IT Outsourcing Challenges: How an EOR Provides Effective Solutions

IT outsourcing challenges have been crippling founders for years now.

We’ve all faced challenges such as higher expenses, slow recruitment cycles, high attrition rates, and compliance errors.

By 2026, companies will no longer question whether to outsource anymore. They’re asking a better question. Why does it feel harder than it should?

There should be an easier way out of this. And that’s why we’ve curated this blog for you.

We discuss in detail the IT outsourcing challenges businesses face today.

We also discuss how an Employer of Record (EOR) addresses these problems effortlessly. More importantly, how Remunance responds to these challenges in its own unique way.

In this blog, we’ll cover:

• • 5 Major IT Outsourcing Challenges
  • How does an EOR solve IT outsourcing challenges?
  • How Remunance helps businesses avoid IT outsourcing challenges?

Are you ready? Because we are.

Top 5 IT Outsourcing Challenges of 2026

Key IT outsourcing challenges businesses face in 2026

It would be wrong to say that IT outsourcing has become the trend in 2026. It has long been a trend. What’s new in this model is that small and big enterprises have started to recognize some loopholes, or rather challenges in it.

So, we’re here to address those challenges in detail. Let’s pick the top five from the list.

Operational Gaps 

The most common IT outsourcing challenge is team coordination. Working together as embedded teams is critical to productivity and quality.

But let’s be honest, outsourced teams are nothing like internal teams. Outsourced teams lack structure, clear workflows, emotional connection, and more.

No matter how talented the candidates are, it’s very difficult to fill these gaps without day-to-day interaction with them. And this is exactly where outsourced IT teams fall short of delivering the desired results.

The most common problems faced are:

• • Handovers without adequate knowledge transfers
  • Poor or outdated documentation
  • Non-updated dashboards

Compliance Hurdles  

Compliance risk is another of the most common IT outsourcing risks and challenges. Why? Because when you have an outsourced IT team in a new country, you also need to keep yourself updated about the local laws and regulations of that country. 

To compound the risk, labor laws vary by country and continue to change over time.

If your outsourced team is based in Europe or India, it’s essential that you are aware of the GDPR and the DPDP Act. If not, you’ll be on the brink of losing your business in the target country.

What problems do you face here?

• • Staying updated about local laws and data all by yourself
  • Getting access to different databases from different countries
  • Sometimes automation across borders doesn’t work, and all you’re left with is manual tracking     

High Attrition Rates 

In IT outsourcing, you find the right talent easily; you lose them even more easily. It’s a fact!

Reportedly, the IT outsourcing sector saw an average of 25% attrition rate in 2025. Moreover, this number is expected to increase in 2026. Pretty concerning, right?

The reason for such high numbers, you ask? lack of connection, employee engagement, and a sense of belonging.

Employees working remotely often feel distant from and excluded by the parent company. They don’t see a clear path to career growth, personal development, or cultural bonding. Emotionally distant employees lack a sense of purpose that keeps them around. That’s why they leave!

The reasons people leave:

• • Feeling disconnected from company culture
  • Limited visibility into career growth
  • Lack of recognition

The higher the churn rate, the lower the productivity, making it one of the worst IT outsourcing challenges.   

Market Penetration 

The harsh reality no one talks about is that anything can go wrong at any time in a foreign location. Factors such as geopolitical disruptions, natural disasters, and updates to local labor laws don’t come unannounced.

In such scenarios, entering a new market is already challenging; establishing stability there is even more difficult. Thus, betting on a single international market poses one of the greatest IT outsourcing challenges.

What makes market penetration riskier?

• • Political instability
  • Change in market trends and hiring freeze
  • Cultural disruptions

Global expansion itself falls under IT outsourcing risks and challenges.  

Cost Unpredictability 

Unpredictable costs remain a top IT outsourcing challenge. You end up spending more than you intended, with multiple factors contributing to this. According to McKinsey reports, outsourced IT projects goes 45% over budget on average. 

One of the main reasons is the hourly payment structure demanded by most third-party vendors. This prevents you from viewing the entire budget. You miss the total cost of ownership when focusing on short-term savings.

Sometimes, large projects can go off course on cost-effectiveness.

So what actually blows up the budget? Yes, we’ll detect that now.

The areas that factor into the concept of over-budget in IT outsourcing challenges:

• • Hidden setup costs: Data migration, tool integrations, and training new teams top the list. These one-time things can eat up a big chunk of your first-year spend.
  • Management overhead: Someone has to manage vendors, contracts, meetings, and follow-ups. That effort costs time and money.
  • Poor quality work: Those apparently inexpensive vendors sometimes hire junior talent. Talents who are incapable of fixing bugs or delivering quality work. That means repeated revisions and rework, ultimately leading to over expenditures.
  • Communication gaps: Factors such as time zones, language barriers, and delayed follow-ups ultimately create longer timelines and greater investment in a single project.
  • Scope bargain: Vendors often try to add extra services to your contract that you won’t be using anyway, but will end up paying for all of them.
  • Economic instability: Factors such as currency fluctuations, rising local wages, and new compliance regulations can lead to cost fluctuations even after contracts are signed.

Read about the HR outsourcing costs in detail. 

All of this adds up to IT outsourcing risks and challenges, where you end up paying way more than you expected.

Calculate the hiring costs in India with our EOR cost calculator now.

How Does an EOR Offer Proper Solutions for IT Outsourcing Challenges

EOR enables faster hiring, compliance, and quality talent access

Now that we have discussed the challenges in detail, there should be a suitable solution, right? Someone who can offer lower costs, access to global talent, faster hiring, etc.

Someone who can give you operational control over your team and still handle compliance hurdles and high attrition challenges. But you need an absolute local expert to handle these IT outsourcing challenges meticulously. 

Don’t you?

Hence, the introduction of EOR.

An EOR is your local safety net. You hire the team you want. You manage the work. The EOR handles the HR and admin.

Here’s how it helps reduce IT outsourcing risks and challenges without killing flexibility:

• • No legal complications: The EOR manages local labor laws, taxes, benefits, everything. You don’t worry about fines or misclassification risks.
  • You stay in charge: This process involves no middlemen or vendor politics. Your team works directly with you. You can keep a daily check on day-to-day tasks, reviews, goals, etc.
  • Better talent, lower attrition: The EOR allows you to work directly with global brands, not vendors. That means stronger talent and lower attrition.
  • Your data stays yours: EOR offers you clear contracts. Contracts that mention strong IP protection and high security standards without any loopholes.
  • Lower costs: EOR eliminates factors such as entity setup and hourly fees and replaces them with a predictable monthly fee, reducing expansion costs substantially.
  • Happier teams: As employees receive local benefits, timely HR support, and more undivided attention, they stay loyal to their work and the company.

So, an EOR doesn’t just patch IT outsourcing challenges. It makes global hiring feel seamless.

Know more about the IT services industry challenges in 2026 here.

How Remunance Helps Businesses Avoid IT Outsourcing Challenges?

Hiring tech talent and expanding in India doesn’t have to be outsourcing to a black box. We assure you that Remunance flips the script of IT outsourcing risks and challenges. 

We don’t just manage contracts, we offer you the best talent available in the country. You build a team exactly like one in your parent company, just in a different time zone.

How do we effectively manage common IT outsourcing challenges?

Let’s look at the strategy we follow:

• • Local brains on a large scale: Remunance works directly with teams, not through layers of vendors. With 1,500+ employees and offices across India’s top tech cities, help is always nearby. The talent database we have is extensive.
  • Holistic approach: We take care of your international team building end-to-end. Laptop issues? Internet problems? Payroll questions? We handle it all. We meticulously manage IT setup, HR, compliance, payroll, and taxes, so your developers can focus on building.
  • Transparent pricing: Worried about hidden fees? Well, now you don’t need to. Remunance shows you exactly what the employee earns and what they charge. We charge a fixed percentage of each employee’s monthly salary. That’s how we reduce IT outsourcing risks and challenges.
  • Fast replies: Stuck waiting for answers? Not here. We respond within two business days. And that’s the max limit.

Remunance is not just your EOR partner, it’s your local guide to the Indian talent market as well.

Conclusion

IT outsourcing challenges don’t come from bad intent. They come from broken structures.

When you don’t engage enough with your teams, stay unupdated on local laws, and expenses go over budget, outsourcing becomes a problem.

But that’s what EORs are for. You get control over your team. You get global talent without legal complications. And, you can finally bond with your team on a professional and personal level.

With the right EOR partner, IT outsourcing challenges become opportunities. They attend to your problems without you having to interfere repeatedly.

With an EOR, all you need to do is take care of your revenue growth; the rest will be taken care of by your EOR. 

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