Good Washington Post article that talks about Outsourcing.
Outsourcing works because the firms pay less and don't have to deal with unions or pension plans.
"Simply by having more experience, a specialty contractor is also more likely to hit upon the most efficient and effective ways of doing things and can quickly adopt those improvements throughout its operations." [in theory]
"The second big advantage that outsourcing firms enjoy is the economies of scale." - due to Specialization.
The disadvantage to Outsourcing is poor management. This is due to a couple of things. Outsourcers just hire Cogs for the Wheel of Industry - no outside thinking involved. Paying less means you get what you pay for. In some cases, bad management, which also comes from hiring cogs.
This might explain why customer service is so awful in the telecommunications industry.