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Hidden Biases in Software Development Outsourcing

Is being biased recommendable when it comes to software development? Let's find out.
Daniel Zacharias

Code Power Team

October 20, 2022
Hidden Biases in Software Development Outsourcing

Apparently, cognitive bias is a good thing, as it’s kept us alive for thousands of years. Making decisions based on previous experience can carry some prejudices, but it seems to have worked so far and saved us from dangerous situations, be it a wild beast attack or taking a shortcut. However, is being biased recommendable when it comes to software development? 

We’ll get to the bottom of this by listing the most common biases in the software development cycle while trying to understand them. So, let’s get started!

The anchoring bias

We’ve probably all fallen prey to the anchoring bias traps. This happens when we face a situation in which we may overlook the “real” situation based on our previous experience with similar situations. It takes a shorter or longer time to realize the (serious) consequences. 

For example, let’s say you’re negotiating a deal with a reputable outsourcing company. They offer you one price for an expert team and their services, yet you find it too high. As a replacement, they offer you another team with a negligently smaller scope of services and a slightly lower price. Judging from your previous experience, this seems like a bargain — you’re still getting what you want at a lower price. 

However, once you sign the contract, you realize that maybe you’ve overpaid them for the services. The only reason you hadn’t noticed that before was that you first rejected a more costly offer! This one is still pretty expensive, but it seemed like the next best thing at the time. Well, perhaps you should’ve skipped that deal altogether.

Anchoring bias examples abound as they aren’t focused solely on the above decisions. You may give orders to your in-house team based on previous experiences. Yet, if the times have changed too much, you may get stuck in the middle of the development process.

To avoid the anchoring bias, you can do a couple of things:

  • Get down to terms that you or other decision-makers in your team are prone to the anchoring bias. Once you acknowledge that fact, it will be easier to recognize and deal with.
  • Don’t rush with your software development outsourcing decisions. Take some time and consult with the managers or developers about outsourcing.
  • Try to think how you would act if you didn’t use your anchor as an argument for or against outsourcing. 

Sunk cost biases

One of the hardest-to-beat biases is the sunk cost bias. That’s because it’s difficult to recognize and even more challenging to deal with. What’s worse, it can appear at any time during the software development life cycle

In an outsourcing context, the sunk cost bias happens when you continue investing in the outsourcing team despite having negative outcomes over and over. You keep spending on outsourcing tools that clearly aren’t working for you, yet you think the circumstances are going to change (no, they won’t) or the outsourcing team behind it will be different (not unless you break the contract).

This type of bias can become very serious since it can push you into making one costly mistake after another. So, what can and should you do?

  • First of all, acknowledge the error. Admit that you’ve already made a mistake and don’t want to make a new one by investing more money.
  • Inform your team members about this kind of bias and try to encourage different perspectives.
  • Rotate your team. It’s a good idea for team members to have different responsibilities at different times. That way, they won’t be inclined to keep pushing the wrong outsourcing strategy.
  • Ask for advice about the outsourcing issue from someone without much experience with it. They may provide you with a fresh perspective.

The status quo bias

Maybe this scenario sounds familiar to you: you’re pretty much content with outsourcing your software development to one popular company, so much so that you don’t want to look any further or enquire about other alternatives.  

If that rings a bell, you’re probably dealing with a well-hidden status quo bias.The status quo cognitive bias can get very tricky since it doesn’t clearly point out that you’ve got a problem with outsourcing your business. If anything, things are going pretty great. 

The problem is, you shouldn’t just stick to one good old outsourcing partner but explore the vast market. The business process outsourcing services industry is currently worth $67.6 billion, and it’s constantly expanding. In other words, outsourcing is highly competitive, and companies continually update and develop their teams and services. You should always be on the lookout for a new outsourcing company or expert, while feeling free to negotiate better deals or ask for new tools or services for your project.

Naturally, one of the biggest challenges with ending the status quo bias is having proper evaluation techniques. You can achieve that by working closely with your team and imagining exaggerating costs. Would the engagement still work for you if it were pricier? If yes, then you’re probably on the right path.

Final words

Perhaps the above prejudices weren’t exactly what you expected, as we haven’t mentioned the situations when one thinks outsourcing is always the cheaper option or that certain countries have better outsourcing teams than others. Still, these are nothing but examples of the above bias types (anchoring bias in particular). 

Our main aim is for you to identify these processes or trains of thought. Once you realize the hidden mechanics between your business decisions, you’ll be able to apply them not only to software development outsourcing but also to other projects and actions.

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