When it comes to software development outsourcing, there are certain major risks associated with it. Here is what you have to know about them.
Reliability of your outsourcing partner
In outsourcing, trust is everything. Most outsourcing companies boast their extensive knowledge and experience that come with promises of perfect project deliverables. However, what you need is credibility. You have to be sure that your outsourcing partner is reliable to work with as your entire project’s success may depend on them. Remember that you can’t rely on face-to-face meetings and on-site visits, but only video calls.
Solution: verify the company website and their social media activity. Get familiar with their recent projects and case studies. Find third-party reviews and client testimonials.
Loss of control over your project
Many businesses consider it the biggest outsourcing risk. Software development partners often do not allow to be in contact with web developers, so you cannot verify if the most challenging tasks have been delegated to experienced programmers. Loss of control over your project can affect the quality of the final product and the entire outcome of your project. This may lead to a loss of money, time, and effort.
Solution: make sure you plan and strategize the whole project. Think of data security. Write a detailed plan and describe requirements and responsibilities. Set up proper communication channels and identify the person of contact. Finally, at each stage of the project, track KPIs and metrics.
Hidden costs
This is probably the second most often discussed among the outsourcing risks. Especially startups may worry that their outsourcing service provider will charge them additional fees at the end of last-minute changes. There may be unpredicted upgrades, bug fixes, redeployment, etc. All of these usually lead to an increase in the overall budget. In some cases, you can even pay extra for obscure overheads.
Solution: in order to avoid unexpected costs, always define the requirements and keep them clear with the outsourcing company. If possible, get a third-party law firm that will support you in decision-making while choosing the outsourcing service provider. The additional costs should be listed down to the nail in the contract.
Lack of domain knowledge
Before you decide to outsource your software development project to an outsourcing company, you should thoroughly check their portfolio of projects. Particular domains may require an understanding of industry business context and knowledge of specific technologies. You should make sure your partner has experience in your domain and product expertise. If you don’t, you risk project delivery delays, missed obligations, extra changes, and substandard quality.
Solution: it’s recommended to get familiar with the company’s offerings and services on their website. Case studies and recent projects may always be helpful to verify the company’s previous experience.
Privacy
Every time you start collaborating with a third party, there is a risk of a data breach. Chances of keeping privacy and confidentiality should be a standard, however, there is always a possibility of information leakage. You never know whether outsourcing firms will abide by the laws of your own country or not which means decreased security.
Solution: you should always sign a non-disclosure agreement since a service level agreement (SLA) might not be enough. Also, you should learn the third party’s data protection practices and policies. When it comes to the contract, make sure you have ownership of the source code.
Communication issues
Miscommunication may lead to very serious problems in outsourcing collaboration. Let’s say you’re hiring an outsourcing firm from a country with the opposite time zone. If you need to get into a detailed discussion about the changes in the project, one of the parties will have to clock in at night to join the meeting. Furthermore, there are language barriers and cultural differences that can cause gaps in understanding between the parties.
Solution: to avoid communication issues, you should start with allocating a single person of contact. They will be responsible for managing a smooth flow of communication between the parties. Additionally, set up regular meetings or calls including both teams. Finally, you can make sure to acknowledge where complicated factors make miscommunications likely. Provide your business partner with enough attention to learn your business as quickly as possible.
Unclear delivery expectations
The parties should be on the same page in terms of deliverables. It’s not enough to write down the project objectives. The best way to go is to prepare the project requirements specification — if you don’t have it, this may lead to lots of changes during the project execution, which can significantly increase costs or extend project timelines. This type of risk includes unrealistic expectations that are a huge barrier to success in software development outsourcing. You cannot expect an architect to let you know how much your house will cost without giving them clear and detailed specifications, right? It’s the same with building software.
Solution: be realistic about your expectations for delivery. Significant milestones and checkpoints are as important as a final deadline, so you need to be transparent with your partner. You should make sure that they are capable of meeting them. Make a proper list of all features your software product should have and share it with potential offshore vendors. Let them come back to you with their questions and doubts.
Quality of software
It’s the bottom line of everything in software development and one of the most obvious risks of outsourcing. If the software product delivered to you eventually has lots of bugs, your project will be delayed until you fix them, which can have a significant negative impact on your business.
Solution: test early and thoroughly. The earlier you detect bugs, the easier it is to deal with them. Ask your outsourcing partner to add a QA engineer to the team — a person who will be dealing with bugs on a daily basis. Regular testing makes it cost-effective to fix them in the earlier stage than later. Also, a thorough code review should be carried out to confirm the quality of the code.
Ineffective task management
Inefficient processes and delivery delays are typical problems for software development outsourcing. Usually, it’s a result of weak project management. A third-party contractor usually assigns a dedicated project manager for each project – they distribute tasks, control their distribution, and report back to you. However, there is always a risk that an external company will not manage your project properly, as it happens in all industries.
Solution: the best option is to interview the project manager personally before they are hired. You should carry out a full assessment – check their experience, the tools they use, and their task review process. Also, you should browse reviews on Clutch and conduct market research to gather opinions about the offshore vendor. As a contractor’s expertise plays a vital role in making your project work, you really need to get it right.
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