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Outsourcing is a method of taking tasks you have normally done in house with your own employees and hiring another firm to do them for you. This only makes sense of the other firm can do the tasks less expensively that you can and still make a profit. For example, if you are running a call centre that costs $1 million to run, it only makes sense to outsource it if another company can do the work for substantially less money, e.g. $750,000. That means that the costs for that company must be cheaper than yours. Although sometimes this can be accomplished by proprietary technology or economies of scale, it is usually a matter of high cost of living/high wage countries outsourcing to lower wage countries, e.g. outsourcing a call centre which pays $15/hour in the US to one in India which pays $2/hour. Thus rich nations (members of the OECD such as the US, Canada, the UK, Germany) often outsource to developing nations (e.g. Pakistan, India, China, Mexico) where wages are lower.
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