Managing an Outsourcing Relationship Doesn't Have to be a Sufferfest

Every time I see that Rambo meme I chuckle - in solidarity, mind you.

Spend enough time in tech and you will hear the outsourcing horror stories. 

Late deliveries.

Budget overruns.

Communication challenges.

Quality issues.

They’re captivating stories because, for the majority of folks, they’re true. In fact, 80% (!) of direct-relationship (client-vendor) outsourcing relationships go over budget or over time. 

30% of projects get thrown in the bin before release. 

It’s enough to make a grown man (or woman!) cry.

When we dig into post-mortems with clients who approach us to find them a new software engineering outsourcing relationship, the cause of death tends to surface pretty easily. Assuming the team has the requisite skills to complete the deliverable successfully, it tends to come down to one of the following:
  • Lack of clear success criteria
  • This includes issues of unclear scope, lack of detail around integrations and maintenance, vague sign-off criteria and so on. These issues can be client-side or vendor-side; both have a responsibility to create a “meeting of the minds”, but vendors will often “just get started” in an effort to both kick the engagement off and to “work it out” over time.
  • Loss of confidence
  • This can have a variety of root causes but is typically things like unclear planning and management, poor communication or personality conflicts. These are management issues common to any working relationship, but in the outsourcing context lead to an erosion of trust and confidence, which breeds other negative behaviours that will lead to the breakdown of the relationship over time.

That’s it. We tend to lump in a whole bunch of detail under these buckets (eg. “the vendor didn’t communicate well”) but when we boil away the emotion it gets quite simple.

So. What to do about it? Are outsourcing relationships just doomed from the start and we should all just accept it? Absolutely not!

Key interventions at critical junctures can alleviate or eliminate the vast majority of issues. This can often include some uncomfortable conversations with our clients (yes, you’re often the source of the problem! 😉). 

For example, if the client doesn’t communicate their requirements accurately, is that the vendor’s fault or the client’s fault? Technically of course it’s both - but that will be cold comfort when the project is shelved and the budget and time have been burned.

We’ve often found that clients expect an outsourcing relationship to work without more traditional setup and management that you’d effect for an internal team hire, but in truth the two setups work very similarly.

Step 1: Get clear on what you need. Just like you’d define a job spec, when you make the decision to outsource you must spend the time getting clear on what skills are required and what outcome you’re seeking

Step 2: Select from the best candidates. Recruiters help you identify good candidates with less effort on your part; the same can be said of outsourcing. You don’t need to rely on a colleague’s recommendation - leverage a partner like Fuel to speed up the process and cast your net wider.

Step 3: Select carefully. Just as we’re often counseled to do the “airport test” with a hiring candidate (would I want to be stuck in an airport with this person?) you can apply similar tests to your potential outsourcing partners. What “vibe” do you get from them? Do they align with your ways of working? Can you see yourself having a productive, successful relationship with this person (or persons) in a year’s time?

Step 4: Set up intentionally. For someone to succeed as an employee, they need to understand how you judge success; the same is true here. Make sure your needs are understood. Get the team to share this back to you in writing - a great test of whether your requirements are well understood! Agree on mutual definitions of success, ways of working, communication cadences and policies and so on. 

Step 5: Launch and track. Any good relationship is built, not born. There’s no need to wait for the project or relationship to end to conduct a retrospective (although that’s important too). Schedule regular check-ins and see what is working/not working for both parties, document, implement and track. This is also where a neutral 3rd party can add huge value, as you may feel more comfortable voicing concerns to the 3rd party versus the vendor directly.


All of this is equal parts art and science. There’s no formula per se, but there is a roadmap.


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