The company has partnered with Illinois-based Affinity Express to help produce and design display ads. Most of the work by Affinity Express will be done at its facilities in the Philippines and India.

"These kinds of decisions are never taken lightly," said Al Autry, The N&O's senior vice president of advertising. "They are truly done to try to make us a stronger operation in the future."

Partnering with Affinity Express will allow faster turnaround of work and result in "significant cost savings," Autry said. He declined to give figures.

People might not like outsourcing, but the newspaper industry is right to look for ways to trim costs, said Philip Meyer, Knight Chair in Journalism and professor at UNC-Chapel Hill's School of Journalism and Mass Communication.

Ad revenue has been hit hard by the slumping economy. Online newspaper readership and ad revenue are increasing quickly, but it has not been enough to offset a slowdown on the print side.

Streamlining operations will be key to healthy finances, Meyer said.

"It used to be that newspapers made so much profit that it wasn't a concern," he said. "But I'm worried about their ability to stay solvent. A newspaper's first duty is to stay solvent."

The 26 N&O employees in the affected department will be able to apply for the 10 remaining positions or other jobs at the company.

Those who are laid off will be eligible for a severance package including health benefits and pay, based on their length of time at The N&O. The transition is expected to be complete by May 30.

The News & Observer, which is owned by The McClatchy Co., is not the first newspaper to experiment with outsourcing.

Other McClatchy papers, including the Sacramento Bee and the Miami Herald, already tried.

Still, there is resistance to outsourcing of newspaper work, especially the generation of editorial content.

Earlier this month, the Miami Herald reversed a decision to outsource some of the copy editing and design work for its "Broward Neighbors" section to India.

"We've decided this would not be an appropriate use of this service, so it won't be tested, nor will other newsroom and editing design like it," wrote Herald Executive Editor Anders Gyllenhaal in a staff memo.

The Miami Herald continues to outsource some advertising design and monitoring of Web site comments.