9 Reasons Why Outsourcing Software Development Fails

“How hard can working with an outsourcing software development company be?” The demand for software outsourcing is only growing and everyone from small businesses to large enterprises is utilizing these services for a variety of reasons. Companies are seeing the benefits of software outsourcing and want to reap the benefits themselves. So you do a little research online and come across the 2020 statistic from the Barometer of Global Outsourcing that 20-25% of outsourcing relationships fail. 

Those aren’t odds worth playing with when outsourcing software development can cost hundreds of thousands of dollars. 

You read about software outsourcing tips and you come across the same tired advice:

   - Keep expectations realistic

   - Don’t work with unprofessional teams

   - Communicate clearly

It is insulting to be told the obvious. You need new information that will help you make more informed decisions. 

Whether you are a startup or an established enterprise, we have some insider insights on what leads to a successful outsourcing partnership.

Throughout our 17 years of software outsourcing development, we have had our fair share of clients. What brought some clients to greater success and what led some to failure is more than just communication and expectations. 

We aren’t here to talk about what you already know. We are here to share our observations from our professional relationships with enterprises of all sizes and industries. We’ll be covering what behaviors and beliefs we noticed made certain enterprises have more successful outsourcing software experiences and what has driven others to fail.

Not Utilizing Full Services

You can get a lot more than what you pay for. Some unfortunately approach a new outsourcing partnership with the false belief that outsourcing is a one-way partnership – the client tells the developers what they want and the developers deliver the product more or less how they want it. Then the back and forth starts. A common mistake made by clients is just thinking about their software development from a technical perspective. 

You are conducting business. 

Talk to your software business partner about your vision, business, along with your technological needs. Software is not just a tool, it is one of the many faces of your enterprise. Keeping things strictly technical will result in a failed software outsourcing partnership. 

1. Business Analysis Consulting

Business is the bottom line. The reason you are outsourcing software development in the first place is to meet your enterprise’s needs. Your developed software should focus on meeting business needs, not whatever is trendy, convenient, or affordable. It does not matter how user-friendly, scalable, or powerful an app is if it does not serve its primary functions. 

All stakeholder needs have to be met – Investors, Users, Clients, and everyone in between. Investors have to see that the newly developing software is going to serve its purpose. Those from your end of the business need to be able to run the app and be able to articulate what changes need to be done to improve the application. If your software is also used externally by customers, they need to be able to use the software with ease and have their needs fulfilled. 

Once needs are defined it is easy to define the necessary scope to begin development and launch with an MVP. 

2. Tech Consulting

The right software is built with the right tools. It should be developed with the needs of the business in mind, not whatever is cheaper or easier for the developer. Some software outsourcing companies focus on specific technologies and can only offer solutions with the tools they have. 

Software needs to be scalable to meet business needs and open to integrations to meet future needs. A solid-built application may be great at launch but after a few quarters falls apart as it can’t scale. Your software outsourcing partner should be able to correctly identify what languages, frameworks, and tools need to be used to meet your needs. 

Sometimes the best thing you can do is get a no-obligation tech consultation from a company that has a broad skill set to offer advice with the least amount of bias.  

3. Quality Assurance / DevOps

Congratulations, you successfully launched your software and are getting good feedback from everyone. But what happens in a few quarters when your servers are burdened, bugs pop up, and the newly integrated features are not functioning properly?

Software is not static. There are always bugs to fix, features to reevaluate, and maintenance to be done. 

Things need to get to market fast. So, software is not always completely ironed out before launching. 

It is an industry standard to try to launch with an MVP and then work out all of the kinks along the way. Naturally, you would need a solid QA and DevOps team to keep things rolling smoothly. 

If you decide to go in-house, make sure your team is experienced in dealing with your specific kind of software. Sometimes having a full in-house team is not financially justifiable. 

From our experience, we find that sticking with the same quality software developers for quality assurance and DevOps is the best industry standard practice. Their internal communication and management are much better than trying to work between two separate teams. 

Just because you are working with a separate company doesn’t mean you can’t form a healthy partnership. 

Keeping the Partnership Active

The outsourcing partnership does not end at launch. There is always more to be developed and expanded upon. The more flexible the software is, the greater the success. Chances are if you had to outsource your development, you don’t have an in-house team ready to deal with much other than light maintenance. 

Build a strong partnership with your software outsourcing provider that goes beyond development services.

4. Lack of Brainstorming

You don’t have all of the answers. Don’t just ask your outsourced software development partner for technical advice during the initial stage. As software development companies have more experience developing applications, they have a lot more to offer than the standard insights you would expect. 

Be verbally open to new ideas. A good software development outsourcing company has more than just developers. Their business analysts and project managers are vital to your success. They have years of knowledge to work with across different industries and software development projects, offering an important perspective.

Not Being Ready for Development

5. Funding

Funding has become the determining factor for software seeing the light of day. No funding, no development. Sometimes startups get so excited about getting their project on the ground that they double down on building an MVP and realize they bit off more than they could chew.

Consider taking smaller steps and utilizing rapid prototyping services to have something to present without having to invest heavily in an MVP.  

6. Weak In-House Team

You are outsourcing for a good reason, having a full development team in-house is very expensive. If you prefer to keep an in-house team to become experts in your software, make sure they are getting extensive training and familiarizing themselves with the software. 

Finding the right balance between outsourcing software development and maintaining an in-house team for support and management is difficult to gauge. 

Remember that software has no real finish line. There is still much work to do after launch. A proper handoff is needed to ensure that your in-house team can continue to keep things running smoothly.  

One of the most important aspects of outsourcing is the knowledge transfer to your in-house team. However, if this knowledge transfer process is rushed, incomplete, or poorly executed, the in-house team may struggle to maintain, enhance, or troubleshoot the software effectively, leading to its eventual demise.

A proper knowledge transfer involves lots of documentation, insights, and training. Don’t settle for something quick thinking every partner is ready to answer your questions after they hand off. Great partners are always ready to continue working together but some may be at capacity and will not be able to find the original team to guide maintenance. 

7. Generalized Domain Knowledge

While you may have found a software outsourcing company that specializes in your industry, it still does not entail that they would have a firm grasp of your enterprise. Getting the basics down is not enough. While certain aspects of your enterprise may seem simple and straightforward, it is better to go over the nitty-gritty details with your outsourcing partner so they can fully comprehend your work processes. 

It is better to go over what seems like redundant information so everyone is on board. 

What Software Development Companies Could Do Better

8. Not Overpromise During Sales

Sales representatives sometimes try too hard to make a sale. They might be more optimistic about their capabilities and their technical team will just try to wing it as they are in need of a client. A struggling outsourcing company may be tempted to take on a project they can’t handle so it is important to assess their capabilities by asking for prior references and starting off with small tasks before signing onto a full partnership if you have a larger project at hand. 

9. Sticking to Tech They Know

There will always be biases in determining your software’s tech stack. Software outsourcing companies have their own preferences when consulting about which technologies to develop your software with. To get the best consultation, it is best to go to multiple companies and compare solutions they advise. It also helps to acquaint yourself with different languages and their use cases to better judge. 

Don’t let your software partner’s stubborn choice of a specific solution lead your software project to failure. 

It Isn’t the End of the World

Even if your first choice was not your best choice, there are always software project rescue services to get your software back in action. Your software can either be salvaged or kept running while a new solution is developed. 

Better to invest the time and money in the initial planning stage and make sure everything is going to be ready than rush through and have to do it all over again with spent resources. 

Slow and steady wins the race.

More helpful resources: 

   - Your Complete Guide to Software Development Outsourcing
   - Our Take on Software Development Outsourcing: An Interview with Armen Kocharyan
   - Business Discovery Workshops: How to Ensure the Successful Kick-Off of Your Software Project
   - Maximizing ROI: How IT Advisory Services Drive Business Growth 
   - Exploring Armenia's IT Landscape: A Compelling Case for Outsourcing Software Development
   - Does My Enterprise Need Digital Transformation?
   - Navigating Digital Transformation Services: A Guide for Industry Leaders in 2024 
   - How to Decide Between Offshore, Nearshore, and Onshore Software Outsourcing: Five Things to Consider
   - Comparing Software Development Proposals: Red Flags and Warning Signs
   - Outsourcing vs. In-House Development in 2024: A Comprehensive Analysis
   - Top Web and Mobile Development Companies in Armenia in 2023: Crafting the Digital Future Locally and Globally
   - Outsourcing vs. In-House Software Development for Companies in the Commodities Industry