5 Risks of Software Development Outsourcing and How to Minimize Them

In the outsourcing pros and cons debate, the benefits seem to outweigh costs, even for global giants like IBM and Intel.

Hiring a dedicated development team with extensive tech expertise and having the ability to scale as the project grows is both time and cost-effective. In addition to these, other benefits may include instant help desk support, faster shipping, and better quality control.

However, these advantages aren’t experienced by default. It takes strategic planning well in advance to avert the risks of outsourcing and enjoy a successful outcome.

The Svitla team has compiled the most common blunders and provided each of them with a set of feasible solutions. Find what you may need to consider first in the following section.

#1 Missing out on proper vendor evaluation

When outsourcing software development projects, you should choose wisely a competent provider who is the right fit in philosophy, culture, and engagement style as basing an assessment solely on rates or market share could be a major oversight. These risks of software development outsourcing include a possible increase in engagement costs, customer loss, fragile software solutions, unauthorized use of third party data, and more.

The situation can also worsen if comprehensive requirements and outcomes have not been defined. This causes workflow inconsistencies, which result in wasted effort and financial resources. Fortunately, however, these perils can be avoided, and the factors below will help evaluate the vendor capacities and help prevent snags from happening:

Company maturity. Evaluate the partner’s experience, number of employees, expert domains, the quantity of successfully implemented projects, website, staff and clients’ reviews.

Case studies. Review detailed descriptions of technologies applied, issues handled, and outcomes for clients.

Development process. Get to know how the development process is arranged, how team roles are distributed, and how quality control is ensured. This will help you evaluate the provider’s full potential and build further communication more efficiently.

Defining project scope. Experienced vendors have experts on board able to assess the project scope including software requirements, compliance procedures, and disaster recovery. Furthermore, they can suggest a number of justified improvements to be made.

Past or current clients’ references. Real feedback sharing is always valuable, especially to reveal any downsides or hidden gains the vendor’s clients can tell you about.

#2 Failing to build strong communication ties

Another risk associated with outsourcing is poor communication between the client and vendor. Most of these misunderstandings occur because of time zone difference, poor language skills, as well as trouble navigating opposing views as to how processes should be set up, managed, etc.

These things lead to mismatched expectations and possible deviation from the initially defined project requirements. Still yet, the risk of these pitfalls can be minimized if the vendor can provide the following:

Communication plan. Devising a strong communication plan should be the firsts step in your engagement with the vendor. The plan may include regular review sessions with the engineers and team leads, status reporting, ad hoc communication methods, and more, making sure not go to extremes scheduling too many communication activities.

Assigning onshore team. A dedicated onshore team acting in sync with the overseas developers is the best-case scenario when outsourcing development because it shortens response times and increases urgency while handling issues as well as greatly reduces misinterpretations since the vendor teams regularly connect to discuss the emerging issues.

Dedicated Project Manager.Dedicated Project Manager who possess strong soft skills can better communicate the client message to the development team and help eliminate possible hindrances and bottlenecks.

#3 Falling short of systematic quality control

Quality control is a two-way street, which means that both the client and vendor should be involved in the entire outsourcing software development process. To make things run as smoothly as possible, you need to have a few in-house tech experts with a keener eye than that their peers to better perform risk assessments that will flag bugs critical to the product users.

Still, a large portion of the quality control is performed by the provider, which is why the vendor should have extensive expertise in quality assurance (QA). Otherwise, you will have to double your efforts to detect coding flaws and fix them.

Another two potential obstacles are tight deadlines and vague system requirements which could lead to insufficient test coverage with development given higher priority. To reduce low-quality shipment risk, here are a few suggestions:

Efficient QA processes. Ensure the vendor has a QA team in place with clearly defined QA procedures and that each test case is based on the documented system requirements.

Types of tests run. They will vary from project to project, but most of test runs will require unit, acceptance, integration, load and functional testings. Test cases and testing types applied to your project should all be mapped out in the test plan.

Access to bug tracking system. To achieve transparency in the workflow, choose one bug tracking system to monitor QA processes.

#4 Using unsafe data processing methods

Intellectual property (IP) safety is one of the biggest concerns for any entrepreneur, and these fears are not unwarranted, of course as about 63% of data breaches arise because of reckless outsourcing practices. Unfortunately, some companies mostly focus on service level agreements without paying due attention to the vendor’s security policies, data loss prevention systems, methods of data processing used by the software development managers, and more.

Thoroughly evaluating these factors is critical for both parties, since company personnel will be aware of the information eligible for sharing as well as its unauthorized use. Consider taking the following precautions:

Documented security policies. Make sure the vendor has a valid security management policy and is ready to sign a data processing agreement.

Code ownership.All the code created by the vendor also needs documenting and assurance that your property is clearly protected by the law.

Risk management plan. Previewing possible risks and ways of handling them will make communication with the software provider a lot safer and enable you to take immediate action when needed.

These are not the only prevention measures you might need to take, though. Find more details in our article on data leak cautions.  

#5 Not defining exit path for contractors

All the plentiful benefits of outsourcing may divert your attention from working out a thorough exit management plan (EMP) which is as essential as any technical documentation and should be finalized before entering into an agreement with the provider. Overlooking this piece may result in enormous litigation costs further down the road, so be sure to make these arrangements upfront while clarifying partnership details.

EMPs do not aim to threaten, they are intended for setting clear and fair procedures for both sides when the cooperation comes to an end or terminates earlier than scheduled. The plan facilitates services handover and fosters business continuity, especially when the services rendered are to be transmitted to another provider. These are some thoughts on what to include into your EMP:

The scope of work performed. Define the scope and longevity of the software development provision, making sure to include obligations for both the customer and provider.
Reviewing exit plan. This is especially important for long-term partnerships, since the scope of work may change with time. This plan should be reviewed periodically by both sides to avoid any inconsistencies.

Knowledge transfer. Set up clear policies for knowledge transfer when completing the project, including any assets to be handed over by the supplier to the customer.

Summing up

Fortunately, the outsourcing risks highlighted above can be easily averted when provider selection and development outsourcing are thoroughly planned.

Preparations may be tedious at times, but the outcome should come close to meeting your expectations, especially when you choose to hand over the work to agile teams.  With the right plan, you’ll be equipped to address even the gravest software development risks so that your customer-vendor relationships can bring positive results.

Hopefully, your outsourcing experience will be beneficial! Keep following our blog updates to explore more insightful posts.

For more information about the best way to start outsourcing read the article: Outsourcing software development.