The risks and rewards of outsourcing software development are high. A company that outsources its IT needs without considering the risks is likely to waste its stakeholders’ resources or plunge its project into a black hole.
When you know how to navigate the common pitfalls of IT outsourcing, it can become the secret sauce that will help your startup grow.
Here, you’ll learn how to avoid the most common pitfalls of outsourcing software development, how to approach outsourcing effectively, and how to build a successful product while making a profit.
What are the top benefits of IT outsourcing?
Small businesses and corporate giants alike are increasingly turning to outsourcing as a way to get their projects completed affordably, on time, and with the same high quality of work that they’ve grown accustomed to. Here are some of the reasons why:
- Accelerate time to market:
When you outsource your software development to a professional software development company, you get a ready-made cake without having to learn how to bake from scratch.
A software development company has a lot of experience. Add that to the experience of your in-house staff, and you’ve got a team that can deliver a product quickly.
- Lower costs:
Companies turn to outsourcing to save money in the long run. You can hire expert developers with lower hourly rates, and you’ll avoid the costs of recruitment, sick leaves, rent, utilities, office supplies, etc.
- Increased productivity:
Hiring a software development company can help you reach new heights in your business. You can delegate support, software updates and industry-specific tasks to the outsourced team. In the meantime, your in-house developers can concentrate on the core tasks of high strategic and security importance.
- A higher level of service:
You can fill the expertise gap very quickly by hiring people from the global pool of experienced IT talent who work remotely. Hiring remote employees means you get to work with people who have impeccable skills, deep domain experience, and a long-standing track record of building successful products.
Some of the benefits of IT outsourcing are obvious, but there are risks lurking behind those benefits that could derail your business if you aren’t careful.
Outsourcing without proper precautions can put your product’s quality, security, and cost-efficiency at risk.
1. Inexperience with tools and technologies
In the same way that industry expertise poses a threat to your project, developers who lack proficiency in the required technology pose a threat as well.
It’s common for vendors to overestimate their developers’ knowledge of frameworks and programming languages. But if you’re looking to build a certain kind of solution, be sure your contractor has enough experience building this type of project.
Some suggestions
When you read the case studies, don’t miss the descriptions of the technologies and frameworks used.
2. Communication difficulties
Cross-cultural issues can cause communication problems even when the team is in the same office and working with a common language. These challenges are magnified when your remote outsourced team is onshore, offshore, or nearshore.
If you choose to outsource your IT projects to a foreign country, consider the language of communication first. Populous countries offering low-cost IT outsourcing include India, Poland, Ukraine, the Philippines and China; but the time difference can be an issue.
Some suggestions
Get to know your development team in person, or at least via video chat. Get involved in interviewing and hiring the development team, and then meet regularly with their project manager to stay on top of things.
3. Hidden costs
When you outsource your IT needs, make sure you understand exactly what the fees cover. You might find yourself paying more than expected or agreed if your provider includes obscure overheads or additional fees in your bill.
You might have to pay a large amount of overheads, along with a limited number of free product iterations and upgrades, relocation, redeployment, after-hours services, and troubleshooting. You may assume that some of these services—like quality assurance for testing your product—are included with the package you purchase but you might have to pay a surcharge for them.
Some of these factors may be indispensable to delivering a high-quality app, while others may be unnecessary.
Some suggestions
You need to ask your vendor for the hourly rates and fees they will charge for each service when drafting a contract. To prevent wasting money on unnecessary tasks, assign a business analyst to estimate technical requirements and prioritize them accordingly.
4. Vision: be on the same page
When developers outsource their work to another company, misunderstandings between the client and contractor can easily arise due to a lack of mutual understanding on technical issues or communication gaps.
When the vision, goals, and motivations of a project owner differ from those of a contractor, the result is an expectation gap.
To overcome the human factor, you must be able to communicate with your contractor and find common ground.
If you and your contractor aren’t on the same page about important factors like the goal, timeline, and budget, you may end up disappointed with the result.
Some suggestions
Explore the software requirements together, so that you and your contractor will be on the same page. Develop a unified terminology framework to prevent any confusion. Outline a work statement with important project details.
5. Absence of integrity
Risks abound when choosing an unreliable vendor with no sense of obligation and integrity.
The wrong choice of vendors can lead to catastrophic consequences. If you choose a faulty vendor, you may lose your warranty protections and have to pay for repairs out of pocket.
Or imagine pouring money into a project and realizing you’ve hired a team of junior developers to do middle-level work.
Some suggestions
Research the vendor’s experience and success rate, look for client testimonials, and check for a company rating on Clutch.
6. Absence of domain expertise
Outsourcing software development has many risks, including the lack of knowledge about industry trends, regulations, audience preferences, and programming languages.
When this happens, a project can end up running late, failing to meet obligations, incurring extra charges and losing quality. Or the contractor can outsource it to a third party who isn’t as experienced or as honest. This might threaten your data security and creative control.
Some suggestions
It is a good idea to ask the contractor about their portfolio and success stories. Discuss how their experience in your industry can be applied to your project. Ask for their suggestions on solving challenges.
7. Risks associated with security and privacy
When you outsource software development, you should be aware of security and privacy issues that come with the territory.
Areas of concern:
- Third parties gaining access to sensitive customer information like credit cards, medical records, or login credentials.
- Intellectual property theft.
- Cybersecurity vulnerabilities can jeopardize the security of your company’s data, and without a compliance certification protecting your company from those negative effects, your business could be in jeopardy.
Some suggestions
Do your homework. Find out if the website mentions any certifications and if they are industry-specific. Make sure to review all paperwork before signing anything, including nondisclosure agreements (NDAs). Does the vendor have a security risk management program in place? Is there documentation for all code?
8. Poor task management
IT outsourcing typically suffers from inefficient processes and delivery delays due to poor project management.
Your contractor will typically assign a designated project manager to manage the project as a liaison between the two companies. The project manager distributes tasks, monitors their execution, and reports back to you on the progress.
No matter how carefully you choose a vendor, there’s always the risk that they will manage your project poorly. But when this happens, delays and slow progress can be overcome.
Some suggestions
Before you hire a project manager, meet with that person in person. Ask about their experience and what tools they use for a full assessment of their abilities. Ask to see the task management strategy; professionals love to talk about their strategies.
Conclusions
IT outsourcing can be a double-edged sword. Used correctly, it can considerably reduce costs and speed up development. However, there are significant risks involved, which is why you need to consider them before making the decision to outsource software development.
Choosing the best outsourcing partner is the key to ruling out risk and guaranteeing quality. The best vendor will bring you significant cost savings and do all the hard work for you.
We know how to manage risks in industries and product types. So don’t hesitate to contact us—we will be happy to help.
