This chapter explores the transformative impact of Artificial Intelligence (AI) on traditional outsourcing models, highlighting both the disruption and opportunities AI presents for the outsourcing industry. As AI technologies automate routine tasks and enable data-driven decision-making, outsourcing providers are evolving from cost-centric service providers to strategic partners in digital transformation. The chapter examines how AI-driven models, such as automation, predictive analytics, and machine learning, are reshaping outsourcing functions, offering businesses greater efficiency, innovation, and customization. However, the shift to AI-powered outsourcing also introduces challenges related to workforce displacement, ethical concerns, and the need for new governance frameworks. The future of outsourcing will depend on the ability of providers to adapt to AI technologies, upskill their workforce, and address the social and regulatory implications of AI adoption.