Failure factors of small software projects at a global outsourcing marketplace

•The risk of project failure was predicted with reasonable high accuracy.•Selection of providers based on good previous performance decreased the risk.•Selection of providers based on low bid price increased the risk.•Client and provider skill were similarly important to explain project failure.•Geographical regions differed much in project failure rate.

The presented study aims at a better understanding of when and why small-scale software projects at a global outsourcing marketplace fail. The analysis is based on a data set of 785,325 projects/tasks completed at vWorker.com. A binary logistic regression model relying solely on information known at the time of a project's start-up correctly predicted 74% of the project failures and 67% of the non-failures. The model-predicted failure probability corresponded well with the actual frequencies of failures for most levels of failure risk. The model suggests that the factors connected to the strongest reduction in the risk of failure are related to previous collaboration between the client and the provider and a low failure rate of previous projects completed by the provider. We found the characteristics of the client to be almost as important as those of the provider in explaining project failures and that the risk of project failure increased with an increased client emphasis on low price and with an increased project size. The identified relationships seem to be reasonable stable across the studied project size categories.