Tips on How to Avoid IT Outsourcing Failures

16 November 2021

By the end of 2021, the worldwide market value of IT services the companies delegate to the IT outsourcing vendors is expected to reach over $413.72 billion, according to Statista. And, the IT outsourcing trend will only increase in the upcoming years, with an annual increase of about 5% each year.

Another thing companies should consider is a huge tech talent shortage trend that has been fueling the tech industry in recent years. Basically, these are the core factors that enhanced outsourcing the IT services and dedicated developers by various tech companies and IT organizations.

In this article, we’ll talk about the common problems of outsourcing, its main failures, and the most effective practices of how they can be avoided.

It’s time to start!

Why Outsourcing Fails?

Along with implementing the evolving technologies, it becomes more challenging for the companies to develop the whole spectrum of innovative software solutions directly in-house. That is why companies try to build an effective strategy of hiring a dedicated team of developers using the outsourcing approach.

However, it’s not that easy as it seems: according to Deloitte, “outsourcing as a concept is changing from making it run to making the change happen”.

This means you have not only to implement this system but also get the benefits of its performance, as well as successfully resolve the possible issues you will encounter in the process. For instance, the most frequent problems of outsourcing can include:

insufficient communication between the organization and outsourcing vendors
the lack of trust with the outsourcing providers
low expertise in optimizations and improvements
inadequate risk evaluation and wrong development strategy
the irresponsibility of outsourced staff

In fact, these are only a few issues that can result in multiple outsourcing failures of any organization. However, if you still think these are only the minor problems of outsourcing that can’t impact the overall situation, the following statistics from Forbes may change your mind: up to 25% of all outsourcing corporations fall within 2 years, and around 50% can fail within 5 years of relationships.

Now, let’s look closer at the potential IT outsourcing failures your company should be aware of to succeed.

Common IT Outsourcing Failures Your Company Might Encounter

After we know why outsourcing fails, it’s time to analyze the potential issues you might face when implementing the outsourcing model into your business. As a part of our discussion, you’ll also learn more from the outsourcing failures examples of the world’s largest companies!

#1 Neglecting the Needs of Your Target Audience

Modern software development is all about delivering the best tech solutions that fully surpass consumer expectations. That is why any sort of product should be customer-centric and provide the most relevant features that resolve specific problems of your target audience. Otherwise, you’re at risk of failing to recoup the financial investments.

One of these outsourcing examples was Subbxi – a tool for generating the subtitles, that has not been published on AppStore after its release. The problem was that the client hasn’t done the research to ensure the app will find its audience.

How to avoid this failure: This IT outsourcing failure can be avoided if the customer-centric basics are strongly baked into the project, always targeted during the planning processes, and clearly outlined in the documentation.

This way you can not only improve the quality and performance of your IT product but also clear out what you expect to get with your product, and why these are important.

#2 Insufficient Communication

The next thing to consider is establishing the communication channels you’ll use to reach the IT outsourcing providers. In fact, the lack of communication can significantly impact the quality of the final software product and cause a list of issues that need additional inputs, which consequently lead to additional expenses on the IT services.

That is why it’s not enough to only implement outsourcing services to your business. More critical is to always track the progress and timely initiate the changes in the process of developing.

How to avoid this failure: To prevent this outsourcing failure, define the communication channels and the frequency of the QA sessions in advance, and also employ the person in charge of the project’s development. The project lead should be the exact mediator between your company and the outsourcing team and be ready to resolve all the issues.

#3 Lack of Clarity

One of the most popular IT outsourcing failures to avoid is the lack of clarity when planning the project and its actual development.

Remember, the outsourcing team will focus on the project documentation when creating the tech product. And, if the outline doesn’t have the clear requirements and instructions of what you expect in the result, you’re likely to get the product that needs further improvements.

How to avoid this failure: To prevent project delays and overpaying for the additional work of your IT outsourcing team, it’s better to state out the clear requirements, goals, and features your product should include. This trick can minimize possible errors and improve the process of software development.

#4 Poor Planning

Another common issue of outsourcing failures you might encounter is insufficient planning – a more global problem if compared with lack of clarity. Poor planning can impact not only the projects your developers are entrusted to create but also the entire process of coworking with your outsourced team.

How to avoid this failure: The detailed analysis of the outsourcing examples has shown that considering the detailed performance of your IT outsourcing team at each stage of the product development is one of the core things to succeed.

For instance, you can start by clearing out the time frames, who and how the progress will be evaluated, as well as the various workflow organization aspects like developing tools, specific requirements, and approaches that are to be used in the process.

#5 Low Quality of Tech Expertise and Inadequate Outsourcing Price

Before the start of any project, it’s essential to find out more about the expertise of your offshore development team. If neglected, this can result in the waste of your time, efforts, and resources needed to get this staff onboarded and when you’ve finally understood that’s not the vendor you want to work with, you need to start all this process all over again.

That’s exactly what happened with the MarketingHelpNet company, which hired an offshore web designer who didn’t possess the required web design skills for creating the functional product, and as a result, the project failed.

How to avoid this failure: Before contracting the vendors, it’s essential to check the references and technical instructions your developers are going to work with. Additionally, to ensure you’ll choose the experienced tech talents for your project, it’s important to research the vendors at a reasonable price and research the case studies before signing the contract.

Guide to Hiring the Best Tech Talents

Having analyzed the major outsourcing failures, let’s now briefly summarize how to find the best talents in the tech industry:

Build an MVP first to estimate the project value
Compare different providers, the services they offer, and their prices
Provide a clear understanding of your product from top to bottom
Pay attention to the project planning and processes organization
Set up the realistic deadlines
Build reliable communication and stay in touch with your developers
Focus on value over cost, since it may impact the final product performance

With having all these points considered, you’ll certainly succeed in hiring the best IT outsourcing vendors for your business.

Bottom Line

As you can see, analyzing the main IT outsourcing failures is one of the key approaches to succeed for your company or business. Hiring a dedicated development team that features advanced expertise in specific product development, possesses vast experience within the scope, and is ready to contribute to the project success are the must-have options to obtain when considering software service outsourcing.

At Intellectsoft, we completely understand these basics and always look for the most beneficial project optimization opportunities within various industries to make your business out of competition.

Looking for your best team for the next project of yours? Talk to our experts and uncover more insights about IT outsourcing and how you can make the most of it from day one!

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