Outsourcing Challenges: 6 Key Concerns & How to Overcome Them
The global outsourcing services market is expected to reach $854.64 billion in 2025. Research and Markets expects this figure to grow at a compound annual growth rate of 5.46% between 2025 and 2030, to reach $1.11 trillion in 2023.
Various research suggests the most commonly outsourced services are recruitment, payroll, and information technology (IT).
According to the Deloitte Global Outsourcing Survey 2022, 52% of executives reported outsourcing business functions. In addition, 76% of surveyed executives outsourced their IT to a third party.
In terms of business solutions, Deloitte found legal, taxes, and HR to be the most outsourced services, with 64%, 61%, and 57% noting they outsource these functions.
As for IT, cybersecurity was the most outsourced function with 81%, followed closely by app and software development with 79%.
Companies don’t turn to outsourcing for the sake of it. Common outsourcing benefits include labor cost reduction and optimization, better focus on core business operations, and savings on infrastructure and other operations.
However, with outsourcing being available for almost every sector or business field imaginable, concerns and hurdles emerge that need to be addressed.
Common challenges of outsourcing business functions
With the business landscape constantly shifting and evolving, businesses need to consider the potential challenges of outsourcing before jumping on to an outsourcing deal.
Here are common outsourcing challenges along with potential remedies for each.
Data security and privacy
As mentioned, cybersecurity is one of the most commonly outsourced business operations in IT. But with rising cyberattacks and threats, companies need to protect sensitive information from cyber threats, while ensuring compliance with data regulations.
Solution: The best way to address this is by conducting regular security assessments and implementing robust security measures that ensure data privacy compliance.
The business process outsourcing (BPO) provider should also conduct regular security audits of their infrastructure and security protocols.
Read Also: 6 Key Benefits of Business Process Outsourcing in 2025
Maintaining quality and control
Organizations that outsource business functions often struggle with a loss of control. In addition, when businesses rely on outsourced service providers, maintaining quality levels or standards may become an issue.
Solution: Companies need to create and establish clear service level agreements (SLAs) with their third-party outsourcing providers.
They should also have clear metrics and key performance indicators (KPIs) as part of those SLAs.
This allows companies to monitor performance through quality assurance and KPIs for their third-party providers.
Adapting to technological advancements
German statistics and visualization firm Statista expects the IT outsourcing market to “witness impressive growth worldwide.” It forecasts the market’s revenue to “reach a staggering $591.24 billion by 2025.”
This growth is expected to continue at a CAGR of 8.28% between 2025 and 2029, resulting in the market value reaching $812.71 billion by 2029.
With this rapid growth, companies need to keep pace with artificial intelligence (AI), including automation and cloud computing. All while mitigating risks when outsourcing non-core functions such as cybersecurity needs or IT infrastructure.
Solution: To overcome the challenges of outsourcing cybersecurity, IT, and software development, companies should learn more about emerging technologies and invest in training.
They also need to keep up with industry trends and maintain a clear line of communication with their BPO provider.
Read Also: Considering Rapid Business Expansion? Beware of These Hidden Traps
Building strong partnerships
Another common challenge is establishing and maintaining strong collaborative relationships with trusted BPO providers. Challenges emerge in vendor selection, communication, and monitoring performance.
Solution: Companies need to carefully select their vendors and BPO providers, maintain clear internal and external communication, regularly conduct performance reviews, and provide feedback to their BPO partner or provider.
Cultural challenges
Besides communication, culture presents a significant hurdle to outsourcing.
From time zone differences to language barriers, each of these can cause delays in responses or even misunderstandings and frustrations. It can also increase the risk of errors, and make it difficult to have real-time discussions.
Solution: To overcome these challenges, organizations may need to invest in cultural sensitivity training to help team members understand and adapt to different communication styles.
Establish clear communication protocols, including defining preferred communication channels, response times, and escalation procedures.
Consider using collaborative tools such as project management software, video conferencing, and instant messaging to facilitate and speed up communication. It’s imperative you keep everyone informed.
Read Also: Empowering the Anywhere Team: 5 Keys to a Strong Hybrid Culture
Ethical and sustainable outsourcing
When organizations consider outsourcing, many often search for sustainable, and ethical, outsourcing options and practices.
This covers factors such as fair labor, environmental impact, and social responsibility by the BPO partner and their operations.
Solution: When considering a BPO or outsourcing service provider, companies should review this provider’s ethical and social responsibility commitments. Organizations need to ensure the BPO provider is in line with their business direction and sustainability measures.
Companies should also consider conducting social audits of their BPO providers. The aim is to assess the provider’s labor practices and environmental impact.
Lastly, they should promote sustainable practices within the outsourcing relationship, such as reducing environmental impact and promoting employee well-being.
Read Also: 8 Mental Health Initiatives for a Better Work Culture
Address challenges headfirst
Every business endeavor comes with advantages and disadvantages. And the abovementioned concerns reflect the ever-changing dynamics of the outsourcing industry.
It is, therefore, important for business leaders and decision-makers to identify potential challenges and address them early on.
Companies need a strategic and proactive approach to managing their outsourced relationships.
After all, a company won’t turn to outsourcing business functions if it doesn’t have a pressing business need.
