Outsourcing has been used by companies in various industries for many decades as a key business strategy (Ghodeswar and Vaidyanathan, 2008). Harmancioglu (2009) states that several successful companies depend on outsourcing to continue to adapt to market changes and to expand their operations globally. He also said that outsourcing was primarily seen and used to reduce costs, but has recently become a widespread and essential tool for gaining competitive advantage. There are various reasons why companies outsource some of their functions, including: cost reduction, entry into new markets and concentration on core activities (Ghodeswar and Vaidyanathan, 2008). Wright (2004) mentions a number of functions that a company can outsource, including: human resources, customer service and IT functions. Apart from the growing concern over outsourcing relationships, there are also increasing indications of failure in their organization (Langfield-Smith and Smith 2003). Lee et al (2011) state that due to the recent emphasis on risk management in the supply chain, companies are identifying the importance of including risk measures in outsourcing decisions. Outsourcing is exposed to high risks since it involves discretion and relationships with third parties (Auzair et al, 2013). After consulting different articles on the subject, the author will give a brief definition of what outsourcing is and the types of activities. that companies source from outside their company boundaries. In addition, the author will discuss the risks that both the client and the service provider face when outsourcing, and also explain how the control measures of...... middle of paper ......s on outsourcing. According to Rothaermel et al. (2006), cited in Broedner et al. (2009), companies that follow a carefully balanced strategy of simultaneously practicing vertical integration and strategic outsourcing when managing innovation improve a company's product portfolio and product success, and thus adds to the competitive advantage and overall performance of the company (Rothaermel et al., 2006). Risks Related to Outsourcing Relationships There are high levels of risks in outsourcing since confidentiality and third party relationships are involved. (Auzair et al, 2013). Das Aundhe and Mathew (2009) assert that when an outsourcing contract fails, both the customer and the server provider are affected. They also claim that outsourcing contracts are planned based on certain rules and therefore carry inherent risks due to limited understanding of the future..