10 Risks of Outsourcing Software Development Services and How to Manage Them

January 15, 2022

outsourcing software development services

Outsourcing software development projects to a remote or offshore team may be beneficial and cost-effective. However, as someone looking for outsourcing custom software development services for their web and mobile development, it’s reasonable to be concerned about the hazards of engaging an offshore outsourcing team.

Companies will eventually find it impossible to stay afloat in an atmosphere where new custom software solutions are released daily. They then alter their approach to a competitive edge by meeting budget objectives more rapidly.

software development company

Outsourcing trusted software development is particularly appealing to firms who wish to incorporate brilliant developers from all around the world in their projects. However, you need to exercise caution here to prevent making mistakes that might result in significant issues.

You can’t escape the hazards of outsourcing software development services, but you may readily mitigate them by taking the appropriate procedures. There are several distinct types of outsourced development methods for custom software development.

Offshore outsourcing model

Offshore outsourcing is when you outsource your software development to a separate nation or location with reduced labor prices yet professional knowledge. It is a cost-cutting strategy in which firms hire software development partners or third-party teams to handle their software development needs.


  • Cheaper labor costs
  • Availability of skilled business specialists
  • Freedom to concentrate on core business activities

Nearshore outsourcing model

Nearshore outsourcing is when you outsource your software development to a nearby or neighboring location. Businesses collaborate with third-party software development outsourcing partners or outsourced teams. This gives cultural closeness, a handy location, and outsourcing benefits.

software development outsourcing partner


  • Closer geographical proximity
  • Reduced labor costs
  • Larger talent pool within your neighboring culture

Hybrid outsourcing model

A hybrid method is a highly optimized strategy that combines the advantages of many outsourcing strategies. Hybrid software outsourcing is when you outsource your software development using a combination of on-site and offshore experienced developers. This outsourcing approach allows you to have both freedom and control over your company.


  • Low labor cost
  • Increased effectiveness
  • Scalability of on-demand labor

10 Risks Of Outsourcing & How To Manage Them

Consider many significant outsourcing risks when outsourcing your company’s complete software development function to a third party. The following are things to keep an eye out for and how to prevent software outsourcing risks:

1. Communication breakdowns

The process of outsourcing development must be ongoing. Communication is crucial in this situation. It needs to be consistent. If this isn’t the case, figure out what’s causing the problem and fix it. When outsourcing partners fail to communicate well, they feel irritated.

Complex technical challenges are easier to explain when using current communications, ensuring excellent voice audibility and intelligibility. A cultural divide can occasionally arise, which is difficult to bridge without the help of professionals.

software development companies

Accents can be noticeable, certain words may be lost in translation, and there may be a sense of incomprehension despite a genuine wish to assist. If you’re having trouble communicating because of a language barrier, hire a professional translator who understands your developer’s accent.

In time zone disparities, set up a 24-hour call center service. If you have a problem with a misinterpretation of goals or inconsistency in attaining them, do not hesitate to reach out to the software development companies.

Create a multi-channel communication paradigm that is both effective and efficient, preferably on a mobile device. Attempt to break down any obstacles to communication as fast as feasible. Because of a lack of transparency and frequent communication, some of the most promising ventures never get off the ground.

2. Lack of project development scope understanding

All the individuals involved must understand the meaning and objectives of a project. Misunderstandings and discrepancies should be avoided at all costs. You will get the desired outcome if you have a shared vision of the goals and meticulous task coordination.

The type and scale of a software project that you outsource offers unique challenges and necessitates customized software solutions.

The type and scale of a software project that you outsource offers unique challenges and necessitates customized software solutions. You will drastically diminish your chances of a good outcome if you overlook the distinctions.

mobile app development

The original formulation of goals should be thorough, clear, and consistent. Define functional and non-functional requirements, and the developer will have no trouble managing content changes. Before they begin working, they will precisely estimate the workload, and you may expect to save money.

Clarify the requirements, expected outcomes, dates, and general project management scope before submitting it to outsource software development. Software developers will be unable to work consistently if this is not done, and the gap between your expectations and actual output will expand.

Provide the outsourcing company with specific and well-justified expectations, both in terms of outcomes and timeliness. Also, be sure to supply them with detailed documentation. A Software Requirements Specification (SRS) document might be an excellent place to start. The offshore development team will then add further specifics and alternative scenarios, formulating a broad strategy before beginning work.

3. Too much focus on cost savings

Yes, outsourcing software development services saves money, but attempting to save money on everything might cause the developer to lose sight of the client’s values. The desire to cut expenses frequently results in a more fantastic price.

Software outsourcing companies often establish unrealistic financial targets while preparing a budget. It’s critical to prevent mistakes like these to keep the final software product development integrity and save money:

  • wrong choice of cooperation model
  • unclear and changing requirements
  • ineffective management strategies
in house team

Outsourcing software should help you optimize your business and free up time for more strategic duties. Choose a software outsourcing company that offers the most value for money. Don’t go for the cheapest option. It’s essential to figure out your budget ahead of time and select a spouse that fits it.

Avoid choosing a fixed cost for software project outsourcing if at all possible. Although having a predetermined budget gives you a sense of control and security because your outsourcing company is liable for any financial concerns, there are many other aspects to consider, including the ultimate quality.

Furthermore, projects with a set price are always more expensive due to possible risks. Because it’s nearly difficult to anticipate all of the intricacies ahead of time, a shift in the quantity of labor is unavoidable. Cost overruns will result as a result of this. Because a software outsourcing company must focus on attaining an agreed price rather than building a superior software product, the quality of work may decrease.

4. Poor collaboration with an in-house team

It is essential to make some adjustments to your company’s management and organizational structure if you opt to outsource software development. Offshore developers that can work in several time zones will be added to your teams. To operate effectively with your new colleagues, you must prepare your internal team. Make this happen as soon as you can, and make sure everyone in your company is aware of it.

software development industry

Explain to your staff why software outsourcing is a good idea and the future benefits. Inform your employees on how they should collaborate with others. This will assist you in avoiding any software development process resistance and increasing its efficiency.

Discuss possible interaction methods, outsourced software for collaboration, and necessary project management tools.

Change your daily routine to allow the internal development team to collaborate with remote employees. Discuss possible interaction methods, outsourced software for collaboration, and necessary project management tools. Encourage your employees to work productively and amicably with the new team.

5. Lack of domain experience

When a vendor has no prior expertise in your industry, they will have to devote extra time analyzing your needs. Even though many solutions are general enough to be used in various niches, a lack of domain expertise can generate a slew of problems throughout development and result in a product that falls short of industry standards.

project manager

Find information about the contractor’s domain knowledge. This information is available on their website or direct request (along with case-studies as proof of experience). Before beginning development, include a product discovery phase/workshop. You’ll get finished wireframes, use cases, and business processes, as well as a blueprint for your product’s technical specifications.

Furthermore, the workshop will expose any technical and soft skill shortages in the vendor. If you discover any red flags, you can take your plans to a more qualified developer. In this approach, a tiny initial investment can protect you from various problems down the road.

6. Technology dependency

Many businesses are concerned that they will become so reliant on their outsourced service provider that switching to another vendor will be nearly impossible.

hiring in house developers
  • Sign a contract that ensures you retain control of your code and data
  • Examine how easy it is to locate developers who work with similar technologies. Determine the cost of switching to a different service provider
  • Insist on having the development process documented

7. Time-zone Adjustment

There will be issues about time zones if projects are outsourced to a neighboring place or a distant country. Outsourcing organizations are sometimes located in entirely different time zones. Sometimes you’ll be ahead of or behind the time zone of your current business.

web development

Since both parties are in separate time zones, there will be issues about tech support availability at odd hours. In this situation, it’s difficult to predict whether the project will be completed on time or not. Here’s how you can get around it:

  • Look for the best software outsourcing companies that are providing 24×7 support
  • Select the companies with the best reviews regarding the time factor
  • Go for the company that has excellent and quick deliverables of its projects

8. Service quality and performance

Every company aspires to provide excellent outcomes. You may be promised high-quality software products deliverables when you are introduced to software development outsourcing services. However, it is not required that a new software development company with whom you have never worked will provide you with excellent outcomes.

quality assurance

If the quality of the service is insufficient, your company will lose both time and money over a short period while searching for a quick and inexpensive answer. Here’s how to assess the quality of any software development services:

Get in touch with past clients

Contact the company’s prior clients and ask about the provided services. Inquire about the outsourcing software development procedure and ethics, as well as their overall experience.

The project’s methodology

Request a complete project outline and the itinerary for the company’s entire procedure, from start to finish. Learn about the proposed project’s tools, methods, and technology services.

Quality testing

Find out how they conduct quality evaluation and software testing at each project stage. Inquire about how they keep track of the bugs in the system and how they plan to deal with them.

9. Privacy and Security Concerns

The loss of control is one of the most significant hazards of outsourcing a custom software development company for a software development project. Your project necessitates creative control, and your requirements must be met according to your specifications, using the tools and technology solutions your company prefers.

Furthermore, many software development outsourcing companies offer to provide you with the most experienced and highly trained engineers but then assign the project to unskilled developers after it is set to them. You are also not permitted to communicate with the creators.

software development companies

The quality and outcome of your project may be harmed if you lose control over it. For instance, if a member of your outsourced software development team steals your company’s code, it can be very concerning. The outsourcing company’s mismanagement of the project might lose money, time, and effort. How will you pursue legal action across international borders?

To safeguard your organization from this security risk, draft an unbreakable outsourcing contract or SLAs (service level agreements) with the help of an international lawyer. To avoid a data breach, you can even request that the parties involved sign a non-disclosure agreement (NDA).

10. Lack of consistent plan

When it comes to company strategizing, there should always be a plan. It’s crucial to pick the perfect time to outsource development. You should be aware of the early symptoms of a need for outside assistance and select what to outsource.

Define your objectives and milestones to guide you through the process, and visualize how the strategy will be carried out. After completing all of the side chores, you may concentrate on the core product features.

Choose a programming outsourcing model that meets your company’s needs. Because outsourcing companies have complete control over the project from start to finish, the project model is more convenient.

mobile app development

You won’t have to worry about delegated procedures if you employ the model with external help because they’ll be perfectly managed. You won’t have to waste much time or resources managing your team if you outsource coding.

Determine the financial cost of achieving your objectives. Management, unanticipated logistics, new IT infrastructure requirements, and so on are all examples of “hidden expenses.” Be ready for unexpected expenses.

A trustworthy mediator can assist in uncovering hidden costs and balancing availability with excellent results. Change your engagement approach to providing an end-to-end solution with transparent pricing. Outsourcing developers should assist you in creating a clear project strategy that considers all possibilities.

Conclusion: Manage the risk when outsourcing to software development services

Outsourcing is one of the most effective strategies to cut software development costs while still gaining access to a large pool of competent engineers. Outsourcing software development has several advantages and disadvantages. Where there is a return, there will always be dangers. However, the benefits of outsourcing outweigh the risks associated with it.

business growth

Outsource your software development to expand your firm. There are always ways to minimize, handle, and manage the outsourcing risks associated with software development outsourcing.

About the author: Joe Silk -

Joseph is a Start-up Consultant, Copywriter & Business Owner with 9 years of PQE. He is extremely client-centric, able to work on a wide range of topics and deliver high-quality standards on projects of all sizes for clients all over the world. View on Linkedin