7 common mistakes in IT outsourcing – and tips to avoid making them

Jeroen van der Horst
Account director

As more and more companies seek to reduce operational costs in areas such as managing enterprise applications and software development, the IT outsourcing sector is experiencing a period of sustained and steadily increasing demand.

But there’s a world of difference between IT outsourcing that leverages the benefits of external expertise, and expensive outsourcing which overruns and potentially damages customer relationships, and your business reputation.

So what can you and your business do to mitigate the risks of things going wrong? I, Jeroen van der Horst, share what I’ve learned from experience as a co-founder at Proshore.

The future is IT outsourcing

There’s no denying it. With the IT outsourcing sector expected to show a compound annual growth rate of nearly 9%, there’s a clear and obvious trend of businesses seeking a competitive advantage through outsourcing software development. 

This is a worldwide phenomenon, with revenue from application outsourcing alone set to reach €94.53bn in 2022. Getting software development outsourcing right can help you overcome technical challenges, and give you a competitive edge. Getting it wrong can lead to a product that doesn’t meet your expectations, or worse, one that’s unfit for purpose.

1️⃣ Planning

“If you’re not properly organized, your management efforts are going to be much greater than the results you’re gaining from outsourcing IT.”

Taking a ‘hands-off’ approach to software development outsourcing can often come back to bite you in the long-term, with mistakes or misunderstandings needing extensive micromanagement to get development back on track, or even salvage it entirely. For that reason, vision is everything.

Without a clear vision, your outsourced software development team won’t have a clear sight of the project’s direction. So before the project gets underway, ensure you know exactly what you’re outsourcing. Give developers a roadmap  – it’s worth putting in the extra planning time to ensure that you know your requirements for the short-term and the long-term. 

Provide a clear scope to ensure your outsourced team knows exactly what functionality they are responsible for developing. Expect questions and be concerned if there aren’t any – questions are a sign of engagement, and the desire to fully understand your business goals and the project itself.

2️⃣ Alignment​

It’s about relationships. We’re not just doing a transaction. When you have a good working relationship with an offshore development company, you get the right developers with the right mindset.
Dr Vivek Bhandari, Chief Technical Officer (CTO) of PowerLedger
Dr Vivek Bhandari, Powerledger Chief Technical Officer (CTO)

Choosing the wrong partner, because they’re cheaper or because it saves you time searching for the best fit, can have ill-fated consequences for software development outsourcing.

Remember, you’re not only outsourcing the capacity for software development – you’re also buying-in outside expertise and experience. Spending more time finding the right outsourcing partner to begin with can save you time later on. And selecting the provider most closely aligned with your business needs, culture, and industry will mitigate problems further down the line. 

The cheapest option may cost you more in the long run, so as with any major expenditure, make sure you see social proof in the form of previous clients’ feedback, reviews, and projects – so you can judge for yourself whether they’re a good fit.

Proshore was bringing a whole solution. Not just the ability to augment our staff with individual developers, but actually expressing the willingness and desire to take on that ownership, and partner with us in a more active way.
Faith Peterson, interviewstream Product Manager

3️⃣ Expectations​

Whilst no one really enjoys getting bogged down in contract negotiations, at the same time, not setting out a detailed statement of work alongside a clear service level agreement will result in ambiguities and confusion about who’s responsible for what. 

Your contract should be clear and precise to prevent management and technical issues from arising in the future – and to avoid conversations like: “We thought you were handling that”.

4️⃣ Ownership

Depending on how you plan to deploy your outsourced team, it can sometimes be unclear as to who has ownership – especially if you’re bringing in a managed team. If the team is self-managed, then there might be a lot of internal decision-making without necessarily involving you as the client.

On the other hand, if your outsourced developers are working alongside an in-house team, it’s important to establish who’s managing the project from the very beginning. And if your outsourced team is taking ownership of a particular area of the project, you need to be clear about the lines of communication, and the management structure – so everyone is clear about who has responsibility for what.

5️⃣ Communication

“If you only have one conversation at the start, when you speak again in a few months time you might end up with something completely different. Regular communication is key.”

When you’re not all in the same room, conversations get missed. As priorities change, you need to ensure they’re being communicated across your teams, whether they’re in-house or outsourced. A lack of communication really only leads to one outcome – and it’s one that’s best avoided. 

It’s a good idea to establish clear channels of communication before your collaboration begins. Taking an Agile approach to software development, you should schedule daily and weekly meetings, together with regular one-to-ones, to help overcome blockers. Face-to-face meetings can be highly effective, but if you’re working across time zones, you may find alternative forms of communication more suitable. 

Whichever way you choose to organize your communication, you need to sustain it beyond your initial conversation to ensure that important information about the project is getting through, and is understood. Otherwise, you could end up with a different product from the one you planned.

6️⃣ Culture​

If you ignore the ‘soft stuff’, things can get hard pretty quickly, especially if you’re working with a remote team in a different part of the world. 

No matter where your outsourced team is located, for your collaboration to work, you need to ensure you share the same core values. Your outsourcing provider might be an expert in the type of project or industry you’re in, but they won’t be familiar with your company culture – unless you onboard them. 

At the same time, it’s essential to onboard your in-house stay with new ways of working alongside your outsourced team. That might mean changes to the project management process, new software, and even strategies for working around different time zones.

7️⃣ Integration

All too often, outsourced software development teams are seen as an additional piece and not a collective of individuals. They might be working remotely in another part of the planet, but if you want them to help build great software, you’re going to need to build great relationships. 

With advances in technology, the barriers to effective communication have been well and truly broken down. That means you have the opportunity to build trust, respect, and positive relationships, which in turn offer the potential to increase motivation and energize team members. 

By treating your outsourced team as part of your organization, you’re not only creating additional motivation, you’re also investing in the potential for future collaboration.

IT outsourcing: getting it right ​

Businesses, trying to balance operational costs with the need to efficiently scale-up capacity, are increasingly looking outside their organization for software development solutions. Their need to find the right team of software developers might be simple, but in a competitive global market, it’s a challenge that is easier said than done.

“Sometimes companies, have an idea, or they have a project – so they throw it over the fence and hope it will be right. That approach often ends in disappointment.”

When it comes to outsourcing software development, you can mitigate the risks by avoiding common pitfalls. And as part of an effective business strategy, IT outsourcing is a risk worth taking for cost-effective, streamlined, and expedited software development that reduces the time taken to get your product to market (and iterate it once it’s there).  

Getting IT outsourcing right can create real value for money and a positive return on your investment. By forging deeper personal connections with your outsourcing partners, you’re also investing in longer-term collaborations, and setting up scope for future projects that might require the expertise and skills of an extended team – with the added advantage that they’ve already familiar with your company culture and ways of working. 

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