The Asian Financial Crisis in 1997/1998 had a negative impact on many organisations in Malaysia and other countries in East Asia. Many were affected and the consequences were devastating particularly for small and medium enterprises (SMEs). The SMEs had a very difficult time because they do not possess sufficient tangible resources, physical and financial capital to survive the sudden strike of the recession. SMEs realize that they need to reposition themselves and consistent with this, many SMEs embark on outsourcing as one of their business strategies to operate their companies so that they could survive and sustain during the tough time. As such, the objective of this study is to investigate the current condition of outsourcing activities among the SMEs in Malaysia. The data was collected from survey questionnaire (322) on SMEs and only 101 of them engaged with outsourcing. The findings recommend that most SMEs outsourced payroll activities, product repair and advertising as well as promotional activities. Furthermore, SMEs engaged with outsourcing mainly to experience quality improvement in performing the functions and to cope with the peak period in managing their business activities.