This diary is partly in response to Bain: Outsourcing IS Offshoring, as when I started responding to it in the comments I found I was going on at length.
The short version is that agree that the way Bain runs their business reorganization work is despicable, but I don't think the original diary is completely correct about the relationship in general between outsourcing and off-shoring. More below the Orange Union Bug.
In theory, the idea behind outsourcing particular work is to make sure it is done by somebody who can do it really well for the given cost. There can even be advantages to out-sourcing, based on my own experience.
I am a software developer, having spent most of my time in the financial services industry. I have worked directly for investment firms as an employee, for investment firms as an independent contractor (i.e. benefit-free employee), and as a direct employee of software companies that provide software to the investment firms. At the investment companies, I was a cost center, since they didn't make any money from us directly; the stars of the firm were the investment people. At the software companies, I was a profit center, since that was what we sold. I was treated better, had better career growth opportunities, and got to work on a wider range of projects than if I only supported one investment house. To me, that is a good sort of out-sourcing, and I don't think it's specific to software. I could be an in-house lawyer, advertising creative, or medical professional working under the two options, and in each case I think I'm better off working for a company that sells my services directly than one that views me as a cost-center.
On the other hand, the reality of the situation is that a large number of cases of both out-sourcing and off-shoring are so that those in power can screw those without power. For example, if Apple had employees working for them in China, all of the complaints about their mistreatment would be directly attributable to St. Steve and his successors, but since they work for a contractor there is a level of deflection available to them. Similarly, if a manufacturing company is unionized then every time they up their manufacturing capacity they end up hiring more union workers. However, if they just out-source the production of components, even to people located next door, the supplier can be non-union and do the job cheaper, while still allowing the main company to claim "Look for the Union Label."
Finally, there really is a difference between off-shoring and out-sourcing. Even though most people who had jobs for a real company that were then spun-off into a less desirable subcontractor have fewer benefits, lower wages, etc., they at least still have jobs. They can attempt to organize, they can lobby the community for support in the form of boycotts, etc. Once those jobs are shipped overseas the jobs (and new workers) are invisible, and the people employed domestically are now unemployed and with no real prospects of getting a new job.
I'm actually more optimistic about the end of off-shoring than I am about out-sourcing. Off-shoring has real costs associated with cultural differences, theft of intellectual property, and in many cases lower levels of expertise than are available at home. Initially these drawbacks were swamped by the very low wages paid, but as the standard of living in India, China, etc. rises the wage difference is gradually vanishing and the savings are no longer so great.
Out-sourcing has few of the drawbacks (they are often local workers, or at least within a time-zone or two, speaking the same language, etc.) and all of the benefits (to the employer) of lower wages, no benefits, ease of termination, etc. This concerns me more, since without something resembling unionization I don't see how the trend is reversed.
Oh, and Mitt is a jerk, regardless of all of the above.