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Why does software development outsourcing fail 1 in 4 times? The answers may surprise you

Aleksandra Dąbrowska

Aleksandra Dąbrowska

Content creator

Leading a business is a never-ending process of constantly improving, expanding and modernising products and services. In extreme cases, companies get big almost overnight with no resources to support that success. That’s where hiring an outsourcing software development company can help. CAN, not WILL. Software development outsourcing problems are real, and before you throw yourself into the deep end, you must know the potential danger of your software project failing and what is has to do with software development outsourcing.  

Wait, what? I haven’t decided on software development outsourcing yet, and you already talk about my project failing?

Dun & Bradstreet’s “Barometer of Global Outsourcing” reports that as far as outsourcing software development projects go, “20 to 25% of all outsourcing relationships fail within two years, and 50% fail within five”. Sad but true. Good news is, if you are aware of problems with outsourcing, you will be able to avoid them easily. And that’s exactly what we’re going to do here – allow you to notice certain aspects of cooperating with an outsourcing company that might have otherwise escaped your attention. 

But if it’s going to fail, why bother with software development outsourcing at all?

In the past, leading software development outsourcing was all about cutting costs. Now, it can cost you more than hiring a freelancer but it’s more about scalability and flexibility. When the company grows it simply needs more people to work on new features, day-to-day maintenance, customer support, etc. – hence outsourcing software development. Not to mention writing a whole application from scratch.

In short: you outsource software development because you need help and someone more knowledgeable and experienced in the subject can do it much better and faster than you.

How to outsource your project development to get quality software solutions? World-class best practices with Dawid Krala

Okay, but how to avoid signing a contract with an outsourcing partner who will delay the project after eating up your budget three times over and eventually deliver disappointing, low-quality service that just won’t do?

Let’s go through some most common challenges of software development outsourcing with someone who’s seen it all – Dawid Krala, Head of Development at The Software House.

Dawid Krala (Head of Development at The Software House)

💡Still not sure about software outsourcing services?

Communication breakdown results in… breakdowns. So mind your communication channels

Dawid Krala: “I can’t stress this enough – transparent communication is the key. The foundation of successful software outsourcing projects is a partnership approach during the entire process – from the planning stages to the final implementation. The critical element is honesty and open communication”. 

Explaining business needs in the most minor details is absolutely crucial to the project. Withholding information won’t hurt any software development companies but you and your software project alone. Every piece of data is important and can completely change the course of the development process, even if you think it’s nothing really.

You can’t work on anything if you don’t know the full details. Software development services are no exception here. The reason you hire software engineers and their project managers is that they know more than you. They don’t tell you how to run your business because you know that best. But when it comes to developing software – it’s their know-how that you benefit from.

That’s why it’s your responsibility alone to provide the software team with crystal clear information on WHAT are your goals straight away. They will know HOW to get there.

Dawid Krala: “It is essential that you are available to the software engineers and the rest of the team to clarify certain business aspects on an ongoing basis. Especially, when the developers feel they don’t have enough information and the lack of it may compromise their work”. 

What happens if you fail to do that? The outsourcing developers won’t understand the final goal of the outsourced project, and you’ll be left with the bitter feeling that their work is great but it’s not what you wanted. Nobody is a mind-reader so don’t expect miracles if you didn’t make your expectations clear in the first place.

Software development is flexible and by being proactive and communicative you can give your comments during regular meetings/calls and adjust the plan.

💡 We've got more resources on communication...

Losing the big picture will hurt both technology and business

Dawid Krala: “An application that works fantastic – it’s bug-free, efficient, secure, scalable, etc. – but has no business value is completely useless. This is related to the aforementioned problem – if you’re not clear about your goals, nobody in the development process will be. As a result, it will be hard to work on every level – from writing code to establishing general business objectives. And you’ll be destined to manage a failed-from-the-start project. Nobody wants that”.

Outsourcing software development has to be on par with your company’s general strategy, so more factors come to play. Will the new software fit your customers’ likings? Does it fall in line with your other products? If you don’t ask yourself those questions, you might end up having the best application in the world but completely out of place where the rest of your important projects are concerned and flop.

It’s easy to ruin the balance between the business scope, time and money with a simple “They have it, and we want it too”. Just because you’ve seen a nice feature somewhere, it doesn’t mean it will work out for your business. Eventually, it may become just a non-essential feature that works nicely but effectively ruined your budget and extended the deadlines.

The same goes for “trendy” technologies. We’ve already explained what happens if you insist on using hyped up new solutions in the article about software consulting. In short, you might end up re-writing your whole app in the foreseeable future.

Some companies are a little scared of giving free rein to the development team. You neither should let them do whatever they want nor micromanage them. Just provide your outsourced development company with specific business vision and clear end-game, and they will know which technologies and tools are going to be perfect for your product/service. Leave the project management to project managers.

If you’re not proficient with tech, you can still verify tech skills of software development company way before you decide on outsourcing.

Finally, this outsourcing project could be your last or could open the door to long term cooperation. If you know from the beginning that you will need similar services in the future, why not inform the outsourcing company about it? They will have an additional reason to develop a high-quality solution, in order to convince you to be the ones to extend it in the later stages. Who knows, maybe with a little bit of trust, this could be your new long term partner. Outsourcing partner, of course. 😉

💡 Read more:

Outsourcing service process outsourced contract time zone problems management

It’s a matter of trust in the dedicated team of software developers

Quoting Bartosz Krawczyk, our Project Manager, building trust in a software team is a waste of time. Shock and disbelief! 

As Bartosz explained: “We usually assume that trust should be slowly built over time and the transition from regime and micromanagement to growing freedom is slow. I suggest you reverse the order. Start with full confidence and a lot of freedom. If there’s a big problem, someone uses your goodwill in a non-cool way, THEN it’s time to introduce restrictions and stricter control”.

Dawid Krala: “I always say that a client’s success is our success. When choosing an outsourcing partner pay attention to engagement and commitment to achieve a common goal. And when you decide on a given company, just trust them.

Finding trustworthy hands to put your outsourced software development in is crucial. Let’s say you’ve picked an outsourcing partner that meets all your requirements but you still try to micro-manage the project or develop arguments with developers. This can make the cooperation unbearable for both sides, where it is supposed to make everybody bond over great product development”.

If you don’t understand why something is being done, just ask. The development team will definitely explain everything until you’re satisfied. Don’t question your software team or suspect them of bad intentions. Instead of telling developers what to do, use their experience to lift up your business!

With each software development project, software outsourcing companies put their reputation at stake too, so it’s your common goal to make the communication and cooperation work.

In some cases, where trust is also a matter of law, you can of course ask outsourcing companies about signing the non-disclosure agreement. If it’s a serious company, they won’t have a problem with that.

Lack of planning and processes

Dawid Krala: “A well-defined process allows developers to be focused on what they are doing, what they are supposed to do and what is expected of them. Bad communication, no big-picture perspective and zero trust for an outsourced development company can result from not having a consistent plan. In order to create one, you need to know what your business needs, what your customers want and how you want to achieve it. The good news is you don’t have to create the whole plan on your own”.

The software outsourcing company should help you in designing a detailed plan that includes time and deadlines, step-by-step process, priorities, standards, requirements, software development team composition, software architecture, communication channels, etc.

To effectively and consistently design such a software development plan, most software outsourcing companies use Agile methodology. It’s more flexible than strict planning and gives both parties more room for creativity.

Don’t fall into the “too good to be true” trap though. Any unreliable outsourcing company will agree on impossible deadlines in a limited budget.  Then they win the bidding work and start working on the software. According to the good ol’ “pick two: cheap, fast or good” rule, you can probably predict what will happen here. You’ll save time and money in the short run but eventually, you will spend even more to completely redesign the entire project. 

💡 Money, money, money...

outsourcing companies help code full time contract vendor for small business

Don’t go with software development outsourcing companies with low-quality solutions

Dawid Krala: “If you plan to build a system, don’t be tempted to take shortcuts to minimize costs. Don’t give up on ensuring a high-quality product during the development phase. These are only phantom savings that will haunt you in the long run. Ultimately, that might have serious consequences for your company, not only financial but also image-related”.

The quality of the product can be described in one sentence: the product’s ability to be used by your customers. Usability includes such requirements like functionality, reliability, security, performance, scalability, and no errors.

They all need to be taken care of at the very early stages of the project because the cost of changes in subsequent stages increases very quickly. We told you that it was going to haunt you. 👻 So keep Quality Assurance in mind when discussing the contract with the chosen outsourcing companies.

However, it can also work the other way round – it’s the outsourcing companies that don’t emphasise the importance of QA and deliver poor quality code. Make sure that the companies you consider have the Quality Assurance team with appropriate processes on board. Otherwise, you might end up with code that no other software developer can understand and work on. Which means salting the earth behind you and starting all over again.

If you outsource and go for the cheapest solution, that’s probably what you’re going to get: developers team delivering low-quality code, poor management services and a final product that leaves a lot to be desired. Then it’s up to another outsourcing vendor to solve all the problems and imposed challenges. Ergo: bye-bye cost savings!

💡 Custom software development outsourcing to Eastern Europe? That's where the talent pool to support your in house team might be

Outsourcing software development can fail but it doesn’t have to

We’ve listed a lot of reasons why your software development outsourcing could end up with a flop – mishandled communication, cost savings, lack of trust, plans and quality processes. The list of issues is far from over. It also often depends on specific scenarios in software development outsourcing. 

We could also include challenges like different time zones, language barriers, cultural differences, etc. We totally realise that all of this seems extremely overwhelming for companies that aren’t proficient in technologies.

Good news is – that definitely won’t be the main reason why your project ends up successful or not. If you have a clear vision of what success means to you, your app and your business, the reliable outsourcing companies will get you there.


The first consultation with The Software House specialists is always free of charge 💙

We (and our customers – just check out the reviews) love to think that we are a dependable outsourcing company, so if you need any third party help with web development services – give us a shout.

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