Outsourcing takes place when an organization contracts out functions, tasks, or services. Typically the goals of outsourcing include circumventing distractions from the company’s core activities, acquiring specialized expertise, and reducing COSTS. Outsourcing involves the substitution of part-time, CONTRACT, and other contingency workers for a company’s full-time employees. Some types of outsourcing are common practices that have existed for decades in American business, while other types became growth industries during the 1990s. Traditionally companies hire temporary personnel, often through employment agencies, to meet seasonal labor needs. Specialized functions such as HUMAN RESOURCES, payroll processing, and even sales representation are also types of outsourcing. Outsourcing provides the benefits of flexibility, lower human resource costs, the ability to try out workers before hiring them permanently, and the reduction of overhead costs through not having to pay INSURANCE and retirement benefits to temporary personnel. In the late 1990s Outsourcing reached into new areas with the concept of a virtual CORPORATION, in which a small group of entrepreneurs employ very few workers, instead contracting for services wherever and whenever needed. Outsourcing allows the virtual corporation to change personnel and locations its their MARKETING STRATEGY evolves. During the late 1990s, many technology companies used outsourcing because skilled workers were not available in local markets. With INTERNET connections available around the world, technology companies subcontracted a wide array of services to highly skilled, lower-cost sources. Sometimes outsourcing has been used as a means to circumvent existing salary structures, particularly UNION wage agreements. During the peak frenzy of technology advances during the 1990s, many companies paid dearly for information technology (IT) expertise. When salary structures restricted a firm’s ability to pay market wages, IT services were outsourced. While outsourcing continues to grow, it is not without costs. First, many companies fail to recognize the administrative cost associated with finding, comparing, contracting, supervising, and evaluating outsourcing activities. A second hidden cost is the impact on employee morale and productivity, when workers are laid off and replaced by outsourcing services. Third, employees tend to be more loyal than contract workers. Fourth, outsourcing increases the likelihood of losing company knowledge and leakage of sources of competitive advantage. Finally, outsourcing can challenge a company’s ethical standards. In the United States, executives perceive many outsourcing decisions to be a betrayal of workers, as threats of outsourcing have been used to extract wage and work-rule concessions.