Based on the panel data for 2005-2011, the paper conducts an empirical analysis on the efficiency and its determinants of China's service outsourcing industry by using the three-stage DEA technique. The empirical results show that the production efficiency of the service outsourcing industry in the year of 2011 is 0.803 from Super-DEA model and 0.573 from standard DEA model. The too-small scale is the main cause that hinders the efficiency promotion, although some regions have already owned the ability to carry out high-end outsourcing business. Influencing factors analysis reveals that the degree of economic openness, the competitiveness of human resources and the level of economic growth have positive impacts on production efficiency. However, IPR protection and the level of informationalization are negatively related to production efficiency. The role of government is insignificant, implying that the industrial development is primarily driven by market forces rather than government intervention.