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When IT outsourcing goes wrong: Seven reasons for failure

Last updated on May 24th, 2019

IT outsourcing - 7 reasons for IT outsourcing failure

While IT outsourcing can deliver numerous benefits to your business, like all large projects, the move in never guaranteed to be completely risk-free.

The UK Border Agency, BSkyB, the Child Support Agency and the Royal Bank Scotland are just some of the big names who have experienced failure with IT outsourcing. Currently, TSB is enduring an IT meltdown following a botched IT upgrade project involving the transfer of 1.3m customer records from TSB’s previous owner Lloyds. With problems dragging into the second week, a large number of customers are still unable to access their accounts or complete transfers. Now TSB may be facing a compensation bill that runs into the tens of millions – effectively negating any cost savings this project was supposed to deliver the business. Not to mention the lasting damage this incident will have on the bank’s brand.

Situations like these highlight how important it is to select the right IT partner. Engaging with the wrong one – or for the wrong reasons – could cost your company dearly in terms of financial outlay, staff morale, productivity and future performance. We have put together an honest list of seven common reasons for failure. These can apply whether you are outsourcing your entire IT function for the long-term or have engaged a third party for a one-off IT project.

Remember it is a two-way partnership and both parties have important roles to play in the process.

1. Cost is the only consideration

Many businesses opt to outsource to simply reduce costs. This is typically already lining up problems from the start. Of course, the cost is a factor but value is more important than flat fees. As an example, many companies look to cheaper offshore companies without considering the potential issues such as communication problems, cultural differences, quality of staff or time zones. These areas can grind a project to its knees.

Rather than simply choosing the lowest bidder or the one who offer the largest upfront discount, look for the provider who will deliver the highest quality of service. Take into account their previous record of accomplishment, obtain references from current clients, and look at the quality of the staff, the teams, their accreditations and experience. If you don’t know how to look at these areas with a complete understanding of all the factors then find a consulting firm that can assist in vendor selection. If your main criteria for selecting a provider is cost then you will get what you pay for.

2. Rushing to meet a tight deadline

As a simple example, if say a 150 person law firm were to introduce a new practice management system we would typically expect the process to take around 12 months, from end to end. This would include things such as; an analysis of existing systems, people and processes; vendor review and selection; migration planning; integrating legacy systems; testing; deployment and change management.

Rushing to complete a project within an unrealistic deadline typically results in lower quality work and further issues down the line. Of course, situations do occur where you have no option but to operate to a tight deadline, but in the norm, you should be scheduling plenty of time for a project. Also, remember to include some contingency. It is better to have it an not need it rather than letting a hurdle throw your timeline wildly off track.

3. Not seeing the relationship as a strategic partnership

In long-term IT projects and outsourcing, your service provider can become a valuable partner in achieving business growth. If you continue to view IT-related tasks in isolation – or even worse, as a “necessary evil” – you are missing huge potential benefits.

4. Outsourcing the wrong functions

To gain the benefits of IT outsourcing you do not necessarily need to outsource your entire IT environment. This approach does not work for every business type and there are some situations where it may be better to keep some IT functions in-house. A good IT consultant will discuss these options with you and advise you accordingly, rather than forcing you into a contract that is not quite right.

5. Failing to accept the need for flexibility

Technical advances and technology developments happen rapidly in the IT world, which can require a degree of flexibility. Agreeing to common sense changes as the contract plays out will ensure you keep up with the latest advancements and that your project remains relevant.

6. Poor communication

As discussed above, offshore outsourcing can cause issues due to language barriers, cultural differences and time differences. This can lead to your staff having to work extended hours in order to reach the outsourced team. However, some companies can have trouble with UK-based providers as well. It is important to make sure that all parties are on the same page and working towards the same goal and the same timeline. Poor communication can seriously damage the outcome of an IT project.

7. Micromanagement

You will have chosen this IT consultancy to manage and deliver your project because you believe they have the skills and experience to do so – so let them use those skills. Of course, there should be regular communication between the business and the project manager, but micromanagement just leads to bad feelings on both sides.

By building a good working relationship, you should be confident that the project manager will execute the work as defined in your contract.


IT project failure is not limited to the biggest businesses, the issues outlined above could affect any organisation undertaking IT outsourcing. That being said, you should not let potential problems put you off altogether, just keep them in mind when meeting with IT consultants to discuss outsourcing or project management. Trust is a crucial element for successful outsourcing so make sure your chosen provider is someone you can work in partnership with.

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