Why Software Outsourcing Fails

Outsourcing software development has the potential to unlock a wide range of game-changing benefits, including cost savings, enabling core functions, increasing capacity, bringing innovative solutions to market faster, and more.

However, the cost of getting this crucial strategy wrong can be steep.

Consequences run the gamut from time lost to reworking sloppy code to poor experiences and data privacy violations that can cause serious, lasting damage to your brand and reputation.

According to Deloitte, organizations’ outsourcing efforts are doomed to fail without the following components:

  • Proper planning, management, and control over the direction of the project/engagement and the terms of the outsourcing relationship.
  • An effective governance process.
  • A risk management strategy that covers all of the “usual bases: legal, financial, commercial.
  • Special attention to managing transitional or transformational phases in the development cycle, as these stages present the biggest risks to the project.

In this article, we’ll dig into some of the more specific reasons why outsourcing fails—and how to avoid the biggest pitfalls that come with the territory.

Why Software Outsourcing Fails Infographic

Poor Planning

Poor Planning

Outsourced projects live and die by strategic planning. In other words, you get what you put in.

While most organizations understand that outsourcing development projects require some level of planning, many fail to cover all of their bases.

Every aspect—from documentation, standards, and milestones to expectations around communication—must be defined in advance.

It’s worth repeating: you shouldn’t start any engagement with an outsourcing partner without first establishing a clear use case, requirements, and scope of work. The best outsourcing arrangements deliver major returns—whether that’s reducing customer churn or boosting profitability—when you ensure you get clear on what you’re hoping to gain from this partnership.

According to Tiempo Solutions Engineer, Angel Almada, consistently delivering positive client outcomes isn’t exactly an easy task. He says, “it requires a holistic approach spanning phases of SDLC, starting with a robust product vision, goal, and roadmap.”

Consider your current product backlog and roadmap. Does it reflect your current business goals? Where you’d like to be in the next five, ten years? Roadmaps have long focused primarily on updating and replacing aging or inadequate legacy systems. While that is still important, it isn’t reflective of an adaptive, dynamic competitive strategy.

The key theme here is aiming for outcomes over outputs. Partners aim for outcomes, while vendors aim for output.

“Consistently delivering positive client outcomes requires a holistic approach spanning phases of SDLC, starting with a robust product vision, goal, and roadmap.” – Angel Almada, Solutions Engineer, Tiempo Development

Lack of Clarity

Lack of Clarity

Failing to define expectations with internal and external staff is another key reason behind many company outsourcing failures.

Make sure to define roles and responsibilities for anyone who may be involved—no matter how remotely—in your project. Internally, that means making sure that someone “owns” this project and is responsible for ensuring that it remains aligned with the organization’s high-level business goals.

If in-house staff will be collaborating directly with outsourced teams, be sure to define workflows and processes covering everything from communication methods to quality testing, provide guidelines for integrating outsourced teams into company culture, and supply guidance for which tools to use and when to use them.

For external teams, you’ll need to take it a step further. That means providing documentation around roles and responsibilities as well as contextual information that helps developers align around goals.

Assuming that product features and requirements are out of scope or already taken care of, the next challenge is communication at all levels.

When strategy doesn’t line up with the execution (i.e., there’s a lack of alignment between different stakeholder teams such as product management and development, internal-external developers, the C-suite vs. the front-lines), deviations occur either on scope, purpose, or priorities. And, as a result, that mismatch means these different groups mismatched expectations. As such, it’s important to avoid making assumptions.

In cases where something isn’t well-defined, it’s better to stop what you’re doing and get an agreement or definition rather than assuming the other party understands what you mean.

This is especially important when you’re partnering up with a provider in another country, where even when you’re speaking the same language, there are still some cultural and professional differences that can further complicate the challenges of working with a remote team of developers.

Choosing the Cheapest Provider

Choosing the Cheapest Provider

One of the main reasons companies choose to outsource software development is to reduce development costs.

It’s well-established that outsourcing is an effective way to get more mileage out of your tech investments, as well as gain access to top talent at a lower rate than working with US-based teams.

That said, focusing too much on the base rate isn’t the best way to achieve those savings. Worse, it’s one of the top reasons for outsourcing failures. The cheapest provider often delivers substandard results—be it low-quality code, project delays, or poor communication.

One of the biggest mistakes we see companies make when choosing an outsourcing partner is the decision is sacrificing the benefit of time zone proximity in favor of the cheapest offshore resources.

Unfortunately, this makes it much harder to implement methodologies like Agile and DevOps and leads to organizations relying on overnight communications for dealing with high-risk dependencies.

On a related note, seeking out the “fastest” provider isn’t a great idea either. One of our software engineers, Pedro Tavares, says another issue that can result in failure is prioritizing timelines over code quality. While efficiency is important, you can’t force your developers to rush the process and expect to get great results.

Again, the focus should be on getting the most business value possible from this partnership. Fast, cheap service will often only cause more problems (and cost more money) in the long run.

Losing Sight of Target Audience

Losing Sight of Target Audience

Modern software development is all about delivering solutions that exceed end-consumer expectations.

Projects that fail to incorporate customer and stakeholder feedback throughout the development lifecycle may no longer be relevant/useful/innovative by the time they make it to market.

For clients, that can mean spending significant sums on projects they can’t sell. Which, unfortunately, means they’ll never be profitable.

Customer-centricity needs to be baked into the planning process and outlined in documentation. Here, you have to provide external teams with the tools, processes, and information they need to incorporate user feedback into the development process.

It’s also worth noting that customer-centricity is far easier to achieve if you’re using Agile methodologies. Clients should look for providers (again, in their time zone) with expertise in this area and ask questions about their process and how they stay focused on the customer.

Lack of Technical Expertise

Lack of Technical Expertise

Lack of technical expertise—either on the client side or the vendor’s—is another big reason why outsourcing fails. On the client side, sometimes issues stem from the person leading the project or outsourcing initiative.

In that scenario, clients may not understand what they’re looking for, or they may be vetting potential partners based on the wrong set of criteria—i.e., price or specific languages/ technologies—rather than finding a vendor who can deliver the desired outcome.

In other cases, the lack of technical knowledge comes through in the project’s documentation and requirements. This issue might be caused by the business leader failing to enlist the help of the internal development team, or maybe the client doesn’t have that internal talent to begin with.

Here, the client might demand features that dramatically increase the size, scope, and cost of a project or fail to deliver any value to the business—think features that include a “trending” new technology or something better suited for another industry/use case.

A lack of expertise on the vendor side can also lead to disaster if they can’t deliver the desired outcomes. That could be because the development team doesn’t have the right set of skills, or they don’t have access to the right resources. The vendor may have the talent, but their process isn’t compatible with the client’s workflow.

The key thing to think about here is, placing greater emphasis on finding a vendor that will fill the role of “trusted partner.”

From Angel Almada again, “not having the correct methodology and best practices for each initiative means that the outsourcing firm is likely to fall short of client expectations. That’s why we need to focus on having the best talent to tailor those best practices in place and avoiding landing on Maslow’s Law of Instrument.

Essentially, the goal is finding a partner who has the right tools and resources in place and also has a deep understanding of how to apply the right people, practices, and technologies so that they can reliably deliver the ideal outcome.


Ultimately, find a partner with the experience and flexibility to adapt to an ever-changing competitive landscape. This partner focuses on business value and outcomes instead of low rates, and high-speed turnaround times.

Tiempo Development provides clients with nearshore software development talent that focuses on delivering the best possible outcomes. To learn more about working with us and how we get results, contact an expert today.