive.org/web/20191011202628/https://www.cio.com/article/2438045/communication--the-holy-grail-of-outsourcing.html
   |url-status=dead
   }}</ref>

Historically offshore development concentrated on back office functions but, as offshoring has grown, a wider range of applications have been developed. Offshore suppliers have had to respond to the commercial pressures arising from usability issues by building up their usability expertise. Indeed, this problem has presented an attractive opportunity to some suppliers to move up market and offer higher value services.<ref>[http://www.userindesign.com/Images/Papers/Usability%20Issues%20in%20Offshore.pdf "Usability Issues in Offshore Development: an Indian Perspective"], accessed January 8, 2013</ref><ref>[http://www.clarotesting.com/page12.htm "What Happens to Usability when Development goes Offshore?"] {{Webarchive|url=https://web.archive.org/web/20190324165751/http://www.clarotesting.com/page12.htm |date=March 24, 2019 }}, accessed January 8, 2013</ref><ref>[http://www.userindesign.com/Images/Papers/Offshore%20Development%20Culture%20and%20UX.pdf "Offshore Development Culture and User Experience"], accessed January 8, 2013</ref>

===Legal issues===
Offshore Software R&D means that company A turns over responsibility, in whole or in part, of an in-house software development to company B whose location is outside of company A's national jurisdiction. Maximizing the economic value of an offshore software development asset critically depends on understanding how best to use the available forms of legal regulations to protect intellectual rights. If the vendor cannot be trusted to protect trade secrets, then the risks of an offshoring software development may outweigh its potential benefits. Hence, it is critical to review the intellectual property policy of the potential offshoring supplier. The intellectual property protection policy of an offshore software development company must be reflected in these crucial documents: General Agreement; Non-Disclosure Agreement; Employee Confidentiality Contract.<ref>How to protect intellectual property and confidential information dealing with offshore software development company? https://belitsoft.com/offshore-software-development-company/protect-intellectual-property-and-confidential-information</ref>

===2000-2012 R&D===
As forecast in 2003,<ref>{{cite web
  |url=http://www.internetnews.com/dev-news/article.php/3069991
  |title=R&D the Latest Target of Silicon Valley Outsourcing - InternetNews.
  |website=internetnews.com  |access-date=April 10, 2019}}</ref> R&D is outsourced. Ownership of [[intellectual property]] by the outsourcing company, despite outside development, was the goal. To defend against tax-motivated cost-shifting, the U.S. government passed regulations in 2006 to make outsourcing research harder.<ref>{{cite web
  |url=https://www.rediff.com/money/2006/nov/27guest.htm
  |title=US tightens grip on Indian R&D centres
  |website=Rediff  |access-date=April 10, 2019}}</ref> Despite many R&D contracts given to Indian universities and labs, only some research solutions were patented.<ref>{{cite news
  |url=https://economictimes.indiatimes.com/articleshow/693457.cms
  |title=Desi scientists help MNCs with R&D solutions
  |author=Sujata Dutta Sachdeva   |date=December 3, 2006
  |access-date=April 10, 2019|newspaper=The Economic Times}}</ref>

While [[Pfizer]] moved some of its R&D from the UK to India,<ref>{{cite book
   |title=India Inside: The Emerging Innovation Challenge to the West
   |url=https://books.google.com/books?isbn=142214240X  |isbn=978-1-4221-4240-0
   |author1=Nirmalya Kumar  |author2=Phanish Puranam  |date=2011| publisher=Harvard Business Press }}</ref> a ''[[Forbes]]'' article suggested that it is increasingly more dangerous to offshore IP-sensitive projects to India, because of India's continued ignorance of patent regulations.<ref>{{cite web
   |title=It's time to stop Outsourcing Pharma R&D to India
   |website=[[Forbes]]
 |date=October 2012
   |url=https://www.forbes.com/sites/johnlamattina/2012/10/11/its-time-to-stop-outsourcing-pharma-rd-to-india/}}</ref> In turn, companies such as [[Pfizer]] and Novartis, have lost rights to sell many of their cancer medications in India because of lack of [[Intellectual Property|IP protection]].

===Future trends===

A 2018 [[University of Chicago Law School]] article titled "The Future of Outsourcing" begins with "The future of outsourcing is digital."<ref name=ChiLaw18>{{cite web
   |access-date=2019-04-17     |title=The Future of Outsourcing  |date=2018
   |url=https://www.law.uchicago.edu/files/2018-11/tech_transactions_uofc_event_compilation.pdf
   |author1=Rebecca S. Eisner |author2=Daniel A. Masur |author3=Brad L. Peterson}}</ref> According to other sources, the "Do what you do best and outsource the rest"<ref name=Drucker10/> approach means that "integration with retained systems"<ref name=ChiLaw18/> is the new transition challenge; people training still exists, but is merely an "also."

There is more complexity than before, especially when the outside company may be an integrator.<ref name=ChiLaw18/>

While the number of technically skilled labor grows in India, Indian offshore companies are increasingly tapping into the skilled labor already available in Eastern Europe to better address the needs of the Western European R&D market.<ref>Indian BPOs Dial Eastern Europe. Jun 2009. http://articles.economictimes.indiatimes.com/2009-06-12/news/27663963_1_indian-bpo-outsourcing-market-india-s-bpo</ref>

==Implications==

===Performance measurement===
Focusing on [[software quality]] metrics is a good way to maintain track of how well a project is performing.<ref>{{cite book |editor=Barry Boehm |editor2=Hans Dieter Rombach |editor3=Marvin V. Zelkowitz |date=2005 |title=Foundations of Empirical Software Engineering: The Legacy of Victor R. Basili |publisher=Springer |url=https://trace.tennessee.edu/cgi/viewcontent.cgi?referer=&httpsredir=1&article=1001&context=utk_harlanabout |via=University of Tennessee, Knoxville}}</ref>{{better source needed|date=August 2022}}

===Management processes===
Globalization and complex [[supply chains]], along with greater physical distance between higher management and the production-floor employees often requires a change in management methodologies, as inspection and feedback may not be as direct and frequent as in internal processes. This often requires the assimilation of new communication methods such as [[voice over IP]], [[instant messaging]], and [[issue tracking system]]s, new [[time management]] methods such as [[Comparison of time tracking software|time tracking software]], and new cost- and schedule-assessment tools such as [[Comparison of development estimation software|cost estimation software]].<ref>{{cite journal |last1=Obwegeser |first1=Nikolaus |last2=Arenfeldt |first2=Katrine |last3=Dam |first3=Amalie Corty |last4=Fenger |first4=Kim Harder |last5=Silkjaer |first5=Johan Vang |title=Aligning drivers, contractual governance, and relationship management of IT-outsourcing initiatives |journal=Journal of Information Technology Case and Application Research |date=2 January 2020 |volume=22 |issue=1 |pages=40–66 |doi=10.1080/15228053.2020.1786265 |s2cid=221056997 }}</ref><ref>{{cite book |doi=10.1007/978-3-319-24366-5_3 |chapter=Trust and Control in Complex Information Systems Development |title=Information Systems: Development, Applications, Education |series=Lecture Notes in Business Information Processing |year=2015 |last1=Jensen |first1=Preben |last2=Ladefoged |first2=Christian |last3=Søgård |first3=Michael |last4=Obwegeser |first4=Nikolaus |volume=232 |pages=32–44 |isbn=978-3-319-24365-8 }}</ref><ref>{{cite book |doi=10.1007/978-3-642-32273-0_19 |chapter=A Multidimensional Model of Trust in Recommender Systems |title=E-Commerce and Web Technologies |series=Lecture Notes in Business Information Processing |year=2012 |last1=Maida |first1=Martina |last2=Maier |first2=Konradin |last3=Obwegeser |first3=Nikolaus |last4=Stix |first4=Volker |volume=123 |pages=212–219 |isbn=978-3-642-32272-3 }}</ref>

The term '''transition methodology'''<ref>{{cite journal |last1=Beulen |first1=Erik |last2=Tiwari |first2=Vinay |last3=van Heck |first3=Eric |title=Understanding transition performance during offshore IT outsourcing |journal=Strategic Outsourcing |date=22 November 2011 |volume=4 |issue=3 |pages=204–227 |doi=10.1108/17538291111185449 |hdl=1765/31793 |url=http://repub.eur.nl/pub/31793 }}</ref> describes the process of migrating knowledge, systems, and operating capabilities between the two sides.<ref>{{Cite web|url=http://ftp.hp.com/pub/services/outsourcing/info/4AA0-4811ENW.pdf|title=HP Business Process Outsourcing transition management}}</ref>

====Communications and customer service====
In the area of call-center outsourcing, especially when combined with offshoring,<ref>{{cite journal |last1=Nadeem |first1=Shehzad |title=Macaulay's (Cyber) Children: The Cultural Politics of Outsourcing in India |journal=Cultural Sociology |date=March 2009 |volume=3 |issue=1 |pages=102–122 |doi=10.1177/1749975508100673 |s2cid=144990275 }}</ref> agents may speak with different [[linguistics|linguistic]] features such as [[Accent (dialect)|accents]], word use and phraseology, which may impede comprehension.<ref>Alster, N (2005) [http://www.cfo.com/article.cfm/4390954/c_2984406/?f=archives Customer Disservice.] {{webarchive|url=https://web.archive.org/web/20070702092211/http://www.cfo.com/article.cfm/4390954/c_2984406/?f=archives |date=2007-07-02 }} CFO.com.</ref><ref name="PC100">The words "100% U.S.Based Customer Service" (followed by "Talk to a real person any time") are on the back of envelopes mailed by a major USA corporation.</ref><ref>{{cite web
   |url=https://www.moneyunder30.com/discover-card-customer-service
   |title=Discover card's 100% U.S. Based Customer Service
   |date=March 18, 2019}}</ref><ref>{{cite web
|url=https://www.nerd#wallet.com/card-details/card-name/Discover-It-18-Month-Balance-Transfer <!--need better source,Black ?listed-->
|title=Dis...
|access-date=March 29, 2019
}}{{Dead link|date=November 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>   <!--- not clickable, info only, may be better off dropping now that found an acceptable source -->

====Governance====
In 1979, Nobel laureate [[Oliver E. Williamson]] wrote that the [[governance]] structure is the "framework within which the integrity of a transaction is decided", and that "because contracts are varied and complex, governance structures vary with the nature of the transaction".<ref>{{cite journal |last1=Williamson |first1=Oliver E. |title=Transaction-Cost Economics: The Governance of Contractual Relations |journal=The Journal of Law and Economics |date=October 1979 |volume=22 |issue=2 |pages=233–261 |doi=10.1086/466942 |s2cid=8559551 }}</ref> [[University of Tennessee]] researchers have been studying complex outsourcing relationships since 2003. Emerging thinking regarding strategic outsourcing is focusing on creating a contract structure in which the parties have a vested interest in managing what are often highly complex business arrangements in a more collaborative, aligned, flexible, and credible way.<ref>{{cite book
|author=Kate Vitasek  |title=The Vested Outsourcing Manual  |year=2011  |publisher=Palgrave Macmillan
|location=New York  |isbn=978-0-230-11268-1  |edition=first|author-link=Kate Vitasek }}</ref><ref>Also see [[relational contract]]</ref>

====Security====
Reduced security, sometimes related to lower loyalty<ref>{{cite web  |website=BBC.co.uk
|title=Outsourcing exposes firms to fraud |url=http://news.bbc.co.uk/2/hi/business/4094894.stm
|date=June 16, 2005}}</ref> may occur, even when 'outsourced' staff change their legal status but not their desk. While security and compliance issues are supposed to be addressed through the contract between the client and the suppliers, fraud cases have been reported.

In April 2005, a high-profile case involved the theft of $350,000 from four [[Citibank]] customers when call-center workers acquired the passwords to customer accounts and transferred the money to their own accounts opened under fictitious names. Citibank did not find out about the problem until the American customers noticed discrepancies with their accounts and notified the bank.<ref>{{cite web |author=J. Ribeiro |date=2005 |website=[[InfoWorld]].com |url=http://www.infoworld.com/article/2668975/application-development/indian-call-center-workers-charged-with-citibank-fraud.html |title=Indian call center workers charged with Citibank fraud |access-date=2015-05-18 |archive-url=https://web.archive.org/web/20150924042721/http://www.infoworld.com/article/2668975/application-development/indian-call-center-workers-charged-with-citibank-fraud.html   |archive-date=2015-09-24 }}</ref>

====Information technology====   <!-- "IT" -->
[[Richard Baldwin (economist)|Richard Baldwin]]'s 2006 ''The Great Unbundling'' work was followed in 2012 by ''Globalization's Second Acceleration (the Second Unbundling)'' and in 2016 by ''The Great Convergence: Information Technology and the New Globalization''.<ref>{{cite book
|url=https://harvardpress.typepad.com/hup_publicity/2016/11/globalizations-three-unbundlings-richard-baldwin.html
|title=The Great Convergence: Information Technology and the New Globalization
|author=Richard Baldwin|author-link=Richard Baldwin (economist)}}</ref> It is here, rather than in manufacturing, that the bits economy can advance in ways that the economy of atoms and things can't: an early 1990s Newsweek had a half page cartoon showing someone who had just ordered a pizza online, and was seeking help to download it.{{cn|date=December 2022}}

====Step-in rights====
{{main|Step-in rights}}
If both sides have a contract clause permitting step-in rights,<ref name=StepIn.BBC19>{{cite web |website=[[BBC News|BBC.com]]
   |url=https://www.bbc.co.uk/mediacentre/speeches/2019/clementi-omc
   |title=Speech by Sir David Clementi to the Oxford Media
   |quote=oversight of the BBC, including step-in rights
   |date=March 18, 2019}}</ref> then there is a right, though not an obligation,<ref name=StepIn.FCAmag>{{cite magazine
|magazine=FCA Magazine
|url=https://www.fca-magazine.com/features/legal-and-business/511-collateral-warranties-and-third-party-rights
|title=Collateral Warranties and Third Party Rights
|author=David Brown |date=April 1, 2016}}</ref> to take over a task that is not going well, or even the entire project.

==Issues and reversals==
[[File:Gambling table - Zensar (3630410644).jpg|thumb|Demonstrating need to ensure outsourcing gains are realised and losses avoided at a summit in London in 2009.]]
<!--- Issues and reversals: WHERE to place image was hashed out long ago; the name of this section is very fitting. -->
<!--- also, on "gaming the system" see nytimes.com/2019/09/24/nyregion/nj-tax-break.html -->A number of outsourcings and offshorings that were deemed failures<ref>{{cite magazine
|url=https://www.informationweek.com/it-leadership/why-it-outsourcing-often-fails/d/d-id/1105317
|title=Why IT Outsourcing Often Fails
|quote=ineffectual leadership, process failures, talent issues
|author=Jim Ditmore |magazine=[[InformationWeek]]}}</ref><ref>{{cite web
   |url=https://www.cio.com/article/2434091/it-outsourcing-gone-bad--4-painful-lessons.html
   |title=IT Outsourcing Gone Bad: 4 Painful Lessons
   |quote=In the .. $4 billion deal between the U.S. Navy and .. EDS, .. in 2003, ... reasons behind the failure are complex, but ..
   |author=Ephraim Schwartz
   |access-date=March 4, 2019
   |archive-date=March 6, 2019
   |archive-url=https://web.archive.org/web/20190306045747/https://www.cio.com/article/2434091/it-outsourcing-gone-bad--4-painful-lessons.html
   |url-status=dead
   }}</ref><ref name=Failed4/> led to reversals<ref name="Forbes.CIO">{{cite magazine  |magazine=[[Forbes]]  |url=https://www.forbes.com/sites/ciocentral/2013/01/16/why-some-u-s-companies-are-giving-up-on-outsourcing
|title=Why Some U.S. Companies Are Giving Up On Outsourcing
|author1=Eric Savitz  |author2=Andy Sealock  |author3=Christopher Stacy
|quote=GM is not the only company to pull back at least a portion of its previously outsourced offshore IT operations.
|date=January 16, 2013}}</ref><ref name="NYT.17"/> signaled by use of terms such as [[#Insourcing|insourcing]] and [[reshoring]]. ''The New York Times'' reported in 2017 that IBM "plans to hire 25,000 more workers in the United States over the next four years," overlapping India-based [[Infosys]]'s "10,000 workers in the United States over the next two years."<ref name="NYT.17">{{cite news |last1=Lohr |first1=Steve |title=Hot Spot for Tech Outsourcing: The United States |url=https://www.nytimes.com/2017/07/30/technology/hot-spot-for-tech-outsourcing-the-united-states.html |work=The New York Times |date=30 July 2017 }}</ref> A clue to a tipping point having been reached was a short essay titled "Maybe You Shouldn't Outsource Everything After All"<ref name="NYT.Hap18">{{cite news |last1=Richards |first1=Carl |title=Maybe You Shouldn't Outsource Everything After All |url=https://www.nytimes.com/2018/05/07/your-money/outsource-happiness.html |work=The New York Times |date=7 May 2018 }}</ref> and the longer "That Job Sent to India May Now Go to Indiana."
<!--NYTimes-->

Among problems encountered were supply-and-demand induced raises in salaries and lost benefits of similar-time-zone. Other issues were differences in language and culture.<ref name="NYT.17" /><ref name="PC100" /> Another reason for a decrease in outsourcing is that many jobs that were subcontracted abroad have been replaced by technological advances.<ref name=Econ1/>

According to a 2005 [[Deloitte Consulting]] survey, a quarter of the companies which had outsourced tasks reversed their strategy.<ref name=Econ1>{{cite news
|url=https://www.economist.com/news/special-report/21569572-after-decades-sending-work-across-world-companies-are-rethinking-their-offshoring
|title=Here, There and Everywhere - After decades of sending work across the world, companies are rethinking their offshoring strategies
|publisher=[[The Economist]] (London) |date=January 17, 2013 |access-date=January 19, 2013 |author=Tamzin Booth
|newspaper=The Economist
|archive-url=https://web.archive.org/web/20130118202607/http://www.economist.com/news/special-report/21569572-after-decades-sending-work-across-world-companies-are-rethinking-their-offshoring|archive-date=January 18, 2013}}</ref>

These reversals, however, did not undo the damage. New factories often:
* were in different locations
* needed different skill sets
* used more automation.<ref name=NYT.ecoBart/>

Public opinion in the U.S. and other Western powers opposing outsourcing was particularly strengthened by the drastic increase in unemployment as a result of the 2007–2008 financial crisis. From 2000 to 2010, the U.S. experienced a net loss of 687,000 jobs due to outsourcing, primarily in the computers and electronics sector. Public disenchantment with outsourcing has not only stirred political responses, as seen in the [[2012 United States presidential election|2012 U.S. presidential campaigns]], but it has also made companies more reluctant to outsource or offshore jobs.<ref name=Econ1/>

A counterswing depicted by a 2016 Deloitte survey suggested that companies are no longer reluctant to outsource.<ref>"Outsourcing accelerates forward", (2016) Deloitte 2016 Global Outsourcing Survey accessed 18 August 2016 at {{cite web
 |url=http://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-cons-sdt-gos-exec-summary-2016.pdf
 |title=Archived copy |access-date=2016-08-18
 |archive-url=https://web.archive.org/web/20170112100552/https://www2.deloitte.com/content/dam/Deloitte/us/Documents/process-and-operations/us-cons-sdt-gos-exec-summary-2016.pdf
 |archive-date=2017-01-12}}</ref> Deloitte's survey identified three trends:
* Companies are broadening their approach to outsourcing as they begin to view it as more than a simple cost-cutting play
* Organizations are "redefining the ways they enter into outsourcing relationships and manage the ensuing risks".
* Organizations are changing the way they are managing their relationships with outsourcing providers to "maximize the value of those relationships".

===Insourcing===
'''Insourcing''' is the process of reversing an outsourcing, possibly using help from those not currently part of the in-house staff.<ref name="auto">{{cite web |website=Plunkettresearch.com
  |url=http://www.plunkettresearch.com/outsourcing-offshoring-bpo-market-research/industry-and-business-data
  |title=Outsourcing, BPO & Contract Manufacturing Market Research-Access Industry Trends, Revenues, Statistics, Forecasts, Technologies, Mailing Lists
  |access-date=2017-05-23}}</ref><ref>{{cite web |website=Whatis.techtarget.com
  |author=Margaret Rouse
  |url=http://whatis.techtarget.com/definition/insourcing
  |title= What is insourcing? - Definition from WhatIs.com  |access-date=2017-05-23}}</ref><ref>Marc J. Schniederjans, ''Outsourcing and Insourcing In an International Context''(New York: M.E. Sharpe, 2005) 3.</ref> Some authors call this '''backsourcing''',<ref>{{Cite web|url=http://www.plunkettresearch.com/outsourcing-offshoring-bpo-market-research/industry-and-business-data|title = Outsourcing & Offshoring Industry Market Research}}</ref> reserving the term ''insourcing'' to refer simply to conducting certain activities in-house.

Outsourcing has gone through many iterations and reinventions, and some outsourcing contracts have been partially or fully reversed. Often the reason is to maintain control of critical production or competencies, and insourcing is used to reduce costs of taxes, labor and transportation.<ref name="Shermon, G.">Shermon, G (2017). "Digital Talent – Business Models and Competencies" Page 190</ref> Sometimes there are problems with the outsourcing agreements, because of the pressure to bring jobs back to their home country, or simply because it has stopped being efficient to outsource particular tasks.<ref>{{Cite web |url=http://www.swissmc.ch/documents/Beardsell_Julie_working_paper_012010.pdf |title=IT Backsourcing: is it the solution to innovation?|last=Beardsell|first=Julie |access-date=2023-03-27 |archive-date=2010-12-19 |archive-url=https://web.archive.org/web/20101219193526/http://swissmc.ch/documents/Beardsell_Julie_working_paper_012010.pdf |url-status=dead }}</ref> 

Studies conducted at companies confirm the positive impact of using insourcing on financial performance.<ref name="Grela, G.">{{cite journal | doi=10.1108/JGOSS-06-2020-0029 | title=Does insourcing of processes pay off? | year=2021 | last1=Grela | first1=Grzegorz | last2=Hofman | first2=Mariusz | journal=Journal of Global Operations and Strategic Sourcing | volume=14 | issue=3 | pages=477–501 | s2cid=233922075 | doi-access=free }}</ref>
<references group="Grela, G., & Hofman, M. (2021). Does insourcing of processes pay off?. Journal of Global Operations and Strategic Sourcing." />
''Regional insourcing'', a related term, is when a company assigns work to a subsidiary that is within the same country. This differs from ''onshoring'' and ''reshoring'', which may be either inside or outside the company.

====Regional insourcing====
'''Regional insourcing''' is a process in which a company establishes satellite locations for specific entities of their business, making use of advantages one state may have over another<ref>such as taxes, education, or workforce skill sets</ref><ref>{{cite journal |last1=Adelsberg |first1=David van |last2=Trolley |first2=Edward A. |title=Strategic insourcing: getting the most from the best |journal=Training & Development |date=1 July 1998 |volume=52 |issue=7 |pages=57–61 |id={{Gale|A20991465}} |url=https://www.td.org/magazines/td-archive/1998/strategic-insourcing-getting-the-most-from-the-best |url-access=subscription }}</ref> This concept focuses on the delegating or reassigning of procedures, functions, or jobs from production within a business in one location to another internal entity that specializes in that operation. This allows companies to streamline production, boost competency, and increase their bottom line.

This competitive strategy applies the classical argument of [[Adam Smith]], which posits that two nations would benefit more from one another by trading the goods that they are more proficient at manufacturing.<ref>Adam Smith, ''The Wealth of Nations: Part II'' (New York: Princeton Library, 1902), 102-104</ref><ref>{{cite report |last1=Feenstra |first1=Robert |last2=Hanson |first2=Gordon |title=Globalization, Outsourcing, and Wage Inequality |website=National Bureau of Economic Research |date=January 1996 |doi=10.3386/w5424 |ssrn=225484 |s2cid=152764851 |doi-access=free }}</ref>

====Net effect on jobs====
To those who are concerned that nations may be losing a net number of jobs due to outsourcing, some<ref>{{cite web
  |author=Harold L. Sirkin
  |url=https://www.bcgperspectives.com/content/articles/manufacturing_supply_chain_management_made_in_america_again
  |title=Made in America, Again |website=Bcg.perspectives
  |date=2011-08-25  |access-date=2017-05-23}}</ref> point out that insourcing also occurs. A 2004 study<ref>{{cite web
     |author1=Mary Amiti  |author2=Shang-Jin Wei  |date=2004
     |url=http://www.imf.org/external/pubs/ft/wp/2004/wp04186.pdf
     |title=Fear of Service Outsourcing: Is it Justified?   |publisher=WP/04/186, International Monetary Fund
     |access-date=2017-05-23}}</ref> in the U.S., the UK, and many other industrialized countries more jobs are insourced than outsourced. ''The New York Times'' disagreed, and wrote that free trade with low-wage countries is win-lose for many employees who find their jobs offshored or with stagnating wages.<ref>{{cite news
   |newspaper=[[The New York Times]] |date=December 12, 2007
   |url=https://www.nytimes.com/2007/12/28/opinion/28krugman.html
   |author=Paul Krugman
   |title=The Trouble with Trade}}</ref>

The impact of offshore outsourcing, according to two estimates published by ''[[The Economist]]'', showed unequal effect during the period studied 2004 to 2015, ranging from 150,000 to as high as 300,000 jobs lost per year.<ref>{{cite magazine  |magazine=[[The Economist]] |url=https://www.economist.com/news/special-report/21569568-offshored-jobs-return-rich-countries-must-prove-they-have-what-it-takes-shape |title=What to Do Now: Shape Up  |date=January 2013}}</ref>

In 2010, a group of manufacturers started the Reshoring Initiative, focusing on bringing manufacturing jobs for American companies back to the country. Their data indicated that
140,000 American jobs were lost in 2003 due to offshoring. Eleven years later in 2014, the U.S. recovered 10,000 of those offshored positions; this marked the highest net gain in 20 years.<ref name=R.init>{{Cite news
  |url=http://www.industryweek.com/competitiveness/reshoring-numbers
  |title=Reshoring: By the Numbers  |date=2017-03-20  |work=IndustryWeek
  |access-date=2018-02-08}}</ref> More than 90% of the jobs that American companies "offshored" and outsourced manufacturing to low cost countries such as China, [[Malaysia]] and [[Vietnam]] did not return.<ref name=R.init/>

====Insourcing crossbreeds====
The fluctuation of prefixes and names give rise to many more "cross-breeds" of insourcing. For example, "offshore insourcing" is "when companies set up their own "{{visible anchor|captive}}" process centers overseas, sometimes called a ''Captive Service'',<ref>{{cite web
   |publisher=OutsourceNews  |title=Business Process Outsourcing – Captive service or third party vendors?
   |url=http://www.CustomerFocusServices.com/www/Outsourcenews.com/Articles/captive_bpo_and_third_party_bpo.html
   |access-date=2008-10-09 |archive-url=https://web.archive.org/web/20081011091128/http://www.customerfocusservices.com/www/Outsourcenews.com/Articles/captive_bpo_and_third_party_bpo.html |archive-date=2008-10-11}}</ref> taking advantage of their cheaper surroundings while maintaining control of their back-office work and business processes."<ref>{{cite web  |website=Searchcio.techtarget.com
|url=http://searchcio.techtarget.com/news/922525/Gartner-Dont-forget-to-insource
|title=Gartner: Don't forget to insource    |date=2003-09-04  |access-date=2017-05-23}}</ref> "{{Visible anchor|Remote insourcing}}" refers to hiring developers to work in-house from virtual (remote) facilities.<ref>{{cite web
|url=http://www.bpmwatch.com/columns/in-sourcing-a-closer-look-at-an-emerging-outsourcing-trend
|title= In-sourcing…Remotely: A Closer Look at an Emerging Outsourcing Trend  |access-date=2013-03-25   |archive-url=https://web.archive.org/web/20130303212216/http://www.bpmwatch.com/columns/in-sourcing-a-closer-look-at-an-emerging-outsourcing-trend
|archive-date=2013-03-03}}</ref>

====In the U.S.====
A 2012 series of articles in ''[[The Atlantic]]''<ref name="PastF.ATL">January: {{cite magazine |date=January 12, 2012 |url=https://www.theatlantic.com/business/archive/2012/01/the-past-and-future-of-american-manufacturing/251351 |url-access=subscription |title=The Past and Future of American Manufacturing |magazine=The Atlantic}}</ref><ref name="ManSpecial.ATL">February: {{cite magazine |author=Howard Wial |date=February 9, 2012 |url=https://www.theatlantic.com/business/archive/2012/02/manufacturing-is-special-why-america-needs-its-makers/252796 |url-access=subscription |title=Manufacturing is Special: Why America Needs its Makers |magazine=The Atlantic}}</ref><ref name="ManRecov.ATL">June:{{cite magazine |author=Derek Thompson |date=June 5, 2012 |url=https://www.theatlantic.com/business/archive/2012/06/the-amazing-and-puzzling-manufacturing-recovery/258148 |url-access=subscription 
|title=The Amazing (and Puzzling) Manufacturing Recovery |magazine=The Atlantic}}</ref><ref name="InBoom.ATL">December: {{cite magazine |author=Charles Fishman |date=December 2012 |url=https://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166 |url-access=subscription |title=The Insourcing Boom |magazine=The Atlantic}}</ref> highlighted a turning of the tide for parts of the U.S.'s manufacturing industry. Specific causes identified include rising third-world wages, recognition of hidden off-shoring costs, innovations in design/manufacture/assembly/time-to-market, increasing fuel and transportation costs, falling energy costs in the U.S., increasing U.S. labor productivity, and union flexibility. Hiring at GE's giant [[Appliance Park]] in [[Louisville, Kentucky]], increased 90% during 2012.

===Standpoint of labor===
From the standpoint of labor, outsourcing may represent a new threat, contributing to worker insecurity, and is reflective of the general process of [[globalization]] and [[Polarization (economics)|economic polarization]].<ref>{{cite news |last1=Krugman |first1=Paul |title=Opinion {{!}} Feeling No Pain |url=https://www.nytimes.com/2006/03/06/opinion/feeling-no-pain.html |work=The New York Times |date=6 March 2006 }}</ref>
* ''Low-skilled work'': Low-skill work outsourced to contractors who tend to employ migrant labor<ref>{{cite news |title=Union takes action against university on grounds of discrimination against outsourced BAME staff |url=https://londonnewsonline.co.uk/union-takes-action-against-university-on-grounds-of-discrimination-against-outsourced-bame-staff/ |work=South London News |date=20 July 2020 }}</ref> is causing a revival of radical trade union activity. In the UK, major hospitals, universities,<ref>{{cite news |last1=Elia |first1=Petros |title=It's time for universities to stop underpaying their outsourced workers |url=https://www.theguardian.com/education/2019/oct/24/its-time-for-universities-to-finally-stop-underpaying-their-outsourced-workers |work=The Guardian |date=24 October 2019 }}</ref> ministries and corporations are being pressured.
<!--Of two poorly cited Financial Times, one has been salvaged, the other dropped and the associated wording trimmed Aug'22 -->
* ''In-housing'': In January 2020, Tim Orchard, the CEO of [[Imperial College Healthcare NHS Trust|Imperial College Healthcare Trust]], stated that the in-housing of over 1,000 [[Sodexo]] cleaners, caterers and porters across five [[National Health Service|NHS]] hospitals in London "will create additional cost pressures next year but we are confident that there are also benefits to unlock, arising from better team working, more co-ordinated planning and improved quality."<ref>{{Cite news |work=[[Financial Times]]
 |url=https://www.ft.com/content/900f66ac-3acc-11ea-b232-000f4477fbca |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/900f66ac-3acc-11ea-b232-000f4477fbca |archive-date=December 10, 2022 |url-access=subscription
 |title=UK government set to hasten immigration curbs on low-skilled
 |date=January 19, 2020 |author1=Bethan Staton |author2=Laura Hughes |author3=Daniel Thomas}}</ref>
<!--vs. generic need-to-locate: |url=https://www.ft.com/content/d2cabb4a-4373-11ea-a43a-c4b328d9061c  |date=30 January 2020 |last1=Staton |first1=Bethan -->
* ''U.S. base'': On June 26, 2009, [[Jeff Immelt]], the CEO of [[General Electric]], called for the U.S. to increase its manufacturing base employment to 20% of the workforce, commenting that the U.S. has outsourced too much and can no longer rely on [[consumer spending]] to drive demand.<ref name="Immelt">{{cite news |last1=Bailey |first1=David |last2=Kim |first2=Soyoung |title=GE's Immelt says U.S. economy needs industrial renewal |url=https://www.reuters.com/article/us-ge-immelt/ges-immelt-says-u-s-economy-needs-industrial-renewal-idUSTRE55P4ZT20090626 |work=Reuters |date=26 June 2009 }}</ref>

===Standpoint of government===
Western governments may attempt to compensate workers affected by outsourcing through various forms of legislation. In Europe, the [[Acquired Rights Directive]] attempts to address the issue. The directive is implemented differently in different nations. In the U.S., the [[Trade Adjustment Assistance]] Act is meant to provide compensation for workers directly affected by international trade agreements. Whether or not these policies provide the security and fair compensation they promise is debatable.

====Government response====
In response to the recession, U.S. president [[Barack Obama]] launched the [[SelectUSA]] program in 2011. In January 2012, Obama issued a Call to Action to Invest in America at the White House "Insourcing American Jobs" Forum.<ref name="whitehouse1">{{Cite web
 |url=https://obamawhitehouse.archives.gov/the-press-office/2012/01/11/president-obama-issues-call-action-invest-america-white-house-insourcing
 |title=President Obama Issues Call to Action to Invest in America at White House "Insourcing American Jobs" Forum
 |access-date=January 11, 2012 |via=[[NARA|National Archives]] |work=[[whitehouse.gov]]
 |author=Office of the Press Secretary
 |date=January 11, 2012}}</ref> Obama met with representatives of [[Otis Elevator]], [[Apple Inc.|Apple]], DuPont, [[Master Lock]], and others which had recently brought jobs back or made significant investments in the U.S.

====Legislative authorisation====
Governments may legislate to authorise the outsourcing of specific functions or the work of specific government agencies, for example in the United Kingdom, the [[Social Security Administration Act 1992]] (as amended) authorises the contracting-out of work-focussed interviews and documentary work,<ref>UK Legislation, [https://www.legislation.gov.uk/ukpga/2009/24/section/2/enacted Welfare Reform Act 2009, section 2], passed 12 November 2009, accessed 16 June 2023</ref> and the Contracting Out of Functions (Tribunal Staff) Order 2009 authorises the contracting-out of [[Tribunals in the United Kingdom|tribunals]]' administrative work.<ref>UK Legislation, [https://www.legislation.gov.uk/uksi/2001/3539/contents/made The Contracting Out of Functions (Tribunal Staff) Order 2001], made 31 October 2001, accessed 16 June 2023</ref>

====Policy-making strategy====
A main feature of outsourcing influencing policy-making is the unpredictability it generates, including its defense/military ramifications,<ref>{{cite news
   |newspaper=[[The New York Times]]
   |url=https://www.nytimes.com/2011/01/27/opinion/27falkenrath.html
   |title=From Bullets to Megabytes
   |author=Richard A. Falkenrath |date=January 26, 2011}}</ref> regarding the future of any particular sector or skill-group. The uncertainty of future conditions influences governance approaches to different aspects of long-term policies.

In particular, distinction is needed between
* ''cyclical unemployment'' – for which ''pump it up'' solutions have worked in the past, and
* ''[[structural unemployment]]'' – when "businesses and industries that employed them no longer exist, and their skills no longer have the value they once did."<ref name=NYT.ecoBart>{{cite news
  |url=https://economix.blogs.nytimes.com/2013/01/29/outsourcing-insourcing-and-automation
  |title=Outsourcing, Insourcing and Automation
  |author1=Floyd Norris  |author2=chief financial correspondent  |newspaper=[[The New York Times]]
  |date=January 29, 2013}}</ref>

=====Competitiveness=====
A governance that attempts adapting to the changing environment will facilitate growth and a stable transition to new economic structures<ref name="Baldwin.2006">{{cite book |last1=Baldwin |first1=Richard |title=Globalisation: the great unbundling(s) |date=2006 |publisher=Economic council of Finland |via=Geneva Graduate Institute |url=https://repository.graduateinstitute.ch/record/15561/ }}</ref> until the economic structures become detrimental to the social, political and cultural structures.

Automation increases output and allows for reduced cost per item. When these changes are not well synchronized, unemployment or underemployment is a likely result. When transportation costs remain unchanged, the negative effect may be permanent;<ref name=NYT.ecoBart/> jobs in protected sectors may no longer exist.<ref name="Stiglitz, J. And Charlton 2005">Stiglitz, J. and Charlton, A., (2005), "Trade can be Good for Development", Ch. 2 in Fair Trade for All, Oxford University Press, Oxford, NY.</ref>

Studies suggest that the effect of U.S. outsourcing on Mexico is that for every 10% increase in U.S. wages, north Mexico cities along the [[Mexico–United States border|border]] experienced wage rises of 2.5%, about 0.69% higher than in inner cities.<ref>{{cite report |last1=Hanson |first1=Gordon |title=What Has Happened to Wages in Mexico since NAFTA? |website=National Bureau of Economic Research |date=March 2003 |doi=10.3386/w9563 |ssrn=387620 |s2cid=51514113 |doi-access=free }}</ref>

By contrast, higher rates of saving and investment in Asian countries, along with rising levels of education, studies suggest, fueled the 'Asian miracle' rather than improvements in productivity and industrial efficiency. There was also an increase in patenting and research and development expenditures.<ref>Krugman, P., Obtsfeld, M. And Melitz, M., (2012) "East Asia: Success and Crisis", in International Economics: Theory and Policy, Addison-Wesley.{{page needed|date=November 2022}}</ref>

=====Industrial policy=====
Outsourcing results from an internationalization of labor markets as more tasks become tradable. According to leading economist [[Greg Mankiw]], the labour market functions under the same forces as the market of goods, with the underlying implication that the greater the number of tasks available to being moved, the better for efficiency under the gains from trade. With technological progress, more tasks can be offshored at different stages of the overall corporate process.<ref name=Mankiw>{{cite journal |last1=Mankiw |first1=N. Gregory |last2=Swagel |first2=Phillip |title=The Politics and Economics of Offshore Outsourcing |journal=AEI Working Paper Series |date=July 2006 |doi=10.3386/w12398 |ssrn=912528 |s2cid=154885103 |url=http://nrs.harvard.edu/urn-3:HUL.InstRepos:2770517 |doi-access=free }}</ref>

The tradeoffs are not always balanced, and a 2004 viewer of the situation said "the total number of jobs realized in the United States from insourcing is far less than those lost through outsourcing."<ref name="NYT.in">{{cite news |title=Outsourcing's Other Side |url=https://www.nytimes.com/2004/04/25/business/l-outsourcing-s-other-side-347981.html |work=The New York Times |date=25 April 2004 }}</ref>

=====Environmental policy=====
Import competition has caused a ''de facto'' 'race-to-the-bottom' where countries lower environmental regulations to secure a competitive edge for their industries relative to other countries.

As Mexico competes with China over Canadian and American markets, its national [[Commission for Environmental Cooperation]] has not been active in enacting or enforcing regulations to prevent environmental damage from increasingly industrialized Export Processing Zones. Similarly, since the signing of the [[North American Free Trade Agreement]], heavy industries have increasingly moved to the U.S., which has a comparative advantage due to its abundant presence of capital and well-developed technology. A further example of environmental de-regulation with the objective of protecting trade incentives have been the numerous exemptions to carbon taxes in European countries during the 1990s.

Although outsourcing can influence environmental de-regulatory trends, the added cost of preventing pollution does not majorly determine trade flows or industrialization.<ref>Copeland, B. (2007), "Trade and the Environment: What do we do now", Ch. 39 in Handbook on International Trade Policy, ed. Kerr, W and Gaosford, J., Edward Elgar Publishing</ref>

===Success stories===
Companies such as ET Water Systems (now a [[Jain Irrigation Systems]] company),<ref name=OutsoETwater.NYT2012>{{cite news |last1=Markoff |first1=John |title=Google Tries Something Retro: Made in the U.S.A. |url=https://www.nytimes.com/2012/06/28/technology/google-and-others-give-manufacturing-in-the-us-a-try.html |work=The New York Times |date=27 June 2012 }}</ref> [[GE Appliances]] and [[Caterpillar Inc.|Caterpillar]] found that with the increase of labor costs in Japan and China, the cost of shipping and custom fees, it cost only about 10% more to manufacture in America.<ref name=Econ1/> Advances in technology and automation such as [[3D printing]] technologies<ref>{{cite journal |last1=Durach |first1=Christian F. |last2=Kurpjuweit |first2=Stefan |last3=Wagner |first3=Stephan M. |title=The impact of additive manufacturing on supply chains |journal=International Journal of Physical Distribution & Logistics Management |date=6 November 2017 |volume=47 |issue=10 |pages=954–971 |doi=10.1108/ijpdlm-11-2016-0332 }}</ref> have made bringing manufacturing back to the U.S., both cost effective and possible. [[Adidas]], for example, plans producing highly customized shoes with 3D printers in the U.S.<ref>{{Cite news
   |url=https://www.reuters.com/article/us-adidas-manufacturing/adidas-to-mass-produce-3d-printed-shoe-with-silicon-valley-start-up-idUSKBN1790F6
   |title=Adidas to mass-produce 3D-printed shoe with Silicon Valley start-up
   |date=April 7, 2017  |work=[[Reuters]] |access-date=2018-01-02}}</ref>

===Globalization and socio-economic implications===
{{Main|Globalization}}

====Industrialization====
Outsourcing has contributed to further levelling of global inequalities as it has led to general trends of industrialization in the Global South and deindustrialization in the Global North.

Not all manufacturing should return to the U.S.<ref name="bsc1">{{Cite web
  |url=https://www.reshoringinstitute.org/reshoring-blog/china-its-in-the-cards
  |title=China – It's in the Cards
  |work=Reshoring Institute Blog
  |access-date=March 17, 2014  |author=Daisie Hobson|date=17 March 2014
 }}</ref> The rise of the middle class in China, India and other countries has created markets for the products made in those countries. Just as the U.S. has a [[Made in USA]] program, other countries support products being made domestically. Localization, the process of manufacturing products for the local market, is an approach to keeping some manufacturing offshore and bringing some of it back. Besides the cost savings of manufacturing closer to the market, the lead time for adapting to changes in the market is faster.

The rise in industrial efficiency which characterized development in developed countries has occurred as a result of labor-saving technological improvements. Although these improvements do not directly reduce employment levels but rather increase output per unit of work, they can indirectly diminish the amount of labor required for fixed levels of output.<ref>Easterly, W. (2002), "Solow's Surprise: Investment is not the Key to Growth", Ch. 3 in The Elusive Quest for Growth, The MIT Press, Cambridge.</ref>

====Growth and income====
It has been suggested that "workers require more education and different skills, working with software rather than drill presses" rather than rely on limited growth labor requirements for non-tradable services.<ref name=NYT.ecoBart/>

==By location==

===United States===
{{See also|Disney litigation}}
Protection of some data involved in outsourcing, such as about patients ([[Health Insurance Portability and Accountability Act|HIPAA]]) is one of the few federal protections.

"Outsourcing" is a continuing political issue in the U.S., having been conflated with offshoring during the [[2004 United States presidential election|2004 U.S. presidential election]]. The political debate centered on outsourcing's consequences for the domestic U.S. workforce. [[United States Democratic Party|Democratic]] U.S. presidential candidate [[John Kerry]] called U.S. firms that outsource jobs abroad or that incorporate overseas in [[tax haven]]s to avoid paying their "fair share" of [[Taxation in the United States|U.S. taxes]] "[[Benedict Arnold]] corporations".

A [[Zogby International]] August 2004 poll found that 71% of American voters believed "outsourcing jobs overseas" hurt the economy while another 62% believed that the U.S. government should impose some legislative action against these companies, possibly in the form of increased taxes.<ref>{{cite web |title=Americans and the World Around Them: A Nationwide Poll |date=September 2004 |publisher=Foreign Policy Association, Zogby International |url=https://www.fpa.org/usr_doc/Zogby_AmericansandtheWorld2004.pdf }}</ref><ref>{{cite news |last1=Bonasia |first1=J. |date=3 December 2010 |title=Offshoring, for good or ill, comes of age putting India on the map competitive world markets demand outsourcing, but it does drain domestic jobs |newspaper=Investor's Business Daily |page=A04 }}</ref> President Obama promoted the [[Bring Jobs Home Act]] to help reshore jobs by using tax cuts and credits for moving operations back to the U.S.<ref>{{cite web |title=Brig nJobs Home Act (2012 - S. 3364) |url=https://www.govtrack.us/congress/bills/112/s3364 |website=[[GovTrack]]
|access-date=November 11, 2021 |language=en}}</ref><ref>Congressional Documents and Publications. (2012, May 16). Brown outlines "Bring Jobs Home Act" aim at encouraging business to bring hobs back to the U.S. 2012 Federal Information and News Dispatch, Inc.</ref> The same bill was reintroduced in the [[113th U.S. Congress]].<ref name="PoliticoBorrowedTime">{{cite news
   |author=Burgess Everett
   |title=Borrowed time: Tale of a Walsh bill
   |url=http://www.politico.com/story/2014/07/john-walsh-bring-jobs-home-act-bill-109307.html
   |access-date=July 25, 2014   |publisher=Politico   |date=July 23, 2014
   |archive-url=https://web.archive.org/web/20140724223856/http://www.politico.com/story/2014/07/john-walsh-bring-jobs-home-act-bill-109307.html
   |archive-date=July 24, 2014}}</ref><ref name="2569sum">{{cite web   |publisher=United States Congress
   |title=S. 2569 – Summary |url=https://beta.congress.gov/bill/113th-congress/senate-bill/2569
   |access-date=July 25, 2014
   |archive-url=https://web.archive.org/web/20140728161506/https://beta.congress.gov/bill/113th-congress/senate-bill/2569
   |archive-date=July 28, 2014}}</ref>

While labor advocates claim [[union busting]] as one possible cause of outsourcing,<ref>{{cite web  |publisher=[[American Rights at Work]]
|url=http://act.americanrightsatwork.org/p/dia/action/public/?action_KEY=576
|title=Tell Xerox to Stop Unionbusting and Shipping Jobs Overseas
|access-date=2011-03-09
|archive-url=https://web.archive.org/web/20110714040839/http://act.americanrightsatwork.org/p/dia/action/public/?action_KEY=576
|archive-date=2011-07-14}}</ref> another claim is high corporate income tax rate in the U.S. relative to other OECD nations,<ref>{{cite web
   |url=http://www.taxfoundation.org/news/show/1466.html
   |title=U.S. Lagging Behind OECD Corporate Tax Trends  |publisher=The Tax Foundation
   |date=May 5, 2006   |access-date=March 15, 2010
   |archive-url=https://web.archive.org/web/20090706032603/http://www.taxfoundation.org/news/show/1466.html
   |archive-date=2009-07-06}}</ref><ref>{{cite web
|author=John Tamny
|url=http://article.nationalreview.com/?q=ODZjNjI4ZTNjZmNiOGMxYjAwOTg1ZGI0NmFiOWFjZjI=
|title=John Tamny on Hillary Clinton Economics on NRO Financial
|publisher=Article.nationalreview.com   |access-date=March 15, 2010
|archive-url=https://web.archive.org/web/20090109171714/http://article.nationalreview.com/?q=ODZjNjI4ZTNjZmNiOGMxYjAwOTg1ZGI0NmFiOWFjZjI=
|archive-date=2009-01-09}}</ref>{{update inline|date=June 2018}} and the practice of taxing revenues earned outside of U.S. jurisdiction, a very uncommon practice. Some counterclaim that the actual taxes paid by U.S. corporations may be considerably lower than "official" rates due to the use of tax loopholes, tax havens, and "gaming the system".<ref>{{cite web
   |url=http://www.smartmoney.com/investing/economy/high-corporate-tax-rate-is-misleading-22463
   |title=High Corporate Tax Rate Is Misleading
   |publisher=Smartmoney.com   |access-date=2010-03-15
   |archive-url=https://web.archive.org/web/20100210200332/http://www.smartmoney.com/investing/economy/high-corporate-tax-rate-is-misleading-22463
   |archive-date=2010-02-10}}</ref><ref>squeezing $100 million of NJ tax concessions by 12 companies threatening to leave that state; one got $26 million. {{cite news |newspaper=[[New York Times]]
          |url=https://www.nytimes.com/2019/09/24/nyregion/nj-tax-break.html
          |title=How One Address Led to a $100 Million Tax Credit Scheme
          |quote=economic incentive programs that in total have awarded $11 billion
          |author1=Nick Corasaniti   |author2=Matthew Haag  |date=September 24, 2019}}</ref>

[[Sarbanes-Oxley]] has also been cited as a factor.

===Europe===
Council Directive 77/187 of 14 February 1977 protects employees' rights in the event of transfers of undertakings, businesses or parts of businesses (as amended 29 June 1998, Directive 98/50/EC and 12 March 2001's Directive 2001/23). Rights acquired by employees with the former employer are to be safeguarded when they, together with the undertaking in which they are employed, are transferred to another employer, i.e., the contractor.

Case subsequent to the European Court of Justice's Christel Schmidt v. Spar- und Leihkasse der früheren Ämter Bordesholm, Kiel und Cronshagen, Case C-392/92 [1994] have disputed whether a particular contracting-out exercise constituted a transfer of an undertaking (see, for example, [[Süzen v Zehnacker Gebaeudereingung GmbH|Ayse Süzen v. Zehnacker Gebäudereinigung GmbH Krankenhausservice]], Case C-13/95 [1997]). In principle, employees may benefit from the protection offered by the directive.

===Asia===
Countries that have been the focus of outsourcing include India and the Philippines for American and European companies, and China and Vietnam for Japanese companies.

The Asian IT service market is still in its infancy, but in 2008 industry think tank Nasscom-McKinsey predicted a $17 billion IT service industry in India alone.<ref>Global Sourcing of Business and IT Services, https://books.google.com/books?id=_IHStt6MRukC</ref>

A China-based company, [[Lenovo]], outsourced/reshored manufacturing of some time-critical customized [[Personal computer|PC]]s to the U.S. since "If it made them in China they would spend six weeks on a ship."<ref name="Econ1" />

Article 44 of Japan's Employment Security Act implicitly bans the domestic/foreign workers supplied by unauthorized companies regardless of their operating locations. The law will apply if at least one party of suppliers, clients, labors reside in Japan, and if the labors are the integral part of the chain of command by the client company, or the supplier.
* No person shall carry out a labor supply business or have workers supplied by a person who carries out a labor supply business work under his/her own directions or orders, except in cases provided for in the following Article.
** A person who falls under any of the following items shall be punished by imprisonment with work for not more than one year or a fine of not more than one million yen. (Article 64)
* Unless permitted by act, no person shall obtain profit by intervening, as a business, in the employment of another.<ref>{{cite web|title=日本法令外国語訳データベースシステム - [法令本文表示] - 労働基準法|url=http://www.japaneselawtranslation.go.jp/law/detail/?yo=%E5%8A%B4%E5%83%8D%E5%9F%BA%E6%BA%96%E6%B3%95&ft=2&re=01&ky=|access-date=April 10, 2019|website=www.japaneselawtranslation.go.jp|archive-date=December 24, 2019|archive-url=https://web.archive.org/web/20191224235501/http://www.japaneselawtranslation.go.jp/law/detail/?yo=%E5%8A%B4%E5%83%8D%E5%9F%BA%E6%BA%96%E6%B3%95&ft=2&re=01&ky=|url-status=dead}}</ref>

Victims can lodge a criminal complaint against the CEO of the suppliers and clients. The CEO risks arrest, and the Japanese company may face a private settlement with financial package in the range between 20 and 100 million JPY ($200,000 – US$1 million).

== Nearshoring <span class="anchor" id="nearshoring"></span>==
According to the 1913 ''New York Times'' article "Near Source of Supplies the Best Policy",<ref name=Near.NYT_1913>{{cite news |title=HOW TO HANDLE MATERIAL.; Founding Industries Near Source of Supplies the Best Policy. |url=https://www.nytimes.com/1913/11/30/archives/how-to-handle-material-founding-industries-near-source-of-supplies.html |work=The New York Times |date=30 November 1913 }}</ref> the main focus was then on "cost of production."
Although transportation cost was addressed, they did not choose among:
* transporting supplies to place of production<ref name="TransP.NYT_1939">{{cite news |title=PLANTS SEEN NEAR SOURCE OF SUPPLY; Shift of the Chemical Industry to Sites With Basic Minerals Is Predicted TRANSPORTATION A FACTOR Potential Factory Migration Is Cited in Report to American Chemical Society |url=https://www.nytimes.com/1939/08/06/archives/plants-seen-near-source-of-supply-shift-of-the-chemical-industry-to.html |work=The New York Times |date=6 August 1939 |archive-url=https://web.archive.org/web/20180402030215/https://www.nytimes.com/1939/08/06/archives/plants-seen-near-source-of-supply-shift-of-the-chemical-industry-to.html |archive-date=2 April 2018 }}</ref>
* transporting finished goods to place(s) of sale
* cost and availability of labor

'''Nearshoring''' or '''nearsourcing''' is having [[business process]]es, especially [[information technology]] processes such as application maintenance and development or testing, in a nearby country, often sharing a border with the target country. Commonalities usually include: geographic, temporal (time zone), cultural, social, linguistic, economic, political, or historical linkages.<ref name="cacm">{{cite journal |last1=Carmel |first1=Erran |last2=Abbott |first2=Pamela |title=Why 'nearshore' means that distance matters |journal=Communications of the ACM |date=October 2007 |volume=50 |issue=10 |pages=40–46 |doi=10.1145/1290958.1290959 |s2cid=14890487 }}</ref>
<!---Colonization is interesting to study, but this is not the place for what was added to NEARsourcing, which these words don't fit -->
<!---  However, some of these commonalities — such as cultural, social, and linguistic linkages — can also be achieved through offshore outsourcing because, historically, several nations have attempted at expanding their territory and control over other, more distant nations through [[colonization]]. -->
The term ''nearshoring'' is a derivative of the business term offshoring. The hybrid term "nearshore outsourcing" is sometimes used as an alternative, since nearshore workers are not employees of the company for which the work is performed. It can also be a reversal, by contracting a development partner in a different country but in close proximity (same or nearby time zone), facilitating communication and allowing frequent visits. This is a business strategy to place some or all of its operations close to where its products are sold. Typically, this is contrasted with the trend to outsource low-wage manufacturing operations to developing nations (offshoring), and reflects a reversal of that trend. Sometime, the work is done by an outside contracted company rather than internally (insourcing), but unlike offshore outsourcing, the work is done in fairly close proximity to either the company headquarters or its target market.

In Europe, nearshore outsourcing relationships are between clients in larger European economies and various providers in smaller European nations. The attraction is lower-cost skilled labor forces, and a less stringent regulatory environment, but crucially they allow for more day to day physical oversight. These countries also have strong cultural ties to the major economic centers in Europe as they are part of EU. For example, as of 2020 Portugal is considered to be the most trending outsourcing destination<ref>{{Cite web   |website=EY.com ([[Ernst & Young]])   |date=2019-06-01   |title=EY Attractiveness Survey Portugal   |url=https://www.ey.com/Publication/vwLUAssets/ey-attractiveness-survey-portugal-june-2019/$FILE/ey-attractiveness-survey-portugal-june-2019.pdf   }}{{Dead link|date=November 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> as big companies like Mercedes, Google,<ref>{{Cite news
|date=April 17, 2018 |title=After Google, Portugal's tech scene gets boost from VW
|language=en |work=[[Reuters]]
|url=https://www.reuters.com/article/us-volkswagen-portugal-software-idUSKBN1HO2MF
|access-date=August 5, 2020}}</ref> Jaguar, Sky News, Natixis and BNP Paribas opening development centers in Lisbon and Porto, where labor costs are lower, talent comes from excellent Universities, there's availability of skills and the time zone is GMT (the same as London).<ref>{{Cite web
|last=Nearshore |first=velv |date=July 24, 2020 |title=Nearshoring in Portugal
|url=https://medium.com/@velv_nearshore/nearshoring-in-portugal-4d04021bc0de
|access-date=2020-08-05 |website=Medium |language=en}}</ref>

In the US, American clients nearshore to Canada and Mexico, as well as to many nations in Central and South America.

===Reasons to nearshore===
====Culture====
Cultural alignment with the business is often more readily achieved through near-sourcing due to there being similarities between the cultures in which the business is located and in which services are sub-contracted, including for example proficiency with the language used in that culture.<ref name=GrailComm.cio/>

====Communication====
Constraints imposed by time zones can complicate communication; near-sourcing or nearshoring offers a solution. English language skills are the cornerstone of Nearshore and IT services. Collaboration by universities, industry, and government has slowly produced improvements. Proximity also facilitates in-person interaction regularly and/or when required.<ref name=NearZone.FT>{{cite news
     |newspaper=[[Financial Times]]
     |url=https://www.ft.com/content/acbb6f8c-69e6-11db-952e-0000779e2340 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/acbb6f8c-69e6-11db-952e-0000779e2340 |archive-date=December 10, 2022 |url-access=subscription
     |title=Indian IT moves to 'near-sourcing'
     |date=November 1, 2006}}</ref><ref name=CommTimeZone>{{cite web
|url=https://smallbusiness.chron.com/communication-problems-outsourcing-80651.html
|title=Communication Problems When Outsourcing
|author=Elizabeth Mott|publisher=Hearst Newspapers}}</ref><ref>{{Cite web|url=https://www.pmi.org/learning/library/effective-communication-successful-outsourcing-7585|title=Effective communication for successful outsourcing}}</ref>

====Other advantages====
Software development nearshoring is mainly due to flexibility when it comes to upscale or downscale<ref>{{Cite news
|date=2020-07-21 |title=Nearshore Software Development
|url=https://www.velv.pt/updates/2020/7/2/nearshore-software-development-teams}}</ref> teams or availability of low cost
skilled developers. The nearshoring of call centers, shared services centers, and business process outsourcing (BPO) rose as offshore outsourcing was seen to be relatively less valuable. More recently, companies have explored nearshoring as a risk mitigation strategy for operational and supply chain weaknesses uncovered during the COVID-19 global pandemic crisis, when offshore BPOs experienced sudden closures and disruptive quarantine restrictions which hampered their ability to conduct day-to-day business operations.<ref>{{Cite web |title=COVID-19's Impact on Call Centers |url=https://magazine.wharton.upenn.edu/digital/covid-19s-impact-on-call-centers/ |access-date=2022-05-19 |website=Wharton Magazine |language=en-US}}</ref><ref>{{Cite web |title=2020 global outsourcing survey |url=https://www2.deloitte.com/us/en/pages/operations/articles/global-outsourcing-survey.html |access-date=2022-05-20 |website=Deloitte United States |language=en}}</ref>

The complexities of offshoring stem from language and cultural differences, travel distances, workday/time zone mismatches, and greater effort for needed for establishing trust and long-term relationships. Many nearshore providers attempted to circumvent communication and project management barriers by developing new ways to align organizations. As a result, concepts such as remote insourcing were created to give clients more control in managing their own projects. Nearshoring still has not overcome all barriers, but proximity allows more flexibility to align organizations.<ref name="sam">{{Cite web |author=Sam Cinquegrani
|title=Nearshoring: A Smart Alternative to Offshore
|url=http://www.ittoday.info/Articles/nearshoring.htm
|access-date=January 9, 2011 |work=IT Today |publisher=Auerbach Publications}}</ref>

==Visa requirements==
{{main|H-1B visa}}
The U.S. has a special [[Travel visa|visa]], the H-1B,<ref>H1B</ref> which enables American companies to temporarily (up to three years, or by extension, six) hire [[foreign worker]]s to supplement their employees or replace those holding existing positions. In hearings on this matter, a U.S. senator called these "their outsourcing visa."<ref>{{cite web |author=Senator Richard Durbin |title=Floor Statement: H-1B Visa Reform |url=http://durbin.senate.gov/showRelease.cfm?releaseId=280890 |archive-url=https://web.archive.org/web/20110106210436/http://durbin.senate.gov/showRelease.cfm?releaseId=280890 |archive-date=2011-01-06}}</ref>

==Examples==
* In 2003 [[Procter & Gamble]] outsourced their facilities' management support, but it did not involve offshoring.<ref>{{Cite news
   |url=https://www.americanprogress.org/issues/economy/news/2012/07/09/11898/5-facts-about-overseas-outsourcing/
   |title=5 Facts About Overseas Outsourcing
   |date=2012-07-09
   |work=Center for American Progress  |access-date=2018-05-31}}</ref>
* [[Dell]] offshored to India in 2001 but reversed this since "customers were not happy with the prior arrangement ...".<ref name=DELL.back/>

==Print and mail outsourcing==
'''Print and mail outsourcing''' is the outsourcing of document printing and distribution.

The [[Print Services & Distribution Association]] was formed in 1946, and its members provide services that today might involve the word outsource. Similarly, members of the [[Direct Mail Marketing Association]] (established 1917) were the "outsourcers" for advertising agencies and others doing mailings.

The term "outsourcing" became very common in the print and mail business during the 1990s, and later expanded to be very broad and inclusive of most any process by 2000. Today, there are web based print to mail solutions for small to mid-size companies which allow the user to send one to thousands of documents into the mail stream, directly from a desktop or web interface.<ref>examples: Neopost.com's IS-330 Mailing System (desktop), Click2mail.com, USPS Web Tool Kit Application Program Interface ... web-based  {{cite web
   |title=Business Shipping Services & Direct Mail Options
   |url=https://www.usps.com/business}}</ref>

==Marketing outsourcing==
The term '''outsource marketing''' has been used in Britain to mean the outsourcing of the marketing function.<ref>{{cite news
   |url=https://www.theguardian.com/media/2010/may/17/guardian-news-and-media
   |title=Guardian News & Media to outsource marketing design services
   |author=Jason Deans  |newspaper=The Guardian
 |date=May 17, 2010  |access-date=April 10, 2019
   |via=www.theguardian.com}}</ref> The motivation for this has been:
* [[cost reduction]]<ref>[http://hbswk.hbs.edu/item/4883.html Should You Outsource Your Marketing?]. ''Harvard Business School. 2005-007-04.''</ref><ref>{{Cite web
|url=https://rsmconnect.com/
|title=RSM Marketing {{!}} Outsourced Marketing Department
 |website=RSM Connect|language=en-US|access-date=2018-06-11}}</ref>
* specialized expertise<ref>{{Cite web   |website=forbes.com
|url=https://www.forbes.com/sites/ilyapozin/2014/04/23/leave-it-to-the-experts-should-you-outsource-your-marketing/#56f9bc8d2393
|title=Leave It To The Experts: Should You Outsource Your Marketing?
|access-date=2018-06-11}}</ref>
* speed of execution
* short term staff augmentation<ref>{{Cite web
|url=http://think-moa.com.au/employee-augmentation-marketing-outsourcing
|title=Employee Augmentation – Marketing Outsourcing – THiNK – Marketing Operations Advisory
|website=think-moa.com.au
|access-date=2017-12-05
|archive-date=December 6, 2017
|archive-url=https://web.archive.org/web/20171206011310/http://think-moa.com.au/employee-augmentation-marketing-outsourcing/
|url-status=dead
}}</ref>

While much of this work is the "bread and butter" of specialized departments within advertising agencies, sometimes specialist are used, such as when ''[[The Guardian]]'' outsourced most of its marketing design in May 2010.<ref>{{cite news |url=https://www.theguardian.com/media/2010/may/17/guardian-news-and-media |location=London |work=The Guardian| author=Jason Deans| title=Guardian News & Media to outsource marketing design services| date=May 17, 2010}}</ref>

==Business process outsourcing==
'''Business process outsourcing''' ('''BPO''') is a subset of outsourcing that involves the [[contract]]ing of the operations and responsibilities of a specific [[business process]] to a third-party [[service provider]]. Originally, this was associated with [[manufacturing]] firms, such as [[Coca-Cola]] that outsourced large segments of its [[supply chain]].<ref name="Financial services business process">{{cite journal |last1=Tas |first1=Jeroen |last2=Sunder |first2=Shyam |title=Financial services business process outsourcing |journal=Communications of the ACM |date=May 2004 |volume=47 |issue=5 |pages=50–52 |doi=10.1145/986213.986238 |s2cid=28372736 }}</ref>

BPO is typically categorized into [[back office]] and [[front office]] outsourcing.<ref>{{cite web  |work=[[Forbes]] |title=Getting A Piece Of Business Process Outsourcing |url=https://www.forbes.com/sites/greatspeculations/2015/06/22/getting-a-piece-of-business-process-outsourcing/#12b9f2c56f90}}</ref> BPO can help your business remain competitive and efficient by leveraging the expertise of other companies that are more specialized in certain functions.<ref>{{Cite web |date=2022-09-24 |title=4 Advantages of Business Process Outsourcing (BPO) {{!}} Euromos Global |url=https://euromosglobal.com/4-advantages-of-business-process-outsourcing-bpo/ |access-date=2022-10-19 |language=en-GB}}</ref>

BPO can be offshore outsourcing, near-shore outsourcing to a nearby country, or onshore outsourcing to the same country. [[Information technology]]-enabled service (ITES-BPO),<ref name="NellisParker2006">{{cite book  |author1=J. G. Nellis  |author2=David Parker
  |title=Principles of Business Economics
  |url=https://books.google.com/books?id=a8RFUZHfz2gC&pg=PA213  |year=2006 |publisher=Financial Times Prentice Hall   |isbn=978-0-273-69306-2  |page=213}}</ref> [[knowledge process outsourcing]] (KPO) and [[legal process outsourcing]] (LPO) are some of the sub-segments of BPO.

Although BPO began as a cost-reducer, changes (specifically the move to more service-based rather than product-based contracts), companies now choose to outsource their back-office increasingly for time flexibility and direct quality control.<ref>Sagoo, Anoop. [https://archive.today/20130420001328/http://www.cio.co.uk/article/3378334/how-it-is-reinvigorating-business-process-outsourcing/ "How IT is reinvigorating business process outsourcing"] CIO. 6 Sep 2012. Retrieved 25 March 2013.</ref> Business process outsourcing enhances the flexibility of an organization in different ways:

BPO vendor charges are project-based or fee-for-service, using business models such as remote in-sourcing or similar software development and outsourcing models.<ref>BPM Watch. "In-Sourcing Remotely: A Closer Look at an Emerging Outsourcing Trend" {{cite web|url=http://www.bpmwatch.com/columns/in-sourcing-a-closer-look-at-an-emerging-outsourcing-trend|title=In-sourcing…Remotely: A Closer Look at an Emerging Outsourcing Trend| archive-url=https://web.archive.org/web/20130303212216/http://www.bpmwatch.com/columns/in-sourcing-a-closer-look-at-an-emerging-outsourcing-trend
|archive-date=2013-03-03}}</ref><ref>{{Cite web
|url=http://www.cio-asia.com/mgmt/outsourcing/boundaries-between-it-outsourcing-and-bpo-are-becoming-blurred-ovum/
|title=Boundaries between IT outsourcing and BPO are becoming blurred: Ovum
|archive-url=https://web.archive.org/web/20141025113103/http://www.cio-asia.com/mgmt/outsourcing/boundaries-between-it-outsourcing-and-bpo-are-becoming-blurred-ovum |archive-date=2014-10-25
}}</ref> This can help a company to become more flexible by transforming fixed into [[variable costs]].<ref>{{cite journal |last1=Willcocks |first1=Leslie |last2=Hindle |first2=John |last3=Feeny |first3=David |last4=Lacity |first4=Mary |title=It and Business Process Outsourcing: The Knowledge Potential |journal=Information Systems Management |date=June 2004 |volume=21 |issue=3 |pages=7–15 |doi=10.1201/1078/44432.21.3.20040601/82471.2 |s2cid=26304610 }}</ref> A variable cost structure helps a company responding to changes in required capacity and does not require a company to invest in assets, thereby making the company more flexible.<ref>{{cite journal |last1=Gilley |first1=K. Matthew |last2=Rasheed |first2=Abdul |title=Making More by Doing Less: An Analysis of Outsourcing and its Effects on Firm Performance |journal=Journal of Management |date=August 2000 |volume=26 |issue=4 |pages=763–790 |doi=10.1177/014920630002600408 |s2cid=146228260 }}</ref>

BPO also permits focusing on a company's [[core competencies]].<ref>{{cite journal |last1=Kakabadse |first1=Andrew |last2=Kakabadse |first2=Nada |title=Trends in Outsourcing |journal=European Management Journal |date=April 2002 |volume=20 |issue=2 |pages=189–198 |doi=10.1016/S0263-2373(02)00029-4 }}</ref>

Supply chain management with effective use of supply chain partners and business process outsourcing can increase the speed of several business processes.<ref name="Financial services business process"/>

===BPO caveats===
Even various contractual compensation strategies may leave the company as having a new "single point of failure" (where even an after the fact payment is not enough to offset "complete failure of the customer's business").<ref>{{cite web   | website=[[Westlaw]].com   | url=https://content.next.westlaw.com/Document/I8417d3ea1cb111e38578f7ccc38dcbee/View/FullText.html?contextData=(sc.Default)&transitionType=Default   | title=Risk transfer in outsourcing contracts   | author1=Dan Burge  |author2=Catherine Bingham  |author3=Amanda Lewis   | date=February 1, 2012}}</ref> Unclear contractual issues are not the only risks; there's also changing requirements and unforeseen charges, failure to meet service levels, and a dependence on the BPO which reduces flexibility. The latter is called [[Vendor lock-in|lock-in]]; flexibility may be lost due to penalty clauses and other contract terms.<ref>{{cite journal |last1=Michell |first1=Vaughan |last2=Fitzgerald |first2=Guy |title=The IT outsourcing market-place: vendors and their selection |journal=Journal of Information Technology |date=1 September 1997 |volume=12 |issue=3 |pages=223–237 |doi=10.1080/026839697345080 }}</ref> Also, the selection criteria may seem vague and undifferentiated.<ref>Adsit, D. (2009)  Will a Toyota Emerge from the Pack of Me-Too BPO's?, ''In Queue'' {{cite web| url=http://www.nationalcallcenters.org/pubs/In_Queue/vol3no21.html |title=Beautiful and Nice Free Gifts from the NACC |archive-url=https://archive.today/20110727112004/http://www.nationalcallcenters.org/pubs/In_Queue/vol3no21.html |archive-date=July 27, 2011}}</ref>

Security risks can arise regarding both from physical communication and from a privacy perspective. Employee attitude may change, and the company risks losing independence.<ref>{{cite journal |last1=Adeleye |first1=Bunmi Cynthia |last2=Annansingh |first2=Fenio |last3=Nunes |first3=Miguel Baptista |title=Risk management practices in IS outsourcing: an investigation into commercial banks in Nigeria |journal=International Journal of Information Management |date=April 2004 |volume=24 |issue=2 |pages=167–180 |doi=10.1016/j.ijinfomgt.2003.10.004 }}</ref><ref>{{cite journal |last1=Altinkemer |first1=K. |last2=Chaturvedi |first2=A. |last3=Gulati |first3=R. |title=Information systems outsourcing: Issues and evidence |journal=International Journal of Information Management |date=August 1994 |volume=14 |issue=4 |pages=252–268 |doi=10.1016/0268-4012(94)90003-5 }}</ref>

Risks and threats of outsourcing must therefore be managed, to achieve any benefits. In order to manage outsourcing in a structured way, maximizing positive outcome, minimizing risks and avoiding any threats, a [[business continuity management]] (BCM) model is set up. BCM consists of a set of steps, to successfully identify, manage and control the business processes that are, or can be outsourced.<ref>{{cite journal |last1=Gibb |first1=Forbes |last2=Buchanan |first2=Steven |title=A framework for business continuity management |journal=International Journal of Information Management |date=April 2006 |volume=26 |issue=2 |pages=128–141 |doi=10.1016/j.ijinfomgt.2005.11.008 }}</ref>

'''[[Analytic hierarchy process]]''' (AHP) is a framework of BPO focused on identifying potential outsourceable information systems.<ref>{{cite journal |last1=Yang |first1=Chyan |last2=Huang |first2=Jen-Bor |title=A decision model for IS outsourcing |journal=International Journal of Information Management |date=June 2000 |volume=20 |issue=3 |pages=225–239 |doi=10.1016/S0268-4012(00)00007-4 }}</ref> L. Willcocks, M. Lacity and G. Fitzgerald identify several contracting problems companies face, ranging from unclear contract formatting, to a lack of understanding of technical IT processes.<ref>{{cite journal |last1=Willcocks |first1=L. |last2=Lacity |first2=M. |last3=Fitzgerald |first3=G. |title=Information technology outsourcing in Europe and the USA: Assessment issues |journal=International Journal of Information Management |date=October 1995 |volume=15 |issue=5 |pages=333–351 |doi=10.1016/0268-4012(95)00035-6 }}</ref>

===Technological pressures===
Industry analysts have identified [[robotic process automation]] (RPA) software and in particular the enhanced self-guided RPAAI based on [[artificial intelligence]] as a potential threat to the industry<ref name="HfSThreat">{{Citation| title=Robotic Automation Emerges as a Threat to Traditional Low Cost Outsourcing| publisher=HfS Research| url=http://www.hfsresearch.com/Robotic-Automation-as-Threat-to-Traditional-Low-Cost-Outsourcing| archive-url=https://web.archive.org/web/20150921062911/http://www.hfsresearch.com/Robotic-Automation-as-Threat-to-Traditional-Low-Cost-Outsourcing| archive-date=2015-09-21}}</ref><ref name="GartnerPredicts2014">{{Citation  | title=Gartner Predicts 2014: Business and IT Services Are Facing the End of Outsourcing as We Know It   | publisher=Gartner   |url=https://www.gartner.com/doc/2656215/predicts--business-it-services}}</ref> and speculate as to the likely long-term impact.<ref>{{Citation  |publisher=Outsource Magazine   |title=Visions of the Future: The Next Decade in BPO   | url=http://outsourcemagazine.co.uk/visions-of-the-future-the-next-decade-in-bpo  |archive-url=https://web.archive.org/web/20150413032822/http://outsourcemagazine.co.uk/visions-of-the-future-the-next-decade-in-bpo   |archive-date=2015-04-13}}</ref> In the short term, however, there is likely to be little impact as existing contracts run their course: it is only reasonable to expect demand for cost efficiency and innovation to result in transformative changes at the point of contract renewals. With the average length of a BPO contract being 5 years or more<ref name="GartnerLength">{{Citation  |publisher=Gartner
|title=Market Trends: Outsourcing Contracts, Worldwide
|url=http://www.gartner.com/DisplayDocument?ref=g_search&id=490855|archive-url=https://web.archive.org/web/20060617211644/http://www.gartner.com/DisplayDocument?ref=g_search&id=490855|archive-date=June 17, 2006}}</ref> – and many contracts being longer – this hypothesis will take some time to play out.

On the other hand, an academic study by the [[London School of Economics]] was at pains to counter the so-called 'myth' that RPA will bring back many jobs from offshore.<ref name="LSEXchanging">{{Citation |publisher=London School of Economics| title=Robotic Process Automation at Xchanging| url=http://www.xchanging.com/system/files/dedicated-downloads/robotic-process-automation.pdf}}</ref> One possible argument behind such an assertion is that new technology provides new opportunities for increased quality, reliability, scalability and cost control, thus enabling BPO providers to increasingly compete on an outcomes-based model rather than competing on cost alone. With the core offering potentially changing from a "lift and shift" approach based on fixed costs to a more qualitative, service based and outcomes-based model, there is perhaps a new opportunity to grow the BPO industry with a new offering.

===Industry size===
One estimate of the worldwide BPO market from the BPO Services Global Industry Almanac 2017, puts the size of the industry in 2016 at about US$140 billion.<ref name="almanac">{{cite web  |website=itproportal.com | url=https://www.itproportal.com/features/the-battle-of-the-bpo-titans-eastern-europe-vs-india/ |title=The battle of the BPO titans: Eastern Europe vs. India |date=November 15, 2017}}</ref>

India, China and the Philippines are major powerhouses in the industry. In 2017, in India, the BPO industry generated US$30 billion in revenue according to the national industry association.<ref>{{cite web   |website=ETCIO.com
|url=https://cio.economictimes.indiatimes.com/news/enterprise-services-and-applications/india-holds-its-global-edge-in-bpm-sector-with-28billion-revenue/54474665
|title=India holds its global edge in BPM sector with $28billion revenue}}</ref> The BPO industry is a small segment of the total outsourcing industry in India. The BPO industry workforce in India is expected to shrink by 14% in 2021.<ref>{{Cite web |url=https://www.ey.com/Publication/vwLUAssets/ey-future-of-jobs-in-india/%24FILE/ey-future-of-jobs-in-india.pdf |title=Future of jobs in India |access-date=November 29, 2019 |archive-date=June 19, 2018 |archive-url=https://web.archive.org/web/20180619032043/http://www.ey.com/Publication/vwLUAssets/ey-future-of-jobs-in-india/$FILE/ey-future-of-jobs-in-india.pdf |url-status=dead }}</ref>

The BPO industry and IT services industry in combination are worth a total of US$154 billion in revenue in 2017.<ref>{{cite news
|url=http://www.business-standard.com/article/companies/bpm-sector-sees-faster-growth-than-it-services-nasscom-117101201283_1.html
|title=BPM sector sees faster growth than IT services: Nasscom |first=Ayan |last=Pramanik   |work=[[Business Standard]]
|date=October 12, 2017}}</ref> The BPO industry in the Philippines generated $26.7 billion in revenues in 2020,<ref>{{Cite news
   |url=https://www.manilatimes.net/2021/12/22/public-square/bpo-philippines-the-global-outsourcing-powerhouse/1826873
   |title=BPO Philippines - The Global Outsourcing Powerhouse
   |work=[[Manilla Times]] |date=December 22, 2021}}</ref> while around 700 thousand medium and high skill jobs would be created by 2022.<ref>{{Cite web
|first=Katrina |last=Domingo |title=BPO automation may displace 40,000, add 700,000 jobs
|url=https://news.abs-cbn.com/business/08/01/17/bpo-automation-may-displace-40000-add-700000-jobs |website=ABS-CBN News |date=January 8, 2017}}</ref>

In 2015, official statistics put the size of the total outsourcing industry in China, including not only the BPO industry but also IT outsourcing services, at $130.9 billion.<ref name="itoutsourcing">{{cite news  |agency=China Daily
|title=China's service outsourcing grows in 2015
|url=http://www.chinadaily.com.cn/business/chinadata/2016-01/20/content_23167866.htm
|date=January 20, 2016}}</ref>
<!--- "Engineering Process Outsourcing" (EPO) was in "..articles with possible conflicts of interest" -->
<!--- "Transition methodology" (5 entries in SEE ALSO, 2 External links, a 5-step/norefs PMO text) was the only article "re" EPO, and there was no "THERE" there -->
<!--- EPO seems to be a subset of BPO, which already has a section in the Outsourcing article -->
<!--- datestamp: April 1, 2019 ... a bit odd to be doing this REAL edit on _April F.O.O.. day_ -->

==See also==
{{div col|colwidth=25em}}
* [[Outstaffing]]
* [[Collaboration]]
* [[Banking BPO services]]
* [[BPO security]]
* [[Business process outsourcing to India]]
* [[Business process outsourcing in the Philippines]]
* [[Business process outsourcing in China]]
* [[Call center industry in the Philippines]]
* [[Call center industry in Bangladesh]]
* [[Contract manufacturer]]
* [[Contingent workforce]]
* [[Facilities management]]
* [[Freelance marketplace]]
* [[Friendshoring]]
* [[Globality]]
* [[Global sourcing]]
* [[Globally Integrated Enterprise]]
* [[Licensed production]]
* [[Moral outsourcing]]
* [[Offshore custom software development]]
* [[Offshoring Research Network]]
* [[Outsourced document processing]]
* [[Professional Employer Organization]]
* [[Recruitment]]
* [[Selfsourcing]]
* [[Software testing outsourcing]]
* [[Telecentre]]
* [[Theory of the firm#Economic theory of outsourcing]]
* [[Virtual assistant (occupation)|Virtual assistance]]

{{div col end}}

==References==
{{Reflist|30em}}

==Further reading==
* {{cite report |last1=Jackson |first1=James K. |title=Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data |publisher=Congressional Research Service |date=21 June 2013 |url=https://crsreports.congress.gov/product/pdf/RL/RL32461}}
* {{cite report |last1=Manuel |first1=Kate M. |last2=Maskell |first2=Jack |title=Insourcing Functions Performed by Federal Contractors: Legal Issues |via=Cornell University Library |publisher=Congressional Research Service |date=22 February 2013 |hdl=1813/77760 |url=https://ecommons.cornell.edu/bitstream/handle/1813/77760/CRS_Insourcing_Functions_Legal_Issues.pdf}}
*Grela, G., & Hofman, M. (2021). [https://www.emerald.com/insight/content/doi/10.1108/JGOSS-06-2020-0029/full/pdf Does insourcing of processes pay off?. ''Journal of Global Operations and Strategic Sourcing''.]

==External links==
{{Wiktionary|outsourcing|nearshore#English}}
* {{Wikiquote-inline}}

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[[Category:Outsourcing| ]]
[[Category:Business-to-business]]
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[[Category:Business terms]]
[[Category:Economic globalization]]
[[Category:Information technology]]
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[[Category:International business]]
[[Category:International factor movements]]
[[Category:International trade]]
[[Category:Office work]]
[[Category:Offshoring]]
[[Category:Postal services]]
[[Category:Telecommuting]]