This chapter explores the role of small and medium-sized enterprises (SMEs) in the evolving AI-driven outsourcing landscape. As artificial intelligence (AI) increasingly transforms business models, SMEs face both challenges and opportunities in integrating AI into their outsourcing strategies. By leveraging AI technologies, SMEs can streamline operations, reduce costs, and enhance customer experiences, positioning themselves to compete globally. However, SMEs must address challenges such as limited resources, skills gaps, data privacy concerns, and the need for continuous innovation. Strategic approaches such as collaboration with AI providers, adopting scalable solutions, and focusing on workforce upskilling are essential for SMEs to succeed. The chapter also discusses the social, practical, and theoretical implications of AI in outsourcing, highlighting the potential for job displacement and the need for adaptive strategies. Ultimately, SMEs that effectively harness AI will thrive in a competitive, AI-driven outsourcing ecosystem