Outsourcing helps to develop, manage and administer the IT activities in accordance with agreed upon deliverables, performance standards and outputs as set forth in the contractual agreement. Information technology outsourcing describes a process whereas an organization decides to contract out or sell the firm’s IT assets, people and/or activities to a third party vendor, who in exchange provides and manages these assets and services for an agreed fee over an agreed time period. The following are the challenges of outsourcing: Vendor selection: This is one of the main challenges to achieve the objectives of outsourcing. We have to choose the right vendor for the outsourcing companies who have right skills and knowledge. All the services are managed by vendor and the cost of maintenance can be brought down and helps in utilisation of resources. If we select the right vendor we can reduce costs, customer satisfaction can be increased and there will be higher quality in delivering the IT services. Also the clients can anticipate predictable outcome. Vendors continuously monitor the changes and the trends that are happening and time to adapt to these changes will be quicker. Vendor management: Vendor management is about quality assurance in outsourcing companies. It is like to check whether they have right skills in outsourcing and in software maintenance services. Vendors play a key role in success of your business. We need to continuously monitor and measure the vendor’s performance from the time of outsourcing contract is signed. There should not be any conflicts between vendors and clients. The vendor should understand what are the goals and outcomes of the organisation that organization is expecting after outsourcing. Vendors should implement the new technology which boosts the business. Commitment: There should be good commitment between clients and vendors in achieving objectives of outsourcing. They have to focus on the core areas of business and mange contractual obligations with the vendors. This mainly includes vendor commitment throughout the outsourcing and negotiates the process. Commitment will impact the outsourcing process and also reflect to the organization. Cultural barriers: This is one of the major challenges in outsourcing. There should be right cultural barriers between the people because the operating procedures vary from one organization to another. Language and work ethics should be taken into consideration. There are often different working methods and habits and behaviour of people due to varied cultural ways in organization. This will impact the outsourcing development in different ways. Clients should understand major cultural variations while dealing with the vendors if they are from other countries. Contract design: This is the main challenge in outsourcing because the objective lies in the contract that is offered to the vendor. First the contract is to be designed perfectly and should be explained to the vendors in easy manner for achieving the goals of outsourcing. It includes software maintenance services, infrastructure and technologies that are to be provided. Maintaining customer satisfaction: customers mainly focus on this challenge and this is the company’s major objective in outsourcing. So the organization should reach the benchmark level in achieving the outcome. If the organization is using better infrastructure new technologies and IT enabled services and all other software maintenance services in developing and the particular project then automatically there will be customer satisfaction.