Software Development Outsourcing Hub

12 Software Development Outsourcing Mistakes & Our Tips to Avoid Them

February 1, 2024

The stakes are high as you undertake a new IT outsourcing project. Not only do you hope to wow users, but you also have ambitious goals for the project (i.e. timeline, budget, etc.).

Unfortunately, 25% of outsourcing relationships break up within just two years. You’ve likely heard horror stories of IT failures. For example, partners who go extremely over-budget, vanish mid-project or even steal IP! 

That’s why it’s so important to know top software development outsourcing mistakes. Find out what typically goes wrong so you can reduce the risks and keep development on-track. Our experts at Netcorp have compiled common pitfalls and strategies to overcome them.

12 Most Common Software Development Outsourcing Mistakes

(Source: SmallBizClub)

Navigating a software outsourcing project can be a major challenge. Here are software development outsourcing mistakes to avoid jeopardizing your end product. Otherwise, you may face setbacks such as delays, extra costs and quality problems. 

Pitfalls When Choosing a Partner

1. Lack of Internal Planning

Before you seek out an IT partner, it’s essential to prepare for software outsourcing internally. Just consider that 39% of IT outsourcing projects fail due to poor planning. Undergo a deep research stage with all key stakeholders. Doing so will help you know your users’ pain points, business KPIs and resource needs.

Having a business plan ready in advance will guarantee that you have a viable product vision. You’ll also have a better sense of your upfront requirements for potential partners.

2. Focusing on Price First

Even though the #1 reason behind outsourcing is no longer cost, pricing is always a priority. 

Keep in mind that cheaper isn’t usually better. The biggest risk is that you end up with a low-quality product that doesn’t meet your needs. In this case, you’ll have to pay to fix or replace the product, plus resolve any customer dissatisfaction. You might also suffer scope creep, hidden fees or delays that undermine your project. 

Instead of cutting costs wherever you can, try to prioritize value. Building a best-in-class product may cost more, but it attracts new customers long-term.  

Realistically consider your project scope and factor in the full picture. Look at key areas that will influence quality first, such as the partner’s expertise, track record, etc. 

3. Not Addressing Cultural and Communication Gaps

Every IT partner has their own unique working style. Don’t turn a blind eye to potential cultural and communication gaps. 

Check that logistics won’t get in the way of fully aligned teams. For example, know the time zone difference and your partner's asynchronous communication practices (you can explore those in much detail in our “Achieving Effective Communication in Software Development Outsourcing” guide). 

In addition, ensure language and cultural differences don’t interrupt fluid project management. Set expectations for deadlines, work quality, etc. early in the project. Choosing a nearshore location can also help keep cultural clashes to a minimum. 

No matter your partner’s background, open communication is critical. In fact, 57% of IT outsourcing projects fail due to a lack of seamless communication. Get to know your partner’s practices during the interview stage and do a trial meeting to learn their style. 

4. Ignoring IP, Data and Security Risks 

Next, you should guarantee that your IP, data and security are in good hands. Start by locking down your intellectual property ownership within your contract. Paperwork such as NDAs may be key to reduce software development outsourcing mistakes (explore in more detail in our “How to Protect Software Intellectual Property” guide). 

What’s more, do your due diligence on your partner’s security protocols. Their practices should comply with key regulations (such as GDPR). They should also protect your sensitive data from theft or loss. Ask for their ongoing backup and disaster plans, so you can be 100% sure of the security. 

5. Having an Undefined Exit Path

Finally, you should always plan ahead for how to wrap up your partnership – whether that’s in six months or six years. Include exit planning clauses in your contract so that it’s clear how the project will conclude.

Every good exit plan will define tasks such as deliverables, transfer of assets and so on. Doing so will ensure business continuity as you take on new work or hire a new partner. Don’t forget to include a conflict resolution clause as well, in case unexpected disputes come up. 

Pitfalls When Kicking Off a Project

6. Unclear Project Scope and Goals

Above all, clarify your project scope in depth. The more detailed your vision, the more accurate the estimates for timeline, budget and so on. Having vague requirements also tends to create gray areas. This could make you vulnerable to hidden fees or contract loopholes. 

Start by defining your project goals based on market and user research. Make these specific and measurable, so your IT partner understands your delivery expectations. These KPIs also serve as a way to track progress throughout the product life cycle. 

Another key area to specify is how changes will be scoped and implemented. When you have to modify or add features, change management policies will be helpful. Otherwise, you may be surprised by extra fees for changes mid-way.  

7. Little or No Discovery Stage

Businesses often focus on the development stage. Yet, Discovery is just as vital to stop software development outsourcing mistakes. 

During Discovery, your partner will guide you through validating your product vision. The idea is to dig into user pain points and come up with an MVP that truly fits their needs. Discovery makes sure you’re headed in the right direction before using resources. It also incorporates all stakeholders to account for all possible business impacts. 

For best results, don’t skip the Discovery phase. It can save you money in the long-term by ensuring your vision is feasible. 

8. Rushed Onboarding Process

Hiring a software partner isn’t a “one and done” deal. It’s important to prepare thorough onboarding, as this can boost productivity by up to 62%

Depending on your project, onboarding may involve a variety of tasks. For example, you can transfer knowledge through detailed documentation and kick-off meetings. If possible, a digital course on your company’s values and activities can be useful. 

Additionally, you’ll want to set up access controls and tools for all parties. Team building may also be key to boost alignment for long-term projects.

9. Not Having Top Management

Software outsourcing success depends on having a seasoned manager at the helm. Make sure you have the right PM coordinating across your in-house and partner teams. If you don’t have an obvious candidate, it’s a good idea to hire one. 

A skilled manager will not only fulfill deliverables, but also motivate teams. This point person will also give you a transparent look into the project, so that you feel in the loop. 

10. Failing to Align Collaboration

Seamless collaboration is at the core of any software development project. In fact, it can elevate productivity by up to 25%.

Get everybody on the same page by setting expectations early. Otherwise you may face misunderstandings and even internal resistance. Some strategies to get your developers fully integrated into the project include:

  • Break down projects into milestones
  • Host daily/weekly check-ins
  • Define communication channels and tools
  • Document processes in depth
  • Work closely with stakeholders
  • Track and report KPIs regularly
  • Create a flexible working environment

When in doubt, keep communication lines open. This way, you’ll be able to stay ahead of any issues and clarify uncertainty on your teams. 

11. Not Undergoing Rigorous QA

Code quality is paramount to satisfy customers and secure your business reputation. After all, 36% of software outsourcing projects fail due to a lack of QA. Check that your partner includes built-in QA testing in your timeline. Ultimately, having quality control in place can prevent bugs and limit downtime. 

QA testing should be scheduled throughout the product life cycle. Rigorous QA will ensure quality adherence and code uniformity. As part of this process, leverage best practices for testing standards and maintenance. 

For example, you should have ongoing monitoring and a schedule of upgrades. User testing should also be included at several milestones to meet customer demands. 

12. Struggling to Build Trust

Another big software development outsourcing mistake is not building a solid working relationship. Strong ties between you and your partner only helps your product to succeed. 

Work closely with your partner to create collaborative processes and a team spirit. Overall, transparency is the #1 value that businesses look for in a partner. If your partner isn’t showing trust signals or long-term commitment, it may be time to make a change. 

Checklist of Key Factors to Choose Your Ideal Tech Partner

At 78%, the vast majority of IT outsourcing partnerships are positive. Yet, there are nightmare stories of businesses that truly blew it. Epic fails in software outsourcing include big names such as Virgin Airlines, J.P. Morgan and more. 

What's the best way to avoid software development outsourcing mistakes? Hire your ideal tech partner. During the vendor evaluation process, ask a lot of in-depth questions. You should also be sure to:

  • Check portfolio and experience
  • Determine technical specializations and resources
  • Look for long-term business values
  • Understand their work and communication style
  • Assess team dynamics, methodologies and protocols
  • Conduct in-depth interviews 

For even more tips on choosing the ideal IT partner, head to our detailed guide here!

Avoid Software Development Outsourcing Mistakes With Netcorp

Software development outsourcing mistakes like these can derail your project. Avoid potential issues by using our key strategies above. In this way, you can overcome common challenges and keep your project on target. 

Perhaps the most important success indicator is hiring the right IT partner. At Netcorp, we build rapport through transparency and technical prowess. Entrust your project to our elite teams and safeguard your software from mistakes. Reach out to us to discuss your project vision today!

Paavo Pauklin
Executive Board Member

Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.

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