Outsourcing is the process of hiring an outside firm to do work that was previously handled in-house. Services that are commonly outsourced include payroll, accounting, human resources, maintenance, marketing and advertising, and manufacturing.
Outsourcing is not limited to private business; in the U.S. and other countries, there are varying attempts to "privatize" or otherwise outsource some gvernment functions. Outsourcing may also allow a company to turn more of its focus to its core business.
Outsourcing can often save a company money, as a firm that specializes in providing the needed service may be able to do it more cheaply, or with higher quality.
When the function is no longer directly tied to the success of the enterprise, there can be a question of commitment of the workers. Especially when a worker in a company to which work is outsourced, such as a telephone support call center, services several companies that have outsourced to it, the actual employer may measure workers by metrics relevant to the process outsourced (e.g., number of calls handled) rather than the requirement of the client (e.g., customer satisfaction).
Governmental functions being outsourced may create problems where the legally responsible management does not have direct control over workers, or where workers assume authority they do not have. Consider, for example, a tax office that outsources collection and delegates the ability to levy to contractors. Consider the oversight of private prison guards, in a field where there is both constant testing of authority, as well as a danger of abuse of authority (see Stanford prison experiment and Milgram experiment).
The term offshoring refers to outsourcing that involves hiring a company in another country.
When operations are 24-hour, it may be easier to find specialists willing to work in during the workday of their locality than in the middle of the night. Internet support often needs regional support for an inherently global service, so off-hours work can shift to a support center for which the event is in the appropriate time zone. Handoff of tasks spanning more than one shift is a critical issue.
It is now fairly common for small hospitals in one country to transmit X-rays to remote physicians that will interpret them. There simply may not be enough work, at a rural hospital in Australia or the U.S., to keep an in-house or local night radiologist busy, but each can transmit the images to a day-shift specialist across the world.
This has been a controversial topic in some countries, particularly the United States, because some workers whose jobs have moved overseas perceive that they have been "sold out" by their company.
Controversy over offshoring is also a part of the controversy over globalization. Many jobs that were formerly done in industrialized countries, especially in the manufacturing sector, are moving to developing countries, such as China or India. Some critics perceive that these low quality jobs destroy traditional cultures, or exploit workers in these countries.
Legal and regulatory issues can be complex. In some cases, the country outsourcing may have strict privacy rules (e.g., HIPAA for U.S. medical information) that are not enforceable on offshored workers. In other cases, outsourcing companies have found such things as European transborder data flow requirements to be more stringent than at home.