AI was supposed to gut the outsourcing industry. So far, it hasn’t

The part that’s actually disappearing

Offshoring versus onshoring isn’t really the question. What’s eroding is the entry-level rung specifically. Basic data entry, routine account queries and simple document processing (the “tier one” work that has traditionally been how school leavers and career-changers got a foot in the door) is the part of the job most exposed to automation. HRD has reported on this pattern showing up in hiring data for young workers more broadly, and MIT-linked research has estimated roughly 11.7% of total U.S. wage value is already technically automatable with current AI systems, concentrated in exactly these administrative and customer-facing functions.

If the entry rung disappears faster than new junior roles appear, organizations lose a pipeline they’ve relied on for years, whether that talent sits on their own payroll or a vendor’s. For heavily regulated jurisdictions, outsourced headcount also often sits outside formal consultation and redundancy processes. That played out when Commonwealth Bank of Australia wound back an offshore contractor arrangement after an AI rollout, cutting hundreds of jobs without a formal layoff process appearing on CBA’s own books.

A regulatory wildcard

American HR and compliance teams should also be watching Congress. The bipartisan Keep Call Centers in America Act and a companion House bill, the HIRE Act, would require employers to notify the Department of Labor before moving call-center work offshore, publish a public registry of companies that do, and strip federal grants and contracts from those on it. Both bills were introduced in mid-2025 and remain stuck in committee, with no vote recorded as of mid-2026. Neither is close to becoming law, but both signal where political appetite is heading, particularly for regulated industries like financial services and healthcare that already face public scrutiny over offshoring.

Where this leaves HR

The outsourcing industry isn’t being shredded. It’s being sorted, increasingly by task complexity rather than geography. Simple, scriptable work is genuinely at risk wherever it sits. More complex work, judgment calls, exception handling, anything that requires empathy, is proving stickier than the 2025-era predictions assumed, and in some cases it’s moving to offshore hubs precisely because AI tools let less-experienced staff there handle it competently.

For HR leaders managing outsourced or offshore relationships, the useful questions aren’t “should we reshore?” or “should we automate?” They’re smaller and more concrete: which specific tasks in our outsourced contracts are entry-level and script-based, what happens to the people doing them, and does our vendor governance account for AI-driven headcount changes the way it would account for a layoff on our own books? Recruitment process outsourcing providers are already rethinking their value proposition around exactly this question. The rest of the outsourcing industry is likely to follow.