Social outsourcing means the contracting out of goods or services to social enterprises. When used by government, it can be seen as a hybrid of the workfare outsourcing found in wage employment schemes, and the commercial outsourcing of government activities to the private sector. This paper focuses on a social outsourcing initiative operated by the government of Kerala State, India. Part of this outsources information technology (IT) services to dozens of cooperatives of women from below-poverty-line families. Interview and case study research was undertaken to assess the impacts of this initiative on five areas of livelihood assets—financial, human, physical, social and political capital. This scheme has Keralan specificities and research shows that social outsourcing may introduce vulnerabilities and questions of sustainability. Overall, though, this paper suggests that social outsourcing has the potential to deliver developmental benefits to marginalised groups. It is therefore worthy of greater attention from international development agencies and governments in developing countries. Copyright © 2009 John Wiley & Sons, Ltd.