How to Avoid Mistakes When Outsourcing IT Projects

Software outsourcing is a great way to save budget and get access to highly specialized experts, but only if you approach it wisely. Many companies when outsourcing make the critical error of focusing solely on reducing costs, forgetting that a cheap contractor often means hidden risks: delays, low-quality code, or even sudden termination of work on the project.

To build successful outsourcing relationships, it’s crucial to involve your project manager from the very beginning to clearly expound requirements and control each stage of development. When outsourcing your software, always choose proven contractors with real cases rather than loud promises.

What Is IT Outsourcing?

IT outsourcing refers to the situation of handing over IT functions and tasks to external service providers.

Instead of relying solely on in-house resources, organizations partner with specialized outsourcing firms to handle various aspects of their IT operations including software development, DevOps, QA and testing, and more.

The outsourcing model allows businesses to tap into a more extensive pool of expertise and experience that may not be on hand within their own company.

By entrusting their software development project to external providers, companies can focus on their core activities while leveraging the knowledge and skills of specialized professionals.

That’s why effective project management is so important. It helps you meet deadlines, control budgets and align deliverables with business objectives. In addition, proper project management has a direct impact on productivity by optimizing workflows and eliminating bottlenecks.

Types of IT Outsourcing

IT outsourcing can take different forms depending on the size and nature of the project. Some common types include:

• Offshore outsourcing: This involves partnering with an outsourcing company located in a different country pretty far away. Offshore outsourcing is often chosen for its potential cost savings and access to a global talent pool.
• Nearshore outsourcing: In this type of outsourcing service providers are situated in not-far-away countries. Nearshore outsourcing offers advantages such as geographical proximity, cultural compatibility, and easier coordination due to overlapping time zones.
• Onshore outsourcing: Also known as the domestic partnership model, this approach involves engaging local service providers within the same country. Onshore outsourcing can offer advantages like closer collaboration, clear communication, and adherence to local regulations.

Top Problems of IT Outsourcing

Outsourcing software development is a double-edged sword. Yes, it gives you access to top specialists and saves your budget. But how many projects are stalled because of typical mistakes that could have been foreseen? Let’s analyze the real pains companies face:

Cost Above All

Chasing a low price in outsourcing is like buying the cheapest parachute. It seems that you have saved money, but the result can be ruinous.

The problem is that the supposed economy often hides: a half-finished product with a lot of bugs, eternal revisions for extra money, and an outsourcing team that disappears at the most crucial moment.

How to avoid this? First, immediately indicate the real budget to the contractor — this filters those who deliberately underestimate the price in order to then “finish” you on additional payments.

Secondly, look not only at the figure in the contract but at what exactly it includes: what guarantees the contractor gives, how the stages of acceptance are defined, and what penalties there are for failure to meet deadlines.

The most insidious pitfall is to think that you pay for “hours of work”. In fact, you should pay for the result. It is better to overpay 20% but get a working product than to spend months fixing crutches in the code. Remember: in outsourcing, a miser pays twice, or even three times.

Unclear Vision and Requirements

Imagine that you order a house from builders, but instead of drawings, you say: “I want something cozy, in light colors. Six months later you get a glass cube in hi-tech style — technically a house, but not the one you dreamed of. This is roughly how outsourcing without a well-defined ToR (Terms of Reference) works.

The main trap is the belief that the contractor is “a professional and knows everything themselves”. In practice, this leads to a painful cycle: you get the result, you realize that it is “wrong”, but it is difficult to explain what is wrong. The developers are bewildered — they did exactly what you asked them to do (or rather, what they guessed).

The secret of success is simple: before looking for a contractor, spend time working out the requirements. Describe not only what the system should do, but also how it should do it.

Also, give examples of similar solutions that you like. Create at least rudimentary sketches of screens. The more specific you give at the start, the less confusion there will be in the process. Remember: in outsourcing, the quality of the result depends directly on the quality of the task.

Poor Communication

In outsourcing, silence is far from gold — it’s often the first sign of brewing misunderstandings. Imagine the situation: you receive weekly reports “all according to the plan”, and when the deadline comes, it turns out that half of the functionality does not work at all as you expected.

At the same time, the contractor is genuinely perplexed — after all, they did exactly what was specified in the TOR three months ago, and all the changes in requirements that you talked about in correspondence simply “fell out of focus”.

The main danger lies in the illusion of understanding when both sides use the same terms, but put different meanings into them. Cultural differences are particularly insidious: in some countries, it is not customary to talk openly about problems, and you get months of “everything is on track” reports until the project is on the verge of failure.

The solution is to build a transparent system of information exchange with clear rules: which issues are resolved in chat and which require a call, who makes the final decisions, and how quickly the answers should come.

Regular synchronizations are not just reports, but a tool for early risk detection. It’s important to have live discussions rather than formal meetings with the key question “What might not be what we expect?”.

Remember: hours saved in discussions often turn into weeks of rework. A culture of transparent communication requires attention on both sides, but it becomes the main factor in the success of an outsourcing project.

Unrealistic Expectations

Many companies approach outsourcing with unrealistic expectations, subconsciously anticipating miraculous results — as if external developers possess some magical ability to deliver complex systems quickly, cheaply, and flawlessly.

However, reality often proves harsher: ambitious timelines turn into endless delays, while “seemingly simple” features require months of work. The core issue lies not in outsourcing vendor incompetence but in the fundamental mismatch between desires and reality.

The “rose-colored glasses” effect proves particularly dangerous when non-technical clients misjudge task complexity. A request like “build it like Instagram” sounds simple — until you learn such platforms represent hundreds of developer years of effort.

Eager to secure contracts, vendors often accept unrealistic terms, leading to mutual frustration: clients receive disappointing results, while contractors struggle with impossible demands.

The solution lies in realistic planning. Conduct a technical briefing where vendors honestly identify project bottlenecks. Structure development in phases, starting with a Minimum Viable Product (MVP). Define clear metrics — replace “beautiful interface” with measurable targets like “<2 second response time under 10k users”.

Cultural Misfit and No Team Spirit

Differences in mentalities and working approaches between the company and the external development team are often a source of poor understanding. However, with the right approach, these differences can be turned into an advantage that enriches the project with different perspectives.

The key to success is to create a common working culture. Start with orientation meetings where teams discuss not only tasks but also the specifics of interaction. Introduce the practice of cross-cultural mediators to help smooth out differences of understanding.

It’s important to remember: that true synergy occurs when differences start working for the project, not against it. Different perspectives on a problem allow finding non-standard solutions, alternative approaches speed up the search for the best way, and cultural differences become a filter for assigning tasks.

Competent management of cultural diversity requires effort, but the result — a well-coordinated team with a rich toolkit of solutions — fully justifies the investment. The main thing is to perceive multiculturalism not as a problem, but as a resource for project development.

Loss of Organizational Trust

Outsourcing key business processes is always risky, and a loss of trust can be costly for both parties. When partnerships crack, it immediately affects the quality of communication, timelines, and ultimately the outcome of the entire project.

How can you protect a partnership from a crisis of trust? You should start with a careful selection of the contractor — their reputation and experience should be confirmed not only by beautiful case studies but also by feedback from real clients.

Transparency at all stages of cooperation plays a key role: from clearly defined SLA in the contract to regular progress reports. Special attention should be paid to the human factor – personal relationships between your internal team and outsourcing partner, joint discussions of problems, and celebration of successes create the very atmosphere of mutual responsibility, which will not allow the partnership to fall apart due to temporary difficulties.

Trust is not given for free — it must be earned and constantly maintained. Timely fulfillment of obligations, readiness to jointly search for solutions in crisis situations, openness to knowledge sharing — all this turns formal business relations into a strong strategic alliance.

Remember: in the world of outsourcing, trust is not just a nice bonus, but a prerequisite for achieving outstanding results. Companies that understand this get not just a performer, but a true partner in business development.

Security Breaches and Protection of Intellectual Property (IP)

Outsourcing IT projects is always associated with risks of data leakage — this is one of the key mistakes to avoid, which many companies underestimate. A serious incident can cause not only financial damage but also long-term damage to reputation, especially in software development outsourcing.

According to the 2022 Deloitte Global Outsourcing Survey, 81% of companies rely on outsourced cybersecurity in an effort to save money and gain expertise. However, 48% of these organizations remain vulnerable — their systems are still susceptible to attack.

How to create a strong defense and avoid common outsourcing mistakes?
You should start with a thorough audit of the outsourcing provider, paying special attention not only to the portfolio but also to relevant data protection mechanisms. Mandatory measures include: multi-level encryption, strict access controls, and legally flawless NDAs.

Pay attention to infrastructure. Firewalls and monitoring systems should be a standard, not a formality. Remember: the main mistake you can face when outsourcing is underestimating proactive measures. Develop a clear incident response plan and enshrine intellectual property protection mechanisms in contracts.

Security in outsourcing requires constant monitoring. Companies that invest in such a system get not just a contractor, but a partner capable of protecting key business assets.

Conclusion

IT outsourcing can be a powerful outsourcing strategy for businesses to leverage external expertise and increase operational efficiency.

However, it is crucial to approach outsourcing projects with attention and avoid common mistakes that can jeopardize their success.

By considering costs, clear requirements, effective communication, realistic expectations, cultural compatibility, trust, and security, organizations can maximize the benefits of outsourcing while mitigating risks and ensuring successful outsourcing.

Whether you’re focused on web development or other development services, a well-structured outsourcing partnership is key to long-term success.

At SCAND, a top outsourcing provider, we not only create custom software but also help every client’s project stay on track through transparent communication and efficient processes.

We provide a choice of several engagement models so that you can find the one that fits your company’s project goals and budget. Do not hesitate to contact us and start developing great products together!