10 Tips on How to Avoid IT Outsourcing Failures

February 16, 2024

Are you interested in outsourcing your IT development needs but are worried about the possibility of running into pitfalls? More and more businesses outsource their software development needs to offshore teams because of the many benefits, including cheaper costs and access to a broader pool of talent.

However, that doesn’t mean that they don’t regularly run the risk of experiencing failure in that area. Before you hire an offshore development team, you need to be well prepared to handle any risks or difficulties you might face along the way.

The good news is that Here at Cloud Employee, we’ve seen immense improvement in our client’s operations in terms of workforce efficiency. This is all thanks to our professional offshore developers in the Philippines. If you’re looking to outsource software development, get in touch with us.

In the meantime, to ensure that you are ready, we’ve put together a helpful list featuring ten tips on how you can avoid IT outsourcing failures.  

1. Have clear and consistent objectives for outsourcing

Before diving headfirst into outsourcing your IT needs, you need to determine the reason you're outsourcing. Knowing exactly why you’re taking the outsourcing route gives you a clear picture of what you want to achieve and how to achieve it. That alone can give you a competitive edge. To properly execute this step, you need to define your objectives for outsourcing, and this can be anything from reducing operational costs to developing a new software product.

Next, determine the things you lack; it could be anything from expertise to working hours. Carrying out these two tasks will help you figure out whether outsourcing is the right course of action for your business, and this, in return, will put you on the right path from the get-go.

2. Determine the goal of your outsourced project

Once you’ve decided that outsourcing is the best option for you, you will need to figure out the goal of your project. Start by determining the exact project you want to outsource. Ask yourself questions like “What is the nature of the project?” and “What functions can be done in-house?”. You will also need to identify your long, and short term needs so that you can have an exact list of expectations and responsibilities to communicate to your offshore team.

Consider the future of your software product and how you expect your offshore team to handle any developments. Doing this ensures that your project remains organized and that your outsourcing team is clear on all the tasks.

3. Ensure that you select the right vendor

Choosing your vendor is one of the most critical decisions you have to make when outsourcing your software development, so you need to ensure that you make the right decision. The vendor you pick needs to be a service provider aligned with your business culture and project objectives. They should equally have the capability to deliver the best service.

To find a vendor like this, you need to do your research. Start by shortlisting your search to about 5 or 6 offshore development companies. Next, analyze each of them by going through their portfolios, client reviews, and expertise.

Get an idea of what their company cultures, values, and processes are like. At the end of your research, you should be able to make a well-informed decision.

4. Prepare for the possibility of internal resistance

One outsourcing failure businesses face is resistance from their internal team. Outsourcing attempts often fail because of conflict between internal and external teams. Internal teams tend to feel like their job security is being threatened and begin to have concerns about control. Other offshore failure examples include cultural differences, gaps in communication, and negative perceptions about the offshore country.

To avoid issues like this, find the right incentives to motivate your internal team and keep their concerns at bay. Also, keep them in the loop at all times, communicate the nature of leadership for the project, and provide them with all the information they need about the outsourcing country. This will go a long way when it comes to preventing problems of this nature.

5. Focus on value, not cost

One of the benefits of outsourcing is the opportunity to save costs, but that shouldn’t be the only reason you choose to look overseas for your IT development. Considering outsourcing because it presents a cheaper alternative isn’t always a good idea, and it could leave you with a defective product.

Instead of focusing on lesser costs, you should shift your focus to value. The vendor’s expertise, work rate, work quality, customer reviews, and experience should have precedence over the low costs. Placing value over price reduces your risk of wasting your money and ending up with a product you are not satisfied with.

6. Employ a manager to overlook the project

Your offshore team is there to help you execute your project, but that doesn’t mean that you should delegate the management of the project. Doing this not only puts your project at risk, but it also gives your offshore team the chance to slack on their work. To that effect, you need to ensure that you have a manager overlooking the project’s completion.

While the offshore team manages its own internal procedures, your manager still needs to provide overall guidance and direction to not put your project in danger of being improperly executed.

7. Prepare a clear and detailed written contract

A formal, written contract always works in your favor when it comes to working with offshore teams. Outsourcing failure statistics show that one of the leading causes of failure with outsourcing involves unclear or unwritten. This is why it is crucial to write a formal contract that clearly defines the offshore service provider’s responsibilities.

Areas such as the required working hours,  agreed-upon rates, and any details regarding the project’s future should be covered in the agreement. This ensures you don’t run into any confusion. It is also essential to plan an exit strategy in the form of a refund policy, so you are covered in the event that your outsourcing team is unable to complete the project or delivers a subpar result.

8. Establish a good communication model

Studies have shown that ineffective communication is one of the leading causes of project failure. Communication is vital, especially when dealing with an offshore outsourcing team that probably operates in a different time zone. You need to establish a good communication model, and this starts by establishing a communication channel with the offshore team.

You could employ tools like video conferencing and instant messaging platforms. You will also need to schedule regular meetings and have follow-up conversations to ensure that all details are addressed.

9. Address any cultural mismatches

There is always the possibility of running into cultural clashes when working with an offshore team. When faced with this issue, you need to understand that they have their own working culture, the same way your business does, and so establishing mutual respect and understanding is essential.

This could involve some levels of staff training, some time set aside for internal and external teams to learn about each other and to establish effective communication protocols.

10. Build relationships with your offshore team

It is just as important to build relationships with your offshore service provider as it is to complete your IT project. Some people may not know this, but a good relationship with your offshore team is more likely to ensure you successfully execute your project. While the project is still well on its way, make an effort to establish mutual trust and respect between your business and your offshore team.

Take some time to get to know the team members and show real interest in them. All this works towards building a healthy, long term relationship that could benefit your current project, as well as your business in the future.


How can pitfalls be prevented in outsourcing?

Pitfalls can be avoided by establishing proper communication between partners and clearly defining what you expect from the offshore team. You also need to compile a detailed written contract, addressing any cultural or technical clashes head-on while being involved in your project’s management.

What are the problems with outsourcing?

There are several potential problems with outsourcing. Some of them include lack of flexibility, differences in time zone, cultural and language barriers, unclearly defined expectations, and not preparing a clear and detailed contract.

What are the two most frequent causes of outsourcing problems?

The two most common causes of problems are companies setting their expectations too high for the outsourcing team. Also, there are organizational culture clashes between businesses and their outsourcing partners.

How can outsourcing be improved?

There are several ways outsourcing can be improved. Some include carrying out adequate research on vendors so you can hire the right fit for your business. You also need to set realistic project goals, involve yourself in the management process, communicate effectively with your offshore team. Also, endeavor to build relationships with your offshore partner.

To Summarise

While there are many benefits of employing an external team to meet your software development needs, you still need to be prepared for all the possible risks you may face along the way. While these ten tips are not all-encompassing, they are still helpful when it comes to getting your business ready for an offshore team. Applying them definitely ups your chances of experiencing a successful business relationship from start to finish.