What Is Outsourcing? Definition, Types, and Strategies for 2025

Outsourcing is when you hire outside help to handle specific tasks or processes, freeing you up to focus on what drives your business forward. For ecommerce brands, that might mean getting help from customer support, IT, digital marketing, or logistics professionals instead of stretching your internal team too thin. 

In today’s competitive business landscape, strategic business process outsourcing enables companies to delegate the work that isn’t core to their brand and concentrate on what sets them apart. The right outsourcing business strategy can improve efficiency, reduce costs, and accelerate growth—particularly for ecommerce businesses looking to scale.

This article covers types of outsourcing and how to build a strategy for your ecommerce business.

What is outsourcing?

Outsourcing is when you delegate specific tasks or processes to external agencies or third parties. But outsourcing isn’t just about cutting costs and handing off busywork. You’re giving your team more time to focus on what matters most: product development, marketing, and customer experience. 

For ecommerce businesses, outsourcing can be a growth engine. Think of a fast-growing store that partners with a fulfillment service provider to handle shipping or brings on a developer to customize its checkout experience. 

From IT support and customer service to manufacturing and digital marketing, outsourcing allows entrepreneurs to stay lean while scaling up.

Onshore outsourcing vs. offshore outsourcing

Onshore outsourcing and offshore outsourcing are two different strategies:

• Onshore outsourcing. This is when you delegate work to a third-party provider in your own country. Onshore outsourcing is helpful when you need real time collaboration or cultural alignment is key, like working with a local agency to manage paid ads for your store.
• Offshore outsourcing. Offshoring means relocating tasks to another country, typically driven by lower labor costs or favorable economic conditions in developing nations. Unlike onshore outsourcing to external firms, offshoring focuses on the geographical relocation of business activities.

Nearshoring: The middle ground approach

Nearshoring offers a strategic middle ground between domestic outsourcing and offshore outsourcing by delegating business functions to providers in neighboring or nearby countries—usually in the same time zone or region. This approach combines cost savings without sacrificing close communication and time zone differences.

Popular nearshoring destinations include:

• Mexico and Canada for US businesses
• Poland and Romania for Western European companies
• Colombia and Costa Rica for North American companies

Nearshoring makes the most sense for businesses prioritizing cultural alignment and faster collaboration while still achieving cost efficiencies. For example, an ecommerce business in the US might nearshore its customer service operations to Canada to ensure representatives work in similar time zones as customers, while reducing operational costs compared to fully domestic operations.

Benefits of outsourcing

• Significant cost savings
• Access to a pool of specialized talent
• Concentration on key business areas
• Boosts operational efficiency
• Enhances organizational flexibility

Outsourcing is a critical aspect of modern business strategy, offering a range of benefits. By working with specialized outsourcing providers, you can sharpen your focus on core areas of expertise. From business process outsourcing to knowledge process outsourcing, each supports business growth and operational effectiveness.

Here are the key advantages:

Significant cost savings

One of the primary reasons companies outsource is to reduce business expenses, especially labor costs. Working with outsourcing providers can lower both operational and fixed costs, making your business model more cost-effective and financially sustainable.

To track the financial impact of your outsourcing initiatives, measure these key metrics:

• Cost reduction percentage: Compare pre- and post-outsourcing expenses; however, while outsourcing can lower costs, Deloitte reports that only 34% of organizations now cite cost savings as the primary driver
• Return on investment (ROI): Calculate the financial returns relative to outsourcing costs
• Total cost of ownership (TCO): Assess both direct and indirect costs associated with the outsourced function
• Cost per transaction: Particularly useful for customer service or payment processing outsourcing

Access to a pool of specialized talent

Outsourcing opens doors to a larger talent pool, including specialized skills that might not be available in-house. It’s particularly beneficial in software development, where niche expertise can make a big difference.

For ecommerce businesses, this might mean hiring specialists in:

• Advanced data analytics to optimize product recommendations
• User experience (UX) designers to improve conversion rates
• Security experts to protect customer data and transactions
• Specialized developers for integrations between your store and other platforms

Concentration on key business areas

Use your talent and resources on your business’s core strengths. You can outsource non-core activities—like administrative tasks and IT support.

For online retailers, core competencies typically include:

• Product selection and merchandising
• Brand development and storytelling
• Customer relationship building
• Marketing strategy and positioning

By outsourcing peripheral functions, ecommerce businesses can allocate more time and resources to these strategic activities that directly drive growth.

Boosts operational efficiency

Outsourcing can improve the efficiency and productivity of business operations. For example, online sellers might outsource IT management to ensure regular software updates, cybersecurity, and system maintenance, leading to smoother and more reliable operations.

To measure operational improvements from outsourcing, track these metrics:

• Turnaround time: How quickly tasks are completed compared to in-house operations
• Error rates: Track reduction in mistakes after outsourcing
• Productivity metrics: Monitor output per hour/dollar invested
• Customer satisfaction scores: Especially important for customer-facing outsourced functions

Enhances organizational flexibility

Outsourcing provides valuable flexibility and scalability. With the right model, you can quickly adjust your business operations, responding promptly to changes in market demand.

For instance, a retail company might use outsourcing to rapidly scale up its customer service team during peak shopping seasons, ensuring prompt response to customer inquiries without the long-term commitment of hiring additional permanent staff. This flexibility, whether through onshore or offshore outsourcing, allows you to expand or contract your operations as needed.

Challenges, risks, and disadvantages of outsourcing

• Overcome communication barriers
• Ensure quality control
• Handle data security and privacy concerns
• Nurture outsourcing relationships
• Mitigate reputational damage

Outsourcing offers numerous benefits, but it also comes with challenges. Offshore outsourcing requires careful consideration for successful implementation. With 44% of core job skills expected to shift within just five years, the World Economic Forum (WEF) reports a growing need for continuous reskilling. This directly impacts outsourcing partners, who must keep pace with technological change and evolving client demands.

Here are some risks and disadvantages to consider:

Overcome communication barriers

Effective communication is key in outsourcing, particularly offshore outsourcing. Language barriers, cultural differences, and time zone discrepancies can complicate interactions between a client company and its external service provider.

To address communication challenges:

• Establish clear communication channels and protocols. Ensure that all parties involved are on the same page, including regular updates and discussions to prevent misunderstandings and ensure smooth collaboration.
• Use collaboration tools. Apps like Slack, Asana, or Monday.com facilitate real-time and asynchronous communication.
• Schedule regular video conferences. They help build relationships and clarify complex issues.
• Create detailed documentation. Include standard operating procedures (SOPs) for common processes.
• Consider cultural training. Bridge understanding gaps for your team.

Ensure quality control

Maintaining quality across outsourced services can be challenging, especially when you rely on outside teams to represent your brand. Setting expectations early and tracking performance is critical.

Before hiring an outsourcing partner, here are questions to ask before signing on:

• What ecommerce clients have you worked with?
• How do you handle seasonal volume spikes?
• What tools or platforms do you use for communication and reporting?
• What SLAs do you recommend for ecommerce functions?

When you’re ready to onboard a partner, review this quality control checklist for ecommerce outsourcing:

• Set clear guidelines. Create measurable standards for product listings, returns, or live chat tone to align quality and improve customer service.
• Develop a robust service level agreement (SLA). Include ecommerce-specific metrics in your SLA (e.g., order accuracy rate, fulfillment center turnaround time).
• Conduct test orders. Or use mystery shoppers to evaluate vendor quality.
• Review real customer support transcripts. See what customers experience. Read through customers’ post-purchase feedback to quickly identify quality issues.
• Set up shared dashboards. Key performance indicators (KPIs) keep you and your partner informed on real-time performance.
• Assign one person to own vendor accountability. This person can focus on building relationships and resolving escalations.

Handle data security and privacy concerns

When outsourcing, businesses risk exposing sensitive data to external parties. To mitigate these risks, thoroughly vet service providers to ensure compliance with data protection laws, and implement necessary security protocols. A managed service provider—tasked with remotely managing IT infrastructure and systems—must be trustworthy and equipped to handle sensitive information securely.

Specific security measures for ecommerce outsourcing include:

• Require partners to maintain current security certifications (ISO 27001, SOC 2, PCI DSS)
• Establish clear data handling and privacy policies in contracts
• Implement access controls to limit data exposure to only necessary personnel
• Conduct regular security audits and penetration testing
• Create a data breach response plan that includes your outsourcing partners

Nurture outsourcing relationships

Building and maintaining a solid relationship with the outsourcing service provider is necessary for long-term success. This relationship goes beyond a contractual agreement; it requires mutual respect, understanding, and cooperation. Ultimately, the client company should view the service provider as an extension of its business, working together to achieve common goals.

To build successful outsourcing partnerships:

• Ensure regular communication, clear expectations, and a collaborative approach to help nurture this partnership. 
• Designate a dedicated relationship manager on both sides
• Schedule quarterly strategic reviews beyond daily operational communications
• Include outsourcing partners in relevant company updates and long-term planning
• Consider creating incentive structures that reward performance and innovation
• When possible, arrange occasional in-person meetings to strengthen relationships

Mitigate reputational damage

Outsourcing, particularly offshore outsourcing, can raise concerns about domestic job loss or labor practices. These perceptions can impact brand trust, so ensuring contracts with the service provider are fair and equitable is important.

Maintain fair labor standards, environmental responsibilities, and overall business ethics when choosing partners.

Strategies to protect your brand reputation when outsourcing include:

• Develop a clear narrative about how outsourcing supports your overall business mission
• Choose partners with aligned values and strong ethical practices
• Consider highlighting how outsourcing improves customer experience or product quality
• Be transparent about what’s outsourced (without compromising security)
• Train outsourced teams to reflect your brand’s tone and values

Outsourcing trends for 2025

• AI and automation in outsourcing services
• Remote work and its impact on outsourcing decisions
• Rise of specialized micro-outsourcing

Outsourcing is evolving rapidly. Artificial intelligence (AI), remote work, and changing team structures reshape how businesses approach external partnerships. According to Grand View Research, the global business process outsourcing market is anticipated to reach $525.2 billion by 2030, growing at a compound annual growth rate (CAGR) of 9.4% since 2023. This growth reflects the increasing strategic importance of outsourcing across industries.

Here are the key trends reshaping outsourcing in 2025:

AI and automation in outsourcing services

AI and automation technologies are changing how companies outsource. Rather than replacing outsourcing, AI technologies are enhancing the value of outsourced services through:

• AI-enhanced customer service solutions combining chatbots with human agents
• Automated data processing that improves accuracy while reducing costs
• Machine learning applications that improve process efficiency
• Predictive analytics for more proactive service delivery

Outsourcing partners can now offer ecommerce businesses more sophisticated services like AI-powered inventory forecasting, automated content generation for product descriptions, and intelligent customer support that resolves issues faster and more accurately than traditional approaches.

However, AI can’t solve everything. According to Deloitte, only 25% of organizations see cost reductions from AI-powered outsourcing. Businesses need clear governance, measurable goals, and AI-literate partners to get real value.

Remote work and its impact on outsourcing decisions

A WEF estimate suggests that by 2030, 92 million jobs could be performed fully remotely, creating new potential for businesses to outsource roles—from software development to customer support—across borders.

Remote work has removed many of the barriers separating in-house and outsourced teams. Today, location matters less than communication, tools, and accountability.

Key impacts include:

• Expanded talent pools as location becomes less important
• Increased comfort with distributed teams across multiple locations
• Greater emphasis on results rather than work location
• Blurring lines between traditional employment and outsourcing relationships

This trend enables ecommerce entrepreneurs to access specialized expertise from anywhere in the world, creating more flexible team structures that combine in-house capabilities with outsourced specialists in a seamless workflow.

Rise of specialized micro-outsourcing

Rather than outsourcing entire business functions, companies increasingly turn to specialized providers for very specific tasks. This “micro-outsourcing” approach:

• Allows businesses to access highly specialized expertise for niche requirements
• Creates more flexible, project-based outsourcing relationships
• Reduces commitment and risk compared to traditional outsourcing
• Enables precise optimization of specific business processes

Platforms like Fiverr, Upwork, and specialized freelance marketplaces facilitate this trend, making it easier for businesses of all sizes to connect with experts for targeted needs. This might mean an ecommerce business could hire a user experience (UX) expert to optimize product page conversion rates, a content writer to create SEO-optimized content for a specific product category, or develop custom automations for particular business processes.

Types of outsourcing

• Engineering process outsourcing
• Legal process outsourcing
• Information technology outsourcing
• Human resource outsourcing
• Manufacturing outsourcing
• Business process outsourcing

Outsourcing varies depending on the business function and your specific needs. Common types of outsourcing include engineering, legal, IT, human resources, manufacturing, and business process outsourcing, each with clear potential benefits:

Engineering process outsourcing

Ecommerce brands outsource engineering processes to develop packaging, optimize store performance, or integrate third-party tools—without hiring full-time engineers. This type of outsourcing involves hiring independent contractors or external companies to handle various engineering tasks, from design to implementation.

For ecommerce businesses, this might include:

• Product design and packaging engineering
• Website and application development
• Integration of complex systems like ERP or inventory management
• Technical optimization of online store performance

Legal process outsourcing

Legal process outsourcing (LPO) helps online sellers manage compliance, protect intellectual property, and draft contracts by delegating legal services to outside companies or law firms. This outsourcing strategy can help you reduce costs while accessing specialized legal expertise.

Ecommerce legal outsourcing commonly includes:

• Privacy policy and terms of service development
• Compliance with international ecommerce regulations
• Intellectual property protection for products and brand assets
• Contract drafting for suppliers and fulfillment partners

Information technology outsourcing

Information technology (IT) outsourcing involves hiring third-party providers or external companies to manage IT functions, from basic tech support to more complex operations like software development and cybersecurity. IT outsourcing can help you save on costs related to hiring and training IT staff while giving you access to the latest technologies and specialized expertise.

Online retailers frequently outsource IT functions such as:

• Ecommerce platform management and optimization
• Cybersecurity monitoring and threat management
• Technical support for both internal teams and customers
• Cloud infrastructure management and optimization

Human resource outsourcing

Ecommerce brands often outsource HR to manage payroll,employee hiring, and employee benefits administration. It can lead to improved efficiency in HR operations, better compliance with employment laws, and potentially better employee benefits management.

Ecommerce businesses often outsource:

• Contractor management for remote teams
• Payroll processing for warehouse or fulfillment staff
• Recruitment for specialized ecommerce roles
• HR compliance monitoring across multiple jurisdictions

Manufacturing outsourcing

Outsourcing manufacturing helps ecommerce brands produce custom goods or private label products without investing in their own facilities.

Retailers can choose whether to outsource individual components or complete products, especially when production costs vary across regions. Outsourcing manufacturing operations can provide a competitive advantage by allowing you to focus on your business’s design, ecommerce marketing tactics, and other core aspects.

For online retailers, manufacturing outsourcing options include:

• On-demand production through print-on-demand services
• Private label manufacturing for branded products
• Packaging and assembly services
• Product customization and personalization services

Business process outsourcing

Business process outsourcing (BPO) is common in ecommerce for tasks like customer service, accounting, or order processing. Successful BPO agreements hinge on clear outsourcing contracts and well-defined service levels between the hiring company and the service provider.

Ecommerce business processes commonly outsourced include:

• Customer service and support
• Order processing and management
• Bookkeeping and financial reporting
• Data entry and catalog management

Outsourcing for ecommerce businesses

• Common ecommerce functions to outsource
• When to keep operations in-house
• Finding the right outsourcing partners

Ecommerce businesses are well-positioned to take advantage of outsourcing. From fulfillment to tech development, outsourcing helps online stores grow quickly, while staying lean. Here’s how to decide what to outsource for ecommerce operations:

Common ecommerce functions to outsource

Many online retailers outsource operational functions, so they can focus on strategic growth initiatives. Here are the most common tasks you can delegate:

• Order fulfillment and logistics: Third-party fulfillment providers can warehouse inventory, pick, pack, and ship orders, and handle returns processing
• Customer service: Specialized agents can handle inquiries across multiple channels, including email, live chat, and phone support
• Content creation: Outsourced teams can develop product descriptions, blog posts, and other marketing content
• Digital marketing: External agencies can manage paid advertising, email campaigns, and social media
• Technical development: Professional developers can build and maintain custom store features and integrations
• Product photography and image editing: Specialized studios can create consistent, high-quality visual assets
• Inventory management: Expert teams can forecast demand, manage stock levels, and prevent stockouts

When considering which functions to outsource, evaluate which tasks are taking significant time away from strategic activities but don’t necessarily require your brand’s unique voice or core expertise.

When to keep operations in-house

While outsourcing offers many advantages, certain aspects of ecommerce operations are often best kept in-house—especially those that define your brand or impact customer trust.

• Brand strategy and positioning: Your unique market position and brand identity should be guided internally
• Core product development and innovation: The creative direction that differentiates your offerings typically benefits from direct involvement
• Customer experience design: The overall journey and touchpoints that define how customers interact with your brand
• Community building: Authentic community engagement often requires genuine brand representation
• Key supplier and partner relationships: Strategic partnerships that are fundamental to your business model

Functions that directly impact your competitive advantage or embody your brand’s unique value proposition typically benefit from remaining in-house.

Finding the right outsourcing partners

Your outsourcing strategy is only as strong as the partners you choose. Here’s how to evaluate potential ecommerce outsourcing providers:

• Relevant experience: Look for partners with specific experience in ecommerce and ideally in your product category or niche
• Technical compatibility: Ensure they work with your current platforms and technologies
• Scalability: Verify they can handle your current volume plus expected growth
• Communication protocols: Establish how and when you’ll communicate, with clear expectations for response times
• Security practices: Confirm they follow industry-standard security protocols, especially for customer data
• Cultural alignment: Choose partners whose working style and values complement your own

When evaluating potential partners, request concrete examples of their work with similar businesses, speak directly with their current clients, and start with a small test project before committing to a long-term relationship. The right outsourcing partner will feel like an extension of your team, helping you scale operations while maintaining quality and brand consistency.