Outsourcing Software Development Services: What Are the Risks and How to Manage Them?

January 15, 2022

Outsourcing Software Development Services What Are the Risks and How to Manage Them

So, you want a new website or app, but you’re not actually sure if you want to develop it in-house or have someone else do it for you. You’ve heard all the horror stories about how things can go wrong when outsourcing software development services, but you’re not sure if they’re true.

We’ve all been there. Sure, there are so many risks involved, and yes, things can and do go wrong. But if you’re smart about it, you can manage those risks and end up with a software project!

In this article, we’ll discuss some of the risks involved in software outsourcing, as well as how to manage them.

Why Outsource Software Development?

In any industry, speed is a vital factor in staying competitive. Outsourcing your web and mobile development can be the key to leveraging against your competition.

software outsourcing cost-effective quote

But the reason doesn’t stop there; here are some others:

Focus on Your Core Business

Let’s face it unless you’re in the business of web development, mobile app development, SaaS application development, enterprise digital solutions, or custom software; chances are it’s not your forte. By partnering with development companies with a staff that lives and breathes code, you can focus on what you’re good at and leave the development to the experts.

Get it Done Faster and Cheaper

Software outsourcing can be a cost-effective solution, especially if you partner with a company in a country with a lower cost of living. But beware, cheaper doesn’t always mean better quality. Do your research to find a company with a good reputation that fits within your budget.

Source Talented and Expert Developers

When it comes to developing software, you want talented and experienced developers in your team. But finding and recruiting these experts can be a challenge, especially if you’re not in the industry. Well, outsourcing can help you with that.

5 Key Features of an Effective Software Development

How do you know if your software development outsourcing partner can deliver a project that can keep up with the trends?

In today’s business landscape, having a strong online presence is essential for success. One way to gain a competitive edge is to differentiate your brand through the use of custom software development.

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By utilizing the latest techniques and technologies, you can accelerate software deployment, ensuring that your products and services are of the highest quality and efficacy. In doing so, you will not only attract more customers, but you will also be able to retain them for longer, giving you a significant advantage over your competitors.

To find out, you should look for the following key features:

1. Artificial Intelligence (AI)

Businesses have long desired to automate time-consuming tasks and make more accurate decisions based on data rather than intuition. AI designers have made these things possible. In the coming years, we expect more growth in this industry, and you shouldn’t pass on an opportunity to outsource software development with AI.

2. Blockchain

Several organizations have started implementing blockchain in their business operations. This distributed ledger technology can provide many benefits, such as increased security and transparency. So, if you’re looking for a software development company that uses the latest technologies, make sure they have experience with blockchain.

3. Low-code

Low-code or no-code software development platforms allow you to create applications without writing code. Developing low-code applications is faster and easier than traditional methods, making them ideal for businesses that need to launch products or services quickly.

data center cloud

4. Cloud-native Development

Software that is developed to run on the cloud can be more scalable and resilient than traditional on-premise software. Cloud-native development can help you take advantage of the benefits of the cloud without re-architecting your existing applications.

5. Analytics

Working with data is essential for making informed decisions about your software development projects. Analytics can help you track progress, identify issues, and make better decisions about the direction of your projects.

Now that you know what to look for, it’s time to know the risks involved in software development outsourcing.

8 Risks in Software Development Outsourcing & How to Manage Them

Like with any business decision, it’s better to anticipate risks rather than be caught off-guard by them.

Choosing to outsource software development comes with its own set of risks that need to be managed in order to protect your investment. If this is your first time outsourcing, you want to be prepared when these risks materialize.

meeting custom software development company

Here are the 8 most common risks in software development outsourcing and how you can manage them:

1. Quality Control Issues

Part of outsourcing software development is trusting that the team to navigate the development process without you. The result? You can’t be as hands-on with quality control.

The good news is that you don’t have to surrender control completely. The best software outsourcing companies will have a robust quality control process in place that includes regular check-ins with you, the client.

You can set the level of involvement in each phase of the process. While some think that the pre-development phase is where you should be most involved, we highly recommend that you are available to guide the team every step of the way.

The way to manage this issue is to create a quality control plan. This document should outline the following:

  • your expectations for the project
  • what deliverables will you need to sign off on
  • how often do you want updates

With a plan in place, you can trust that the team is working according to your expectations, and you can avoid quality control issues.

custom software outsourcing quote

2. Lack of Understanding of Project Requirements

What could possibly happen if your outsourcing partner doesn’t completely understand your project requirements? You receive a product that doesn’t meet your needs.

This is one of the most common risks when outsourcing software development and can be costly in terms of time and money. When this happens, it often leads to frustration on both sides and can jeopardize the entire project.

So how do you avoid this risk? Everyone should be on the same page. In order to achieve this, there are three actions you can take:

Don’t assume that the team understands your business as well as you do

The challenge in custom software development is that the product is uniquely for your business, and your team may not be familiar with your industry. That’s why it’s so important that you take the time to explain your business and what you’re looking to achieve with the project.

Find information about the contractor’s domain knowledge

If you want to know this information, it is available on their site or by request. Make sure to do a product discovery phase/workshop before development to get use cases, wireframes, business processes, and a blueprint for your product’s technical specifications. You’ll be glad you did!

Make a Software Requirements Specification (SRS) document

To be as specific as possible when outlining your project requirements to your software development team, create an SRS document. This should include the following:

  • What is the product supposed to do
  • Use cases and business processes
  • UI/UX prototypes or wireframes
  • A detailed description of each feature

This document will help to ensure that your team understands exactly what you need and can avoid any misunderstandings. The outsourced team will supplement the initial details with additional information and potential scenarios, allowing for a more comprehensive strategy to be created before work begins.

Remember that prevention is better than cure, and that applies to software development outsourcing as well.

meeting software outsourcing company

3. Dependency on a Single Vendor

Let’s say you’re working with a vendor who is doing an amazing job on your project. But what happens if they suddenly go out of business or stop responding to your requests?

You’re left in the lurch, and your project comes to a screeching halt.

This is why it’s so important to avoid dependency on a single outsourcing software development vendor. While it’s great to have a good working relationship with your team, you should always have a backup plan in place.

To manage this issue, you should work with multiple vendors. This way, if one vendor goes out of business, you can switch to working with the other. But, with this, another problem may arise: working with multiple vendors.

Suddenly, you have to manage multiple relationships and keep track of progress across multiple software development teams. This can be daunting, but there are ways to make it work.

Delegate a team member from your organization to be the primary point of contact for each vendor. This way, you can focus on other aspects of the project and leave the day-to-day project management to someone else.

cost savings

4. Attempting to Cut Development Costs Too Much

While it’s true that outsourcing software can save money, trying to cut costs on everything could lead the developer to lose sight of the client’s values. When businesses attempt to save money too frequently, they often spend more in the long run.

Oftentimes, the vendor will take shortcuts to meet deadlines and budget restrictions, which can result in a subpar product. In the end, you may have to hire another development team to fix the issues, costing you even more money.

What’s the solution? We can give you three choices on how to manage this issue:

Don’t try to cut costs at every turn

Instead, focus on creating a product that meets your needs and provides value to your users. Once you have a product that you’re happy with, you can then look for ways to optimize costs.

If possible, avoid outsourcing your software project at a fixed cost

While a set budget may give you some comfort as your outsourcing company is then responsible for any financial worries, there are many other elements to think about—such as the final product’s quality.

Don’t go for the cheapest option

There’s a reason why they’re the cheapest—they’re likely cutting corners somewhere. In the end, you may have to pay more to fix the issues that arise.

Outsourcing software should help you optimize your business and free up time for more strategic duties. To minimize software development risk, select a contractor who offers the most value for money.

renting office space

5. Timezone Differences

There will be issues with time zones if you work with an offshore development team. Different time zones can lead to communication difficulties, missed deadlines, and frustration on both sides.

In this situation, it’s difficult to predict whether the project will be completed on time or not.

However, there are a few ways to mitigate this issue:

Choose an outsourcing company with 24/7 support

Since both parties are in separate time zones, there will be issues with tech support availability at odd hours. Having a vendor that offers 24/7 support will help ensure that communication difficulties are minimized.

Hire a project manager

If you’re working with an offshore team, it’s a good idea to hire a project manager who is in the same time zone as the team. This way, they can act as a liaison between the two parties and help with communication.

Use a project management tool

Aside from having a project manager, another way to keep track of deadlines is to use a project management tool. This will help both you and the development team stay on the same page, and it will be easier to track progress.

If you really want to eliminate this problem, hiring in-house developers may be the best solution. But, if you’re set on outsourcing, then these tips should help you minimize the risk.

meeting team

6. Lack of Cultural Compatibility

Cultural differences are one of the hidden risks of software outsourcing because it manifests when you’re in the process of working together. So, it’s better to be aware of it now than later.

What may happen if there’s a cultural clash between the client and the vendor? Several things:

  • Miscommunication
  • Delay in projects
  • Inefficient workflows
  • Decreased productivity
  • Loss of money

Don’t fret! We have one solution to help reduce the risk of a cultural clash: research their culture.

When looking for software development companies, research the country’s culture and see if it matches your own. It would be easier to work with a team that shares the same values as you do.

Moreover, you can directly ask the vendor about their culture and how they work. This way, you can get a feel for whether or not you’d be compatible. Trust us, you will not regret taking this step because not only will you have a successful project together, but you will also gain a valuable partner.

dedicated team

7. Language Barrier

We’re not talking about programming languages here—we’re talking about the barrier that exists when two people speak different languages.

Affordable but trusted software development companies are not always easy to find, especially if you’re looking for ones that also speak your language.

But, the language barrier is not an issue that should deter you from outsourcing. With the help of technology, language barriers can be overcome.

There are many translation tools available online, such as Google Translate, that can help with communication. In addition, many project management tools offer translation features, such as Trello and Asana.

If you cannot be bothered by the translation tools, you can also find software development companies that speak your language. For example, if you’re looking for Indian developers, try to find ones that speak English.

Look for English-speaking developers in the first place. This way, you can avoid any communication issues from the start.


8. Privacy and Security Concerns

Your project may contain confidential information, such as your company’s trade secrets. So, it’s understandable that you would be concerned about privacy and security when outsourcing the development process.

When your hired software developers are oceans apart, it may not be easy to keep track of what they’re doing with your project. Some companies do not even allow you to communicate directly with the creators.

For example, if an employee of your outsourced software development team steals your company’s code, it can raise many legal questions. How will you pursue them across international borders? This is a major concern for many businesses, and it’s one of the main reasons why they don’t outsource. But there are ways to mitigate this risk.

The first step is to sign a non-disclosure agreement (NDA) with the software development company. This will ensure that the team will not share your company’s confidential information with anyone.

Another way to mitigate this risk is by using a version control system, such as Git. This will allow you to track the changes made to your project and who made them.

Lastly, draft an unbreakable outsourcing contract or SLAs (service level agreements) with the help of an international lawyer. This will protect your company in case something goes wrong.

While there are many risks in getting software development outsourcing services, there are also ways to mitigate them. These eight risks are the most common ones that businesses face when outsourcing. But, with proper planning and execution, they can be avoided!

handshake software development project

Let’s Build Your Custom Software!

Every year the software development industry evolves, and new trends emerge. As a business, it’s important to stay up-to-date with the latest trends so you can take advantage of them.

Outsourcing software development is a great way to stay ahead of the curve. By working with a team of experts, you can get your project done quickly and efficiently.

If you’re looking for a software development company to outsource your project, look no further!

StarTechUP is a leading software development company with years of experience working with international clients. From start-ups to large enterprises, we have a proven track record of delivering quality software on time and within budget.

If you’re ready to get started on your project, contact us today for a free consultation! We would be more than happy to discuss your project with you and provide you with a proposal!

About the author: Andrea Jacinto - Content Writer

A content writer with a strong SEO background, Andrea has been working with digital marketers from different fields to create optimized articles which are informative, digestible, and fun to read. Now, she's writing for StarTechUP to deliver the latest developments in tech to readers around the world. View on Linkedin