Virtually every business is built on software, whether it’s a website, a mobile app or desktop programs. Companies that are good at outsourcing can launch products and services much faster and cheaper than competitors, and maintain a long competitive edge. Unfortunately, most companies are awful at it. A horrifying two thirds of outsourced projects are late, over budget, incomplete or malfunctioning, and often all four at once. This unnecessarily costs businesses billions each year.

I know a little bit about outsourcing because I was the founder and former CEO of RentACoder.com (later renamed vWorker.com), an outsourcing marketplace with 400,000 users, and $131 million in projects. I saw numerous companies making the same mistakes over and ...