18 Disastrous IT Outsourcing Mistakes and How to Avoid Them

Nowadays outsourcing development of software is a widespread practice in the US, Canada and various countries of the EU. Understandably, not every experience in this field is positive and successful. Whether you have no outsourcing experience or you have already worked with dedicated remote teams, it is quite useful to find out about the typical mistakes that can be made.

This article will tell you not only why does outsourcing fail and what are common mishaps but also will offer you ways to prevent them as well as solutions to existing problems.

 

Mistake № 1: Not Doing Market Research

Hiring any specialist is a very serious process, let alone when a company hires an offshore team. That is why market research, which will help you estimate the risks and opportunities, should be the first step you take.

The solution from Echo: In order to avoid outsourcing mistakes, take a look at the solutions that your competitors and more well-known companies use. It does not mean you should copy them completely. But the research will give you a general understanding of the options you have.

Another good practice for preventing unsuccessful outsourcing is to research the peculiarities of the IT market in different countries. For instance, outsourcing to Ukraine becomes more popular each year. This analysis may help you to choose the best country to look for developers.

Mistake № 2: Unclear Requirements and Vision

Some outsourcing disasters may be the result of misunderstanding and incomplete information. Even the best developer in the world would not be able to deliver the results and meet your expectations if you did not convey your ideas fully.

The solution from Echo: To avoid it, first of all, look at your in-house team, at the roles and responsibilities of each team member. Analyze them thoroughly so you will understand what do you expect from your remote team and which tasks/roles you will give them. Another important bit is to choose the proper outsourcing model that will suit your company perfectly.

Second of all, you have to prepare a complete and extensive description of your ideas and your project that would include all the necessary details. Regular communication with the team is also necessary. This way team members will have an opportunity to clarify unclear information and ask you questions.

Mistake № 3: Poor Selection Process

As was mentioned before, the hiring process is not an easy one. It is preceded by selection. Main mistakes in a selection process include lack of market knowledge, absence of a hiring plan, only a cost-oriented approach.

The solution from Echo: Fast and superficial selection can result in failed outsourcing projects as well as monetary and reputational losses. To avoid this mistake, uppermost you should learn about the steps and characteristics of selection and hiring in IT. A general understanding of this process will greatly simplify it.

Mistake № 4: Hiring Workers from Anywhere

Modern world technology gives you an opportunity to reach any company’s representatives within minutes. But in this case, like in the previous one, choosing the first option that seems suitable is most likely a bad decision.

Hiring developers from other countries may be problematic for a number of reasons: cultural gaps, insufficient education, or even time differences between your countries. At first glance, you may think that you are saving costs. However, the aforementioned problems may later result in unexpected expenses and disappointment.

The solution from Echo: You should first learn about different models of outsourcing of software, and then decide if you opt for nearshoring or offshoring. It is necessary then to read about the countries you may work with to ensure developers from it have the necessary levels of education and experience.

Mistake № 5: Timings and Timezones: Plan to Keep Delays to a Minimum

Delays are inevitable in every work process and every team. However, when you work with the remote team, it may be harder to control them and to minimize delays. In this case, you will always need to take into account the time differences, especially if your team is a part of an offshore software development project.

The solution from Echo: If you prefer to get fast reactions to pressing issues, you should choose nearshoring and the country that has no more than 4 hours difference. Thus, the schedules of both you and your remote team will overlap. It will be easier to plan meetings and have real-time conversations with team members.

Mistake № 6: Going for the Shiny Brand

Thinking about how to prevent outsourcing failures, you may assume that working with a big company with an established name will solve all problems. However, such companies usually work with equally big and well-known enterprises. Thus, your project may not always be a priority for them. Another issue that may arise is unreasonable prices and sudden changes in the cost of the services.

The solution from Echo: In most cases, working with middle-sized or even small IT companies may be the best choice. This way you will be sure that your project will be treated with attention and respect. Moreover, you will get the same (or even better) quality of development services at a reasonable cost.

Mistake № 7: Not Judging the Skills in a Specific Business Niche

It is obvious that looking for a software development company that has experience of working in your field is a smart choice for the outsourcing of software. This way you will be able to evaluate the knowledge of developers better and choose the right people for your team. Try not to opt for a company that has a very narrow area of expertise as this means they will have less knowledge in your field and will need more time.

The solution from Echo: The main advice here is to judge the company by the cases they worked with. Even if its experience does not match your expectations 100%, you still can send them a request. Such a decision is especially relevant if you opt for outstaffing. So you can just choose several remote developers in a narrow field to complement your existing in-house team of IT specialists.

Mistake № 8: Not Having Account Managers

When working with an IT outsourcing company, mind that communication is the key. If you do not ensure that your remote team is lead by Project Manager or Account Manager (depending on the cooperation model), you may face unpleasant outsourcing consequences.

The solution from Echo: While communicating with the representative of an IT outsourcing company, make sure that they have a person with the necessary skills and knowledge to lead your remote team. This person will be the first to update you on the team’s progress and the first to react to your inquiries and requests.

Mistake № 9: No Technical Assistant Provided from your End

One of the reasons for failed outsourcing is the absence of technical specialist in the client company. It does not matter if you choose the staff augmentation or outsourcing model, you can not put all the responsibility on the contractor.

The solution from Echo: Reliable and responsible Project Manager does not mean that you should not have your own IT specialist. Without the involvement of your CTO or Technical Assistant, your remote team won’t be able to meet your expectations fully and deliver the best services.

Mistake № 10: Outsourcing for the Short Term

Treating your remote team as a temporary workers is another way to unsuccessful outsourcing. There are no doubts you want your remote developers to be dedicated to your project. Therefore, keep in mind that you don’t hire them just for one single project. Their work may have long-lasting effects on your business.

The solution from Echo: In order to avoid this mistake, treat your team as a part of your business process. Also, in the selection process, pay attention to contractors that support big projects of other companies for years. This means that they are reliable, have rich experience, and provide the services of the highest quality.

Mistake № 11: Outsourcing the Wrong Activities

Most IT companies offer the widest range of services. And of course, you may be tempted to outsource as many tasks and functions as possible. Rush and lack of analysis are some of the reasons for failed outsourcing projects.

The solution from Echo: Just as in the case with the mistake №2, first, you should analyze your needs, requirements, and tasks of your in-house team. Evaluate risks, pros and cons, and consequences of each option one by one. Only after you have a clear understanding of what you already have and what can be done in-house, you should start to look for a remote team.

Mistake № 12: Internal Resistance

Your in-house team of IT specialists may also sometimes be the reason for a company’s failed outsourcing. In-house staff may be skeptical about outsourcing or even openly resist the idea. Sometimes they are worried about their own position in the company or their own income. They also may doubt that the remote team of developers will deliver the product of good quality.

The solution from Echo: As in many situations, in this one, communication is the key. You have to clearly and definitely justify why outsourcing is the best choice in your situation. Your in-house developers will for sure appreciate open discussion and the ability to ask questions. Try not to work with the specialists who are not committed and devoted to the project and your business.

Mistake № 13: Ignoring Personality, Technical, and Process Mismatches

Outsourcing usually means you will probably work with people from a different country (especially if you opt for offshoring). That is why it is crucial to remember about the cultural differences you may have, which include differences in business culture as well.

The solution from Echo: In order to avoid this outsourcing failure, thoroughly discuss all the cultural differences that may be sensitive and influence your cooperation. In some cases, additional employee training regarding this topic is necessary. You may as well introduce additional cooperation rules and policies. Another important point to discuss and approve on both ends is the technologies and systems you are using.

Mistake № 14: Not Being Transparent

There is no doubt that you are interested in protecting your business and its secrets. However, without a full understanding of what you are doing and what are the main business processes in your enterprise, it would be hard for vendors to satisfy your needs and meet your expectations. Too much hidden information may ruin your relationships with your remote team.

The solution from Echo: Try to be as transparent and honest as possible. To protect your intellectual property and sensitive data, discuss and sign non-disclosure agreements with your remote employees. This will make your experience of outsourcing of software both safe and efficient.

Mistake № 15: Not Committing

An offshore software development project is a thing that requires trust and commitment on both sides. Lack of those will most likely result in significant losses of time and money. No commitment may result in delays in your project as well as the situation in which you will have to change the contractor in the middle of the project.

The solution from Echo: The best advice, in this case, is to be 100% sure when you sign a contract with the IT outsourcing company. You have to be certain that the remote team you have chosen will be dedicated to the project. On your side, enterprise-wide commitment is also necessary as every moment of uncertainty may harm your business.

Mistake № 16: Cracking The Code: Who Will Own The Code and IP

Сonfusion with rights and ownership of intellectual property may harm your business in the long run. Although this detail is obviously very important, it is sometimes neglected. And it may result in failed outsourcing experience.

The solution from Echo: The solution to this problem is similar to the previous one. Sign detailed and thought-through NDA agreements to protect your data and make sure that the final code and IP of the app belongs to your company. Ensure that everybody knows their position and rights.

Mistake № 17: Lack of Defined Exit Strategies

Exit strategies are crucial in every business process. You never know if you need to finish your cooperation before the end of the contract term. In such a case, you would like to save time, budget, and efforts as well as your reputation as a potential business partner for other contractors.

The solution from Echo: Development outsourcing best practices require the involvement of legal teams on both sides. Be sure that the agreement you sign has clear conditions for renegotiation, renewal, and termination of your cooperation.

Mistake № 18: Forgetting to Reward Good Work

It is obvious that any person needs praise and approval for one’s work to stay motivated and enthusiastic about it. It is especially relevant to remote teams. Even if you do not see them each and every day in the office, they still work for you and need to know that their work is appreciated.

The solution from Echo: Even if you are very busy on a daily basis, find some time to message each team member or at least to write an uplifting letter for the whole team. Including small team building activities (for instance, pizza parties) for your offshore team into your budget is also a nice way to thank them.

 

Choosing an IT outsourcing company is a complicated process with a lot of risks, and a lot of mistakes can be made during it. It is also important to remember that it is not a one-time thing, it may have a long-time effect on your business as a whole. In order to avoid the most widespread mistakes in outsourcing, it is crucial to study failed outsourcing examples. To make the right choice, you should be ready to dedicate a lot of time and effort to this process.

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I've founded Echo based on my three passions: engineering, marketing, and headhunting. As a company CEO, it is always hard for me to make time for writing. However, I like sharing my experience with people around.
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Lou Reverchuk

Entrepreneur, Marketer, Writer

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