Because they have no idea how to hire and manage teams that build software. It's a lot harder than it sounds if you have no personal experience delivering software (read: most legacy corp CTOs).
I've spent my career at startups and growth companies building and scaling engineering orgs. So I take it as a given that I could get a highly capable team but wonder how much it would matter. Would we still be weighed down by internal bureaucracy to the point of failure?
I suspect that might be the case.
If so it's hard to fault a CTO for outsourcing. If your company isn't built to support having a tech org then you might see these kinds of failures no matter what you do.
It's possible. But it's really hard work, very politically expensive, and extremely high risk. So, yeah, not surprising.
> Branded as a success
I fear you aren't cyncical enough.
Was it a filure? Did the company's balance sheet improve? Did the company's stock price increase? Did the spinout attract a load of investment for its (pre-destined) success and turn that into a rich revenue stream?
Markets -- for both debt and equity -- are mostly idiotic machines on short timeframes. Your ability to generate free cash flow puts a floor on your price. Others' imagination and available liquidity are the only ceilings.
Additionally, these types of spin outs can behave like generational wealth. They may be incompetent idiots, but who cares? Daddy's money is more than you can raise and mommy's rolodex is richer than you could possibly imagine.
You have dozens of people with competing interests some of who are actively working against you and the C suite doesn't know what is really going on our what to do because all the information they are receiving is intentionally being distorted by people trying to spin it so they can keep creeping up the ladder.
The biggest enemy of a large organization is almost always itself.
I just want to point out that this isn't just legacy corps - I previously worked for a manager who went straight from a theory heavy CS degree to a theory heavy PhD to consultancy to management.
You still get companies like this where some middle manager with 0 years of SWE experience has to hire Software Engineers with 5+.
Software development requires placing millions of bytes exactly at right places to make billions of transitors sing and dance in precise sequence about billion times a second, every second. This is of complexity unlike anything humanity has ever encountered before.