Published On: February 23, 2022
Last Updated: April 8th, 2022
Outsourcing software development to a remote or offshore team can be very rewarding and bring cost-reduction to your business. But, as a person who is seeking outsourcing services for their business, it is natural to have some fears and doubts regarding the risks of hiring an offshore outsourcing team.
You can’t avoid the risks that come with outsourcing your software development but you can easily overcome them by taking the right steps.
Everything about outsourcing software development
By outsourcing software development, you allocate and delegate parts or all of your software development functions to a remote or offshore team. Outsourcing software development services can be quite beneficial to your business as it:
- Access to a larger talent pool
- Saves time
- Fast delivery
- Reduces cost
- Increases productivity
There are different types of outsourcing development models for software development. They are:
Offshore outsourcing model
Outsourcing your software development to a different country or a city with benefits of lower labour costs but skilled expertise is called offshore outsourcing.
It is a strategic practise that businesses follow to reduce their costs by hiring software development partners or third-party teams for their software development needs.
Benefits of Offshore Outsourcing:
- Cheaper labour costs
- Availability of skilled business specialists
- Freedom to concentrate on core business activities
Nearshore outsourcing model
Outsourcing your software development from a nearby or adjacent location is called nearshore outsourcing. Here, businesses tie up with outsourcing development teams or third party software development partners. This provides cultural proximity, a convenient location and comes with the benefits of outsourcing.
Benefits of Nearshore Outsourcing:
- Closer geographical proximity
- Reduced labour costs
- Larger talent pool within your neighbouring culture
Hybrid outsourcing model
Outsourcing your software development with a blended approach of both on-site and offshore developers is called hybrid outsourcing. This type of outsourcing model provides you with flexibility as well as control over your business. A hybrid approach is actually a very optimized model that comes with the benefits of different types of outsourcing models.
Benefits of Hybrid Outsourcing:
- Low labour cost
- Increased effectiveness
- Scalability of on-demand labour
Top 9 risks of outsourcing & how to overcome them
When it comes to outsourcing an entire software development function of your business to a third party, there will be certain major outsourcing risks associated with it. Here is what you need to be on the lookout for and how you can avoid software outsourcing risks:
Reliability, Uncertainty And Trust
Most of the companies talk about their vast experience and come with promises of perfect project deliverables. Everyone does well in their pitch but what you need is credibility.
Are they actually as good as they say at their work? Are they reliable to work with? Building trust is very important. Your entire business depends on it and you cannot outsource your project to just anyone. Here is how you can overcome this:
- Learn the history of the company
- Read about their offerings and services
Social Media Activity
- Observe their presence on social media
- Learn about the type of image they have created on different social media platforms
Projects and Case Studies
- Read about the projects that the company has undertaken
- Read all the client success stories and case studies presented by them
Third Party Reviews
- Check the company’s presence on review platforms such as Clutch, Goodfirms, etc.
- Read the reviews given to the company and it’s projects on review platforms.
- Watch the client testimonials videos or read the client testimonials documents provided by the company.
- Talk to the different clients they have worked with and get a first-hand review from them.
Software development varies from project to project. There are different requirements of developers who excel in different languages, frameworks and technologies. Before outsourcing your software development requirements to a third party firm, you must check the portfolio of projects they have done.
- Read all the company offerings and services on the company website.
- Read all case studies of the projects they have completed and successfully delivered.
Knowledge, Tools And Proficiency
Outsourcing firms will pitch you that they are proficient in the best technologies with highly skilled developers. How can you be sure that the vendor company’s developers are skilled and proficient as much as they are saying?
In the name of cost reduction, you do not want a company that cannot fulfill your basic requirements. You need experts and skilled professionals for all your project requirements. Here is how you can tackle this:
- Check the skills and computer proficiency of their developers.
- Learn all about the latest technologies that they have updated themselves with.
Softwares and Tools
- See what tools and softwares are used by their developers.
- Read about the various technologies that they have used in various projects.
Team Planning and Learning
- Understand their process of managing a project as a team and the strategy implemented by their team lead.
- Observe their learning process of new or upcoming technologies.
Outsourcing projects in a nearby location or in a different country means that there will be concerns regarding the time-zones. Sometimes, the outsourcing companies are in a totally opposite time-zone.
Sometimes ahead or behind the timezone of your existing business’ location. In this situation, it can be uncertain whether the project will be delivered within the stipulated time or not.
There will also be concerns regarding the availability of tech support at odd times due to both the parties being in different time-zones. Here is how you can overcome this:
- Find companies providing 24×7 tech support.
- Select the companies with the best client reviews when it comes to the time factor.
- Go for the company that has excellent and quick deliverables of its projects.
Loss Of Control Over The Project
One of the biggest risks of outsourcing a software development project is the loss of control. Your project requires creative control and your requirements need to be fulfilled based on your expectations with the tools and technologies preferred by your firm.
Also, many outsourcing companies agree to provide you with the most experienced and highly skilled developers and once the project is assigned to them, they give the task to inexperienced developers. You are not allowed to be in contact with the developers either.
Loss of control over the project can affect the quality and the outcome of your project. If the project is mis-managed by the outsourcing company, it can cause loss of money, time and efforts. Here is how you can mitigate this:
Plan, Strategize, Implement
- Write a detailed plan of management, responsibilities and requirements.
- Provide an in-depth catalogue of all your requirements along with the preferred technologies, tools, languages and frameworks.
- Set up a proper communication channel with the outsourcing company where you will be in contact with all the developers working on your project.
- Identify the person of contact and get regular reports and updates on the status of the project.
- Set up small milestones and deadlines for the entirety of the project.
- Keep track of metrics and KPIs not just at the finish but at various intervals and stages of the project.
Privacy, Security, And Confidentiality
Outsourcing software development to a third party organization in a different country means giving your business’ access to an outsider. It is natural that there will be uneasiness in exchanging sensitive information and data outside of your organization.
By hiring a reputed company, there are low chances of having privacy, security and confidentiality issues but there is always a possibility of information leakage. You don’t know if an organization from another country will abide by the laws of your own country or not. Here is how you can protect your project:
- Learn their data protection practises and policies. See how they have previously dealt with intellectual property.
- Make sure that you get the vendor company to sign a very strong, airtight Non-disclosure agreement.
- Get into an airtight contract with the firm regarding the ownership of the source code.
- Reach an agreement regarding who gets to decide the changes in design and in code.
Hidden And Uncertain Costs
When outsourcing software development, there are chances that the company will charge you additional fees at the end in the name of changes or last minute modifications. The main aim of outsourcing is to save costs, not pay more.
The outsourcing vendor company might come up with unforeseen, hidden costs such as upgrades, relocation, redeployment, after-hour services, troubleshooting, etc. This might add up and increase the price out of the budget of the overall project. Here is how you can refrain from such costs:
- From the beginning, keep your needs and requirements clear with the outsourcing company.
- Ask a detailed, itemized list of each and every expense that the company will incur during the course of the project, from start to finish.
Engage With A Law Firm
- Get a third party law firm involved when making the decision of selecting the outsourcing company.
- Sign an airtight contract with all the additional costs listed down to the nail.
Service Quality and Performance
All businesses aim to deliver excellent results. When an outsourcing company will pitch their services to you, you will be given promises of good quality software deliverables. It is not necessary though that a new third-party service provider that you have never worked with, will guarantee you good quality results.
If the service quality is not there, there will be losses of both time and money for your business when you were only looking for a quick, cost-effective solution. Here is how you can evaluate the quality of work of any service provider:
Talk With Past Clients
- Get in touch with their previous clients and discuss the deliverables that they received from the outsourcing company.
- Inquire about the work process and work ethics of the outsourcing company and their overall experience.
Methodology Of Project
- Ask for the entire process outline and the project itinerary from the company including the start to finish steps that they will take.
- Learn about the tools, techniques and the technologies that will be used in the project.
- Learn about how they do quality analysis and testing and at how many stages of the project.
- Ask about how they track the bugs in the system and how they plan to tackle the bugs and errors.
Barriers In Communication
Miscommunication is one of the biggest risks that one faces in outsourcing their software development project to another company. Regardless of how many tools you use for communication, if you do not define a proper channel and a flow of communication, then there are bound to be mishaps.
For instance, if you are hiring a team from a country with the opposite time zone, one of you will have to clock in at night and get into detailed discussions and explain the changes or ideas on the behalf of your entire team to their team.
Translating your ideas, getting the outsourcing team to interpret it correctly and then getting the ideas implemented is a very difficult task. Here is how you can avoid this risk:
Allocate A SPOC (Single Person Of Contact)
- Allocate a person of contact between both teams for managing a smooth flow of communication between both the parties.
- Make sure that the person is skilled and experienced at handling task management and chain of communication as well as able to resolve conflicts.
Set Up Regular Communication
- Add it in the agreement that there will be a general meeting including both the teams at a regular interval.
- Keep taking regular updates of the progress of the project to make sure all requirements are being implemented.
Why You Should Outsource Your Software Development?
Outsourcing comes with its risks and returns. On one side there are tremendous risks but on the other side, it comes with so many valuable benefits that it overcomes the risks and obstacles.
Some of the major benefits of outsourcing are:
- Save time spent on the development process
- Get convenience by collaborating with outsourcing development company
- Reduced costs of software development
- Efficiency due to a large pool of talented developers
- Globalization which brings you experienced developers of different cultures bringing different perspectives
- Manage peak demands by outsourcing various projects at once to different companies
- You get the freedom to focus on your other business functions and responsibilities.
Outsource Software Development comes with some major pros and cons. There will always be risks where there is a return. Yet, the advantages of outsourcing are way more beneficial compared to the risks that come with it.
Outsourcing is one of the best ways to reduce costs for software development and get a huge pool of talented developers. Grow your business by outsourcing your software development. There are always ways to reduce, navigate and manage the outsourcing risks that come with outsourcing software development.