5 reasons most outsourcing projects fail

Outsourcing is an integral part of today’s work culture. Companies across a wide range of sizes and industries are choosing to outsource some or all of their software development. As David Berry, CIO of Daymon says, outsourcing is no longer about saving money, but primarily about flexibility and getting to scale.

While outsourcing has many benefits, it also brings some operational challenges. To get a better sense of the roadblocks that could derail an outsourced project, I interviewed people who take responsibility for outsourcing software projects – CIOs.

Most outsourcing projects fail because tech leaders do not follow these 5 steps:

1. Role clarity

Like any great leader, most CIOs should start by emphasizing the need for complete clarity about their own role in the outsourcing process. They are the bridge between the CEO and the IT division.

A CIO must understand the business implications of the project. There has to be a specific business case for each IT project. It might be overhauling the online presence of the company by redesigning the website, or adding a new mobile app to help a business unit better communicate with customers. Either way, the implications of the outsourced project must be clearly understood by the CIO and properly communicated to the internal and outsourced IT teams.

On the other end, a CIO should be equally adept at understanding the technical components of the project. Until she understands the nuances of the project, it will be very difficult to guide the team. Great CIOs understand their role, the incentives of each stakeholder and must know how to communicate with each party to keep everyone motivated.

2. Big picture

Once the CIO understands her role in the outsourcing engagement, she must then understand how the outsourced project integrates with all the other tools and products in the company. CIO of Weitz and Luxenburg, Arun K. Sharma, states that it is important to know how a project initiative for one product can affect other products or services in the portfolio. For example, if you are developing a new mobile application for your account management team, you should plan ahead and look into all the other products it should integrate with. In this case you might want the application to integrate with your customer service, social media and other customer facing tools so that account managers can get a more comprehensive picture of each customer across each touchpoint.

If you don’t take into account these big picture flows and processes, you might successfully build an isolated product but then face severe challenges integrating it, which could cause the project to fail.

3. Planning

After you know your role and understand the high level view, you transition into the planning phase. Tom Amrhein, CIO at Integrated-DM, mentions that to properly plan your next project, you have to work closely with your customers to understand their needs and priorities. Every aspect of the milestone needs to be planned in advance to ensure smooth operation. Of course there is a balance because you want to be agile so you cannot plan out every detail in a long term project but it’s important to make sure your standards and preferences are clear and at least the tasks for the next milestone, usually 4 weeks, are clear. Sean Azhadi, CIO of Arizona State Credit Union, states that proper planning helps ensure that a project does not deviate from its intended direction.

Key standards that should be predefined include – documentation, styling, architecture, and method of communication. 

4. Trusted partner

If you have a trustworthy partner, you can include them in the planning phase. Rob Lloyd, CIO at City of Avondale, says that you must focus on the outcomes that you are targeting from a specific project and make sure that is very clear, but you can involve the outsourced developer in the planning phase. By having a trustworthy outsourced partner you can leverage their experience while developing a detailed roadmap.

Brian Luckey, VP of Technology at Knowledgenet, also believes finding a trusted outsourced vendor prior to starting your project is critical. This allows you to focus on product development instead of constantly questioning the development teams incentives. 

5. Implied communication

Most people make the mistake of omitting some information while sharing a project brief as they assume it is obvious. Seasoned CIOs warn against this behavior. They repeatedly stressed on explaining things in detail. What is obvious to you, say an industry veteran who has spent the last 30 years in the insurance industry, might not be as clear to an outsourced team that might have only done 1 or 2 insurance projects.

This is even more important when you are working with a team for the first time or partnering with a company that doesn’t have extensive experience in your industry. Also there are always some unique aspects of your business processes or structure that will impact the way the product is built; it’s your job to make sure this is clear.

While it’s hard to iron out all the details, regular reporting, communication and cross checking will help ensure that the scope is properly understood. It’s always better to over communicate than miss out on some seemingly obvious but important details. 

According to Nigel Fortlage, CIO at GHY, implied communication is a larger problem in a remote working engagement so it’s important that you regularly video conference to mitigate the communication gap.

These are the 5 areas that CIOs usually struggle with when outsourcing a project. Christopher Augustin, CIO of First Data, sums up the key to a successful outsourcing engagement, “The outsourced tech team has to be aligned with the goals of the product, and the business.” If you have great planning, alignment and a structured communication process you avoid some of the most common reasons outsourced IT projects fail.