Outsourcing involves contracting non-core business functions to specialized third-party providers. Companies outsource to access scalable and efficient services, improve quality, and reduce costs while focusing on core competencies. India is a major global outsourcing destination due to its large skilled workforce and cost advantages. Key outsourced areas include IT services, BPO, KPO. While outsourcing provides benefits, challenges include client retention, employee turnover, and competition from other emerging low-cost destinations.