Outsourcing is a business practice in which services or job functions are farmed out to a third party. In information technology, an outsourcing initiative with a technology provider can involve a range of operations, from the entirety of the IT function to discrete, easily defined components, such as disaster recovery, network services, software development or QA testing.
The term outsourcing is often used interchangeably — and incorrectly — with offshoring, usually by those in a heated debate. But offshoring (or, more accurately, offshore outsourcing) is a subset of outsourcing wherein a company outsources services to a third party in a country other than the one in which the client company is based, typically to take advantage of lower labor costs. This subject continues to be charged politically because unlike domestic outsourcing, in which employees often have the opportunity to keep their jobs and transfer to the outsourcer, offshore outsourcing is more likely to result in layoffs.
In recent years, IT service providers have begun increasing investments in IT delivery centers in the U.S. with North American locations accounting for more the a third of new delivery sites (29 out of a total of 76) established by service providers in 2016, according to a report from Everest Group, an IT and business sourcing consultancy and research firm. Demand for digital transformation–related technologies specifically is driving interest in certain metropolitan areas. Offshore outsourcing providers have also increased their hiring of U.S. IT professionals to gird against potential increased restrictions on the H-1B visas they use to bring offshore workers to the U.S. to work on client sites.
