Why 70% of IT Outsourcing Projects Fail: DM Perspective
- Problem: Most outsourced IT projects fail not from technical issues but from broken accountability between parties.
- Solution: Trace three break points — the communication triangle, the "built to spec" trap, and missing end-to-end accountability.
- Outcome: The fix is finding a "Single Point of Accountability" who owns the result throughout.
Have you ever hired an outsourced dev team to build a system at a bargain price, had a perfect kick-off meeting, but when you received the final product, your first thought was... "This is not what I wanted!"?
If you have, you are not alone. According to industry reports (such as the Standish Group CHAOS Report and McKinsey research), nearly 70% of outsourced software projects face severe issues: delayed timelines, bloated budgets, or deliverables that are completely unusable in a real-world business context.
With 14 years of experience as a Delivery Manager and BrSE for the Japan - Vietnam market, I have witnessed countless trainwrecks. This article isn't about bad code; it's about broken accountability—the silent killer of offshore outsourcing projects.
Before you read on: failure sometimes starts at the root decision — do you even need to build? If you're unsure, read SaaS or Custom Software? A Build vs Buy Framework first.
TL;DR (Executive Summary)
- Problem: The majority of IT outsourcing projects fail not due to poor technical skills, but because of fractured accountability among parties during the requirements communication process.
- Solution: Identify the 3 core points of failure: the communication triangle (Client - Sales - BA - Dev), the "just following specs" trap, and the lack of end-to-end accountability.
- Outcome: To overcome this, businesses must establish a "Single Point of Accountability" to ensure the technical solution aligns with business goals throughout the entire project lifecycle.
1. The Broken "Telephone Game": Client → Sales → BA → Dev
A typical workflow in a traditional software agency looks like this:
- You talk to a Salesperson (who is great at talking and promises you the moon).
- The Salesperson relays the info to a BA (Business Analyst).
- The BA writes a technical document and tosses it over the wall to the Dev team (who only know how to type code).
What’s the problem here? The Telephone Game. The person writing the code doesn't understand your business goals. You (the business owner) never get to talk directly to the person solving the technical problem. The result? A system built exactly as written in the document, but completely flawed in its operational logic. (Read more on how to escape the human-dependency trap in internal systems). In Japan–Vietnam offshore projects, this telephone game gets amplified further by cultural gaps — I've analyzed it in why "Japanese quality" doesn't automatically replicate in Vietnamese offshore teams.
2. The Trap of "Doing Exactly What is Asked" Instead of "Solving the Problem"
In the traditional software outsourcing model (especially offshore), companies usually charge by "Man-month" (billable hours). Their golden rule is: "Do exactly what the client says, don't over-engineer, and never argue."
This sounds obedient, but it will kill your project. Because you are an expert in your industry, not a software engineering expert. Sometimes what you ask for ("I want an AI system to analyze warehouse data") is not what you actually need ("You just need a simple AI automation script to push data from Google Sheets to WhatsApp every morning").
A top-tier Delivery Manager must know how to say "No" to the client and propose a simpler, cheaper solution that achieves 100% of the business goal. Unfortunately, agencies tend to nod at complex requests just to... bill more hours.
3. No "End-to-End" Accountability
This is the biggest culprit. When a project fails:
- Devs blame the BA for unclear requirements.
- The BA blames Sales for overpromising.
- Sales blames the Client for constantly changing the scope.
In a project, if there isn't a single person who slams their hand on the table and says: "Regardless of whose fault it is, I am ultimately accountable for ensuring this software increases the company's revenue", then that project is extremely risky. There is a massive difference between Responsibility (doing your task) and Accountability (owning the final outcome).
The Solution: Seek "Single Point of Accountability"
Instead of cramming a disjointed 10-person team into your project, the most effective model for SME projects is finding a Full-stack Delivery Manager:
- Someone who sits down with you to dissect your Business Model.
- Someone who personally sketches the System Architecture.
- Someone who writes (or strictly reviews) the most critical lines of code.
- And the ONLY person you hold by the collar if the system crashes.
Don't buy headcounts. Buy commitment to results.
In Japan–Vietnam offshore work, this role is usually expected of the BrSE — but not every BrSE can carry it: see what a BrSE really is and how it differs from "an interpreter who knows IT". And if you're still selecting a partner, run the 5-axis offshore vendor evaluation before signing, or self-estimate project complexity to prepare a solid RFQ.
If you are worried about an expensive IT system that isn't delivering ROI, or if your current project is "stuck" and cannot be launched, feel free to submit your case — I'll respond if it fits my expertise and available time.
Frequently Asked Questions
Why do outsourced IT projects fail so often?
The root cause is usually not technical but broken accountability as requirements pass through client - sales - BA - dev. Each handoff drifts a little, and in the end no one owns the end-to-end result.
What does "Single Point of Accountability" mean?
A single person or role accountable for the final outcome, from understanding the business problem to a working solution. This role connects the handoffs to prevent "built to spec but solving the wrong problem".