WINaTALENT Research on Outsourcing Failure
Research by Technavio predicts that the IT outsourcing market size will grow by $98 billion during 2020-2024, so software outsourcing is definitely on the rise. But despite its growth, outsourcing has high failure rates. 20 to 25% of all outsourcing relationships fail within two years, and 50% fail within five. But what are the primary causes of this failure?
Outsourcing, or the practice of hiring a third party (an agency or a freelancer) to complete a specific task, has become a global exercise in recent years.
Based on research by WINaTALENT freelance platform, a newly established online website, outsourcing fails for one of the following reasons:
1. Insufficient technical expertise
Sometimes individuals or companies that outsource lack the required technical knowledge and expertise in software development and project estimation; this leads to:
- Demanding an extra feature in the product which increases the costs and extends the timeline of the project
- The inability to create a balance between software development costs and the minimum scope of business at the same time
- Failure in conjecturing the best technology to use for the software project
- Failure in estimating the costs and the timeline of each feature in the process of outsourcing
2. Improper planning
Clients assume that by signing a contract with outsourcing companies, they hand their project off to them entirely. But the truth is the project still needs management and supervision to avoid deviation.
3. Ambitious project estimates
Project estimation is a technical and complicated procedure in software development.
As most people who outsource lack sufficient technical knowledge to make proper estimates during a project, they set unrealistic and ambitious timeline, scope, and budget goals. When teams cannot achieve the milestones clients have set, the project starts to go in the wrong direction and will ultimately fail.
4. Unfamiliarity with global outsourcing rates
Global outsourcing rates differ from region to region through time.
Unfamiliarity with global rates may cause clients to spend too much on a software project, which makes things financially challenging. They might also spend too little and end up with a dissatisfactory product.
Many platforms have tried to solve these problems by offering technical support and consultancy regarding outsourcing and project estimation. Some of these platforms are WINaTALENT, Estimate My App, and Neoteric.
Most of these platforms offer outsourcing services with competitive rates aside from their estimation services as well.