7 Tips on How to Avoid Common Software Outsourcing Failures

Quick fact-check: 37% of organizations that thus far outsource software development are chalking out plans to increase the amount they outsource.

If 2020 taught us anything, it's that a handful of jobs can be done from anywhere that we never imagined before. Distributed development teams, work from home, offshore software development are some of the new norms in different industries. However, in IT, the trend of outsourcing software development has been around for quite a while now.

From greater scalability to reduced costs, businesses worldwide have begun to realize the reap rewards of outsourcing customized software in their bid to ace in the competition.

But it's not that simple; talk about money for old rope. Without the required knowledge and diligence, outsourcing software development can quickly become a company's nightmare. For instance, when Cornwall council outsourced its work to BT, the estimated cost rose from $650 thousand to $800 thousand. (that's quite a lot!)

So, while there are many significant benefits of hiring a software development outsourcing company, there are also quite a few lessons to learn! If you're not attentive enough, misplaced costs can very easily lead to higher spending and a lot of IT headaches.

Luckily, you can catch the sights of a failing project and avoid the pitfalls. To ensure your smooth sailing, let's get started with some tips on successful software outsourcing!

1. Set Clear and Consistent Objectives

Before you dive headfirst into outsourcing your IT needs, know why you're taking the outsourcing route. Determining the exact reasons for your decision will give you a clear picture of your objectives and how you want to accomplish them. This alone can provide the needed competitive edge.

To effectively carry out this step, define your business goals for outsourcing. It could be anything from building bespoke software to reducing operational costs. Next, find out the things you lack, anything from not having the needed skill or resources to effective software expertise.

Executing these two basic yet highly significant tasks will help you decipher whether opting for a software development outsourcing company is the best decision for your business and how you should lead the whole process.

2. Choose Compatible Businesses

The software development outsourcing company has to align with your business requirements absolutely. Therefore, it's crucial to do your homework before collaborating with a business. Misalignment is a painful catalyst for most outsourcing failures and miscommunications. If the other team is pulling in a completely different direction, tasks, deadlines, and interactions have been set to unwind.

Alternatively, work with an offshore partner that understands your business goals, work culture, and preferred working methods. Check out the below-mentioned list of activities for choosing a prospective outsourcing partner:

- Past portfolios of work

- Testimonials of similar software projects

- In-depth, legitimate reviews

- Preferred tools, technology, and project management methodology

3. Avoid Ballooning Costs

If not effectively done, offshoring software development can lead to unimaginable costs. For instance, one software project can take 500 more hours for developers and $20 thousand more costs if you don't evaluate your software development outsourcing company.

To prevent such cost increase, you must choose the best pricing model as per your project needs and budget. There are various models such as:

- Cost-plus Model (adding a mark-up on top of costs)

- Fixed Price Model (a fixed budget)

- Time and Material Model (depending on the time and money used)

Of all these, the most straightforward way to avoid ballooning costs is the fixed price model. More important than this, write a detailed contract and explain all KPIs and results. This way, the scope of the project will be well-defined and brings down the risk of surpassing costs.

4. Control Internal Resistance

More often than not, businesses face outsourcing failures due to the internal resistance from their onsite teams. Sometimes the conflict between external and internal teams leads to the dead loss of an outsourcing attempt. Internal resistance comes from office teams feeling like their job security is at risk and losing their controls.

Other unsuccessful outsourcing reasons include lack of communication, cultural and language differences, and a dismissive mindset for offshore countries and people.

To prevent issues like this, you need to figure out the right incentives to encourage your internal teams and keep their constraints at bay. Additionally, you can always keep them in the loop, inform the kind of leadership the project needs, and communicate with all the necessary information about the software development outsourcing company.

5. Build a Mutual Relationship

As it's important to complete your IT project seamlessly, equality is important to build a relationship with your offshore team based on respect and trust. A lot of people might not have realized it, but a good relationship with the software development outsourcing company is going to ensure the successful execution of your project.

Even if your project is going well, make at least an effort to establish a trustable and respectable give-and-take relationship. All this can head towards building healthy and durable associations that can tremendously benefit your ongoing project, as well as your future business.

6. Focus on Value, not Cost

Sure, outsourcing software development is a cost-effective choice, but that should be the only ground. Moreover, price and quality are kind of inversely proportional. Hence, never consider offshore development as an easy and cheap way to load off in-house work. Outsourcing should amplify your business goals and liberate time so that you can focus on other important work.

The rate of your chosen software development outsourcing company indicates their level of software expertise, skills, and work quality. For example, a vendor might have a $30/hour rate but execute the project with junior and underskilled developers. In contrast, another vendor might charge a higher rate of $70/hour but execute the project with fewer developers but with more experience and skill.

So, which of them has better productivity and can bring more value to your project?

7. Establish Proper Management

Yes, the software development outsourcing company will provide project management services, a significant advantage of outsourcing. But despite your vendor's level of experience and competency, they will require your instructions and guidance. So get ready to be a crucial part of the management process or assign managers who will lead the outsourcing activities and communicate with the offshore team.

Keep in mind that excess supervision can ruin the relationship between you and your offshore team. Don't discourage them from reflecting on their own ideas and expertise. Your job is to convey your desired end results to them clearly. So stay away from micromanagement and avoid the "no one can do it beer than me" disorder!

To Summarize

All in all, software outsourcing challenges and hassles are the inevitable parts of the whole process. These are like intermediate steps you have to conquer on your way to a successful project. But the bright side is, for any company, the advantages of outsourcing outplay the risks.

A well-reputed software development outsourcing company can ensure easier, cheaper, and faster development of your project. Recognizing the potential reasons for failures and chalking out a defined strategy for outsourcing bestows a complete roadmap for the success of your business. I hope these essential tips help you mitigate the typical outsourcing failures and reap the benefits of this process.