How outsourcing leads to increasing technical debt

Last updated on July 8th, 2021 at 01:37 pm

Most of the nontechnical precursors of technical debt that afflict in-house work also afflict outsourced work. For example, the planning fallacy affects internal planners. But it also afflicts the bidders for contracts that cover outsourced work. As described in “Unrealistic optimism: the planning fallacy and the n-person prisoner’s dilemma,” Boehm, et al., call this the “Conspiracy of Optimism.” [Boehm 2016] But outsourcing engineering work can introduce pathways for incurring technical debt that are specific to outsourcing.

The risks of incurring technical debt from outsourcing

Green fields
Green fields. Greenfield outsourcing, also known as startup outsourcing, is the outsourcing of activity that the enterprise has never performed in-house. Greenfield outsourcing is especially tricky with respect to technical debt formation. The risk arises because much of the expertise necessary to perform the work in question is probably not resident within the enterprise. That void in enterprise expertise makes for difficulties in managing technical debt in the outsourced artifacts.
Outsourcing is inherently more likely to incur technical debt than is equivalent work performed in-house. When most enterprises contract for development of systems or software, the criteria for acceptance rarely include specifications for maintainability or extensibility. This happens, in part, because such qualitative specifications are difficult to define quantitatively. That’s why the condition of deliverables relative to maintainability and extensibility is so variable. Outsourced deliverables can best be described as bearing an unknown level of technical debt.

The root cause of the problem is likely a lack of a universally accepted metrics for quantifying technical debt [Li 2015]. That’s why it’s difficult to specify in the vendor contract an acceptability threshold for technical debt. And since the consequences of technical debt in deliverables potentially remain hidden during the lifetime of the outsource contract, years might pass before the issue becomes evident. That inevitably complicates the task of understanding the root cause of the problem.

Six ways outsourcing can contribute to technical debt

In what follows, I use the term vendor to denote the organization performing the outsourced work. I use the term enterprise to denote the organization that has outsourced a portion of its engineering work. The retained organization is the portion of the enterprise directly relevant to the outsourced work, and which has remained in-house.

Among the mechanisms that lead to incurring technical debt in the outsourcing context are the six mechanisms sketched below. Gauging the size of these effects by auditing deliverables or by auditing the internal processes of the vendor could be helpful in managing levels of technical debt arising from outsourcing.

This list isn’t exhaustive. Quite possibly other phenomena also contribute to technical debt formation in the context of outsourcing.

Progressive erosion of retained organization capabilities

Over time, after outsourcing work on a particular asset, the enterprise can expect erosion of some engineering expertise. The expertise most vulnerable is that needed to manage, evaluate, understand, or, if need be, to re-insource (or backsource) the outsourced work [Willcocks 2004][Beardsell 2010]. Typically, staff who formerly performed the outsourced work do move on to other work, voluntarily or not, either within the enterprise or elsewhere. Indeed, cost savings from terminations and employee buyouts often accompany outsourcing decisions. That reallocation is part of the economic justification of outsourcing decisions.

But even if the enterprise continues to employ the people who formerly performed the outsourced work, the deleterious effects remain. Those employees, filling new roles, likely become less familiar with the current work and therefore less able to perform it. And since they’re now carrying out other assignments, their availability is limited. In the public sector, the organizations that perform the outsourced work exacerbate this phenomenon by recruiting staff from their former agencies [Kusnet 2007]. In manufacturing, Kinkel, et al., suggest that, paraphrasing, outsourcing disturbs the formation of internal competence [Kinkel 2016].

Thus, outsourcing engineering efforts can erode the ability of the enterprise to perform the outsourced work internally. Likewise, it erodes enterprise capability to monitor or evaluate the work when vendors perform it. Consequently, the enterprise is less able to monitor, evaluate, or retire any technical debt that accumulates in the outsourced work products.

Stovepiping among vendors

Most multi-vendor efforts use a separation-of-concerns approach [Laplante 2007] to dividing the work. That is, each vendor is empowered to use any approach it can, consistent with its own contract and statement of work. In some cases, two or more vendors might have overlapping needs that cause them each to produce similar capabilities as elements of their respective deliverables. Sharing their results is of course possible. But unless both of their contracts anticipate the need for sharing, sharing is unlikely. Failure to share those results that could have been shared can lead to incurring unrecognized technical debt.

Stovepiping within vendors

Technical debt formation is possible even if there is only one vendor. Different teams or individuals working for that vendor might unwittingly create elements with overlapping capabilities. That duplication could lead to technical debt, or it could constitute technical debt in itself. For example, two teams working for the same vendor might have similar needs, and might develop duplicative tools independently. As a second example, consider a version of stovepiping combined with temporal displacement. Suppose that one team is unaware that a previous effort for the same customer had already developed a capability that it now needs. That team then might re-create that already-existing capability.

Stovepiping within vendors is less likely when the vendor operates under a single vendor technical lead, and the enterprise interacts with that single lead through a single in-house technical lead. When either side of the relationship manages communications through multiple contacts, stovepiping is more likely. New technical debt is more likely to form.

Loss of continuity in the outsourced engineering staff

Unless the agreement between the vendor and the enterprise specifically addresses staff volatility, an additional risk arises. Staff turnover or reassignment within the vendor organization can lead to technical debt. This can happen in just the same way that turnover in-house can lead to technical debt. But the risk is most significant at interfaces between one version of the product or service and the next. With outsourcing, however, the vendor has little internalized motivation to control this phenomenon. Moreover, the enterprise likely has less control and less awareness of staff assignments within the vendor organization than it does within the enterprise. Thus, loss of continuity in the outsourced engineering staff is both more likely and more likely to lead to technical debt.

Reduced coordination of engineering approaches and business objectives

Lack of coordination between engineering approaches and business planning can cause technical debt formation. This happens because engineers create and deploy artifacts that they must revisit later. The need for rework arises after engineers learn of business plans they didn’t know about at the time they produced those artifacts. See “Failure to communicate long-term business strategy.” This scenario is more likely, and possibly irresolvable, when the enterprise withholds its long-term plans from the outsourcing vendor to protect its strategy.

Hiring and retention problems

In some instances, the enterprise has never before performed work like the outsourced work [Delen 2007]. This kind of outsourcing is startup outsourcing or greenfield outsourcing. In these cases, typically, the enterprise must reassign existing employees or hire new employees to interface with the outsource vendor. These roles are analogous to remote supervisors, except that the teams they supervise aren’t enterprise employees. Hiring and retaining people for these roles can be difficult. Startup challenges arise both within the enterprise and within the vendor organization. Recruitment and especially retention problems in these roles can decrease the likelihood of controlling technical debt, and increase the likelihood of incurring technical debt.

Last words

A policy that would address these risks is one that would facilitate accomplishing three objectives:

  • Retain organizational capability sufficient to assess the effect on technical debt of any outsourced engineering work
  • Represent the effect on technical debt faithfully in any financial models used in making the outsourcing decision
  • Include in financial models the effects of technical debt, the cost of carrying technical debt, and the effects on controlling technical debt when deciding whether to extend outsourcing contracts with vendors.


[Beardsell 2010] Julie Beardsell. “IT Backsourcing: is it the solution to innovation?”, SMC Working Paper Series, Issue: 02/2010, Swiss Management Center University, 2010.

Available: here; Retrieved: February 15, 2018

Cited in:

[Boehm 2016] Barry Boehm, Celia Chen, Kamonphop Srisopha, Reem Alfayez, and Lin Shiy. “Avoiding Non-Technical Sources of Software Maintenance Technical Debt,” USC Course notes, Fall 2016.

Available: here; Retrieved: July 25, 2017

Cited in:

[Delen 2007] Guus Delen. “Decision and Control Factors for IT-sourcing,” in Handbook of Network and System Administration, Jan Bergstra and Mark Burgess, eds., Boston: Elsevier, 929-946, 2007.

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Cited in:

[Kinkel 2016] Steffen Kinkel, Angela Jäger, Djerdj Horvath, and Bernhard Rieder. “The effects of in-house manufacturing and outsourcing on companies’ profits and productivity,” 23rd International Annual EurOMA Conference, At Trondheim, Volume: 23, June 2016.

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[Kusnet 2007] David Kusnet. “Highway Robbery II,” report of the National Association of State Highway and Transportation Unions (NASHTU).

Cited in:

[Laplante 2007] Phillip A. Laplante. What Every Engineer Should Know About Software Engineering. New York: CRC Press, 2007.

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Cited in:

[Li 2015] Zengyang Li, Paris Avgeriou, and Peng Liang. “A systematic mapping study on technical debt and its management,” Journal of Systems and Software 101, 193-220, 2015.

Cited in:

[Willcocks 2004] L. Willcocks, J. Hindle, D. Feeny, and M. Lacity. “IT and Business Process Outsourcing: The Knowledge Potential,” Information Systems Management 21:3, 7-15, 2004.

Cited in:

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