Outsourcing or contracting out is giving work to an outside agency to improve efficiency and to reduce cost. Some of the developed countries
outsource their work because of high wages in their own countries compared to the developing countries which offer similar services at a much cheaper rate. So for optimal use of resource and to maximize profit, these companies outsource their work to overseas location (offshoring). Example; Data processing is an IT related service which can be easily carried out in Asian, East European countries where IT skill staff with good English language are available at a much lower wages. Also overhead costs are much lower, making it all the more profitable.