According to Nicholas Beaumont and Amrik Sohal (2004) outsourcing is a fashionable way of solving some business problems and there are numerous reports of its increasing use. However, the use of outsourcing in Ethiopia is very low with the exception of outsourcing some non-core functions like Security service and Janitorial service. Thus, this variation attracts the researcher to undertake a research with the objective of evaluating the current practice and future potential of outsourcing in the country. This research assessed the current practice of outsourcing, identified those business functions that Ethiopian organizations are willing to outsource and pointed out the reasons for outsourcing and not outsourcing. Accordingly, the use of outsourcing in Ethiopia has been low and highly dominated by noncore business functions such as maintenance and janitorial services, security services and information technology services. The findings also confirm that Ethiopian organizations are willing to outsource non-core business functions, such as maintenance and janitorial services, security services and information technology services. Conversely, the research found out that Accounting and Administration outsourcing service providers will face great challenges form Ethiopian organization to deliver their services. This is mainly due the fact that Ethiopian organizations fear the risk of loss of confidential information and loss of control in outsourcing these business functions. In addition, the organizations assume that the external service providers are not loyal to them in providing such business functions. The most expressed reasons for outsourcing in ascending order are: allowing more focus on core business, improving service level, acquiring innovative ideas and cost savings. On the other hand, the most strongly expressed reasons for not outsourcing, in ascending order, are: loss of control, having no loyalty to company and possible loss of confidentiality.