Outsourcing became popular among developed nations starting in the 21st century. Companies were trying to find ways to reduce their operating costs and discovered that savings could be found by transferring certain processes outside of the organization. Outsourcing sometimes involves transferring employees from the original company to the new company in order to secure a smooth transition of the manufacturing process or service. Offshoring can also occur. Offshoring is the movement of a business operation to another country for cheaper labor, less tax, or less stringent environmental laws.
Companies usually outsource for one of two reasons: to save costs or to get rid of irrelevant services that are not essential to the business system. Saving costs includes the avoidance of regulations, high taxes, high energy costs, and the avoidance of expensive unionized labor. Outsourcing irrelevant processes includes the outsourcing of cleaning staff, landscaping staff, and occasionally information technology services (IT). But, Outsourcing creates legal, ethical, and compliance issues. Transferred employees are no longer working for the original company and therefore do not need to report to management directly as they did before. Additionally, outsourcing, and specifically offshoring, threatens the jobs of those whose jobs have been deemed moveable.