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By taking the correct steps, you can overcome the risks associated with software outsourcing.
Outsourcing software development: Everything you need to know
You can contract all or part of your software development duties to an offshore or remote team by outsourcing software development. It is beneficial for your company to outsource software development.
- A larger pool of talent
- Saving time
- Fast delivery
- Cost reductions
- Productivity increases
Software development can be outsourced in different ways. There are different types of outsourcing development models for software development.
Outsourcing model for offshore
Outsourcing your software development to a foreign nation or city with reduced labor costs and professional experience is known as offshore outsourcing.
Hiring software developers or a third-party team to handle their needs is an effective way for businesses to cut costs.
Offshore Outsourcing Benefits:
- Cheaper labor costs
- Business specialists are available to help you.
- Concentrate on your core business.
Model of offshore outsourcing
Nearshore outsourcing is the process of developing software in a location that's nearby. Businesses partner with third-party software developers or outsourcing teams. It is a good option for businesses that want to be close to their customers, have a central location and enjoy the advantages of outsourcing.
Nearshore Outsourcing Benefits:
- Geographically closer proximity
- Reduction in labor costs
- The talent pool is larger in your neighboring culture
Outsourcing hybrid model
Hybrid outsourcing is outsourcing your software development using a blended approach that includes both local and offshore developers. The hybrid outsourcing model gives you flexibility and control of your business. A hybrid approach is a model which combines the best of both types of outsourcing.
Hybrid outsourcing: Benefits
- Labour cost is low
- Effectiveness is increased
- On-demand Labour Scalability
How To Avoid The Nine Biggest Risks In Outsourcing
Major risks are involved when you outsource an entire function in your company, such as software development. What you should look for, and how to avoid outsourcing software risks.
Reliability and Trust
Many companies boast about their experience and promise to deliver the best project results. Credibility is what's needed, not just a good pitch.
Do they do what they claim to? Do they have a good reputation? Trust is important. You must do more than outsource a project, which is vital to your business. You can easily overcome it by following these steps:
Website of a Company
- Discover the history of your company
- Learn about the services and offerings of these companies
Social Media Activities
- Social media is a great way to observe their activity.
- Find out what images they've created using different social media platforms.
Projects and Case Studies
- You can read about projects undertaken by the company.
- You can read all about clients' success stories and their case studies.
Third-Party Reviews
- Look for the company on popular review sites such as Clutch and Goodfirms.
- Review platforms allow you to read reviews about the business and its projects.
Client Testimonials
- You can watch the video testimonials or download the testimonials provided by your company.
- Ask them about the clients that they've worked with.
Domain expertise
The software development process varies depending on the project. Developers who are experts in various languages, frameworks and technology will have different needs. You should check their portfolio before outsourcing software development.
- Visit the business website to learn more about its products and services.
- You can read all the case studies that they've completed.
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Know-How, Skills and Proficiency
You will be told that outsourcing firms are highly qualified and have the latest technologies. How can you verify that a vendor's developer is as skilled as the company claims?
You do not need a firm that can't meet your requirements to save money. You need professionals with expertise and skills for all your project needs. You can do this by following these steps:
Technology Skills
- You should also check the computer skills of your developers.
- Please find out about their latest technology.
Softwares and tools
- Find out what software and tools are being used by the developers.
- You can read about how they used different technologies in their projects.
Planning and learning for teams
- It is key to understanding their project management process as a group and their leader's strategy.
- Watch their process for learning new technologies.
The Time Zone Adjustment
Time-zone issues are a concern when outsourcing projects to a country or location that is not yours. Outsourcing companies can be in opposite time zones.
Being ahead of or behind your current business location's time zone is possible. Predicting whether a project will be completed within the specified time is difficult.
Both parties will be in different time zones, so there may also be concern about the availability of technical support during odd hours. You can solve this problem by following these steps:
- Search for companies that offer 24x7 technical support.
- Choose the company with the highest client ratings when considering the time factor.
- Choose a company with excellent project deliverables and a quick turnaround.
Project Control Loss
Outsourcing a project for software development can lead to a loss of control. You need creative control over your project and want your needs met using the technologies and tools your company prefers.
Many outsourcing companies agree to give you the best and most skilled developers. Still, they assign the project to untrained developers once they receive it. The developers are also not permitted to contact you.
The loss of control can hurt the outcome and quality of the project. The outsourcing company can mismanage the project, resulting in a loss of time, money and effort. You can reduce this risk by following these steps:
Strategize and plan
- Prepare a plan detailing the management, responsibility and requirement.
- Let us know your requirements, including the technologies, languages, frameworks, and tools you prefer.
Communication Channels
- Establish a communication channel between you and the company that will allow you to be in touch with each developer working on your project.
- Get regular updates and reports on the progress of your project by identifying the contact person.
Track KPIs
- Establish small deadlines and milestones throughout the entire project.
- Track metrics and KPIs at different stages and intervals of your project.
Privacy, security, and confidentiality
Outsourcing software development is not a smart idea. This gives your company access to someone else. There is a natural reluctance to share sensitive data and information outside your company.
Hiring a well-respected company will reduce the chances of privacy and security issues, but information can still leak. It is hard to predict whether a foreign group would abide by their own country's laws. How can you protect your project?
NDA Signing
- Please find out about their policies and practices regarding data protection. Learn how they previously handled intellectual property.
- Be sure to get your vendor firm to sign an extremely strong and airtight non-disclosure contract.
Code Ownership
- Enter into a contract that is as tight as possible with your firm regarding ownership of source code.
- You must agree on who is responsible for deciding the design changes and code.
Hidden And Uncertain Costs
When you outsource software development, the company may charge additional fees for changes made at the last minute or in response to late requests. Outsourcing is primarily about saving money, not paying more.
Outsourcing vendor companies may have hidden, unforeseen costs, such as upgrading, relocation, redeployment and troubleshooting. These costs can add up, and the total price of your project may increase. You can avoid such expenses by:
Define the requirements
- Keep your requirements and needs clear from the start with the outsourcing firm.
- A detailed itemized breakdown of all expenses that the firm will incur during the entire project.
Hire a Law Firm
- When selecting an outsourcing firm, involve a law firm.
- A contract that is as detailed and accurate as possible will help you avoid any surprises.
The Service Performance and Quality of the Customer.
Every business aims to achieve excellent results. You will hear promises about good software when an outsourcing firm pitches its services. You don't have to work with a third-party service provider before you get good results.
You will lose both money and time if the quality of service could be better. You can assess the work quality of any service provider in several ways:
Chat with Past Clients
- Contact their former clients to discuss what they got from them.
- Ask about the company's work processes, work ethics and overall experience.
Methodology Of Project
- The company should provide you with the complete process and project schedule, including all the steps from start to finish.
- Find out about the technology, tools and techniques you will use in your project.
Quality Test
- Please find out how often they test and analyze quality and how much time they spend on each project.
- You can ask how they monitor the bugs and the plan they have to fix them.
Barriers In Communication
Outsourcing software development services to another firm can be a risky business. No matter how many communication tools you have, there will always be mishaps if you don't define the right channel for your communication.
Suppose you hire a team in a different time zone than yours. In that case, you'll have to assign someone to come into the office at night to discuss the details and explain the ideas or changes on behalf of the entire team.
It takes a lot of work to translate your ideas and get the team outsourcing them to do it right. Then, you have the task of getting those ideas put into action. How can you avoid it?
Assign a SPOC (single person of contact)
- Assign a point of contact to both parties for a smooth communication flow.
- Be sure the individual is experienced and skilled in managing tasks, chain communication and resolving conflicts.
Set up regular communication
- Add that both teams will meet regularly for a general assembly in the agreement.
- Keep track of project progress and ensure all the requirements are met.
Why Outsource Software Development?
The risks and rewards of outsourcing are both present. There are risks, but there are also many benefits.
Outsourcing has many benefits:
- Saving time on development
- Outsourcing development companies can be a great way to save time and money.
- Software development costs reduced
- A large pool of developers with talent translates into efficiency
- Globalization brings together developers from different cultures and perspectives.
- Outsourcing multiple projects to various companies simultaneously will help you manage peak demand.
- This allows you to concentrate on other aspects of your business.
Outsourcing IT has many benefits
More and more businesses are paying attention to outsourcing, which has become an important part of their work. Companies invest heavily in studies and research to better understand IT outsourcing.
Deloitte's 2021 Global Shared Services and Outsourcing Report provides these figures to help us understand that IT outsourcing represents global expertise. This is a best practice that small businesses and enterprises alike can use. This survey revealed that 88% of the respondents saw cost savings. In comparison, 78% said process standardization improved, and 63% admitted that their business value had increased.
Outsourcing has many other benefits. These are just a few of the benefits.
Read More: Brief Explanation of Software Development Life Cycle
Focus on priorities with outsourcing
Imagine the following scenario: You need to solve problems in your domain, but there are many other tasks that the team must complete. You could hire specialists to help solve domain problems, allowing your team to focus on other tasks.
For many small- and medium-sized businesses, focusing on core business activities offers them their only opportunity to grow. If an employee can focus on key tasks, results will be fast.
Outsourcing can help you achieve better results
The outsourcing world is full of new opportunities and experts with diverse expertise across different fields. You can, for example, hire an outsourced team to help develop your payment system. You can also find someone to take charge of creating a brand-new service.
Cost-effective outsourcing
Outsourcing can save you money, as we've already said. Hire developers in other countries, usually at a cheaper hourly rate. Or hire them to work on a single project.
Outsource has a better reach
Relocation of the expert is fine for a large enterprise. Small and medium-sized businesses, however, need help to employ talent from other states or countries. The outsourcing process is different. Online, you can hire an entire team without worrying about buying equipment or maintaining their workspace.
The Risks of Outsourcing Software Development
Outsourcing software development has many benefits but also comes with its risks. Outsourcing is one of many ways to go. We will give you all the information you need in the next blocks to work with an outsourced team over a longer period successfully.
Hidden And Uncertain Costs
You will be shocked to learn that specialists charge different rates for doing the same work. The hourly rate is affected by expertise, location, self-esteem, etc.
The hourly rate may be the least dangerous option when outsourcing IT, but it is still risky. The risks of software outsourcing are often associated with unknowable and hidden costs. You may have agreed to $100 in exchange for a professional's services. The number of free iterations has yet to be discussed. After four iterations, the job was completed, but at a cost of $150. Only two interactions were free. All subsequent iterations will be charged at the rate of an hourly basis.
It happens more often than you think. There is a way to avoid it.
- Sign a contract in detail before working with any new contractor
- In agreement, please indicate any additional services' price and hourly rate.
- Add information on the free interactions or several edits.
The Quality of the Product
Low-quality delivered work is one of the biggest risks in software development outsourcing. It becomes even worse if the job is not checked for quality in advance (for instance, before release). What can you do to avoid this? What are your options?
- Always check the quality before releasing or launching
- If you need more confidence to test the work independently, hire QA.
- Develop and implement delivery methods and tracking systems to help you better assess delivered projects.
Communication Borders
A clear and well-written assignment is the key to good-written code. Communication borders can be a challenge when working with outsourced developers.
Why did we add this to our list of major risks when hiring software development firms? Imagine you have hired an extremely skilled developer in China with a poor command of English. You will not be able to explain what you need, even if they are experts in software development.
We offer these solutions to avoid using communication boards:
- Choose developers who can speak English. Interviews are better conducted to ensure that both parties understand one another.
- Avoid complicated words and write your assignment.
- Add more references to visualize the results you wish to achieve
Knowledge Transfer
Outsourcing risk management is based on the principle that knowledge transfer must be ensured. The company must provide all details and necessary information to the outsourced specialist to complete the task. The outsourced specialist is responsible for delivering code to other developers.
How can you achieve that? Answer:
- You should work with specialists that don't manually capture data but instead use the software. This will make it easier to share all the information regarding your project.
- Choose specialists that use innovation roadmaps to transfer knowledge. This will ensure that the specialist you choose does not believe in "code ownership" (i.e., the person who wrote the code is the owner).
Poor Management
To minimize software development risk, you need a strong project manager. You shouldn't save money by having someone in your team manage outsourced specialists. Outsourced teams need better management than internal teams. Hire a project leader to ensure that your entire team works together.
Software development companies often offer teams that have a manager. It is a very beneficial approach, as the team has been together for a while and knows how to assign tasks.
Privacy and security concerns
You can't ignore the security risk of outsourcing. Deloitte's survey on current outsourcing trends and third-party risk addressed respondents' concerns about the risks associated with working with an outsourcer. Data security is a concern for 62% of the respondents, then performance/resilience (45%) and compliance (39%) with law and regulation by providers.
Is there a way to reduce the risks in terms of security? They are.
- Always sign an NDA with your vendor.
- Choose agencies and contractors that have experience working with sensitive data.
- Before you begin working together, discuss the security standards important to both of you.
The viability of service providers
The vendor's inability to deliver the services discussed is one of the greatest fears regarding offshore outsourcing. There are many reasons why this may happen, such as the task is never completed on time, or the service quality could be better. You may decide to start working with an agency. However, the agency will decide to stop their work in a few months. There is no way to avoid these scenarios, but you can take steps to reduce their likelihood.
- Include detailed information about penalties and cancellation fees in the agreement.
- Develop an operational contingency plan so that you can continue to work on tasks and processes even if the outsourcing fails.
- Revise your operational contingency plans regularly to ensure that you can still follow them.
The Negative Effect on Your Company Culture
This is the biggest surprise when it comes to outsourcing security. Even the smallest business with only 2 or 3 employees has a corporate culture. The more people are involved with the corporate culture, the bigger the business. All employees have the same expectations, and all follow certain rules.
If you start working with an outsourcer, ensure that the culture of your business will not be affected. Follow these tips to achieve it:
- The rules could be the same for all. Suppose, for example, that in-house experts meet deadlines. Outsourcers should then also adhere to them.
- Never discuss the rates with team members of any outsourced specialist.
- Make outsourcing part of the corporate culture.
Insufficient domain expertise
Each company is an expert in its field. This expertise may come from industry research or the peculiarities in working with the audience. The most important thing is domain expertise, which helps achieve goals more quickly. The standard is high, but the quality remains the same. The need for more expertise in the domain is one of the risks of IT outsourcing. This may make it more important to hire internal specialists than outsource talent.
Check out the suggestions below if you are concerned about this issue:
- Share your expertise and domain knowledge with outsourcing experts. Protect sensitive information by signing an NDA when you hire new talent.
- Outsourcers with experience working in your field are the best.
Intellectual Property
The privacy and security issues are very similar. Remember that you can protect your intellectual property by following these simple rules.
- Always sign NDAs with Outsources.
- Work with experienced outsourcers with experience working with sensitive information
- Protect your Intellectual Property by Law
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The conclusion of the article is:
Outsourcing Custom Software Development has its pros and cons. Risks will always exist where there are returns. Outsourcing has many advantages, but the benefits far outweigh the associated risks.
It is possible to cut costs on software development by outsourcing. You can also access a large pool of developers with great skills. Outsourcing your software development can help you grow your business. Outsourcing software development comes with several risks that can be managed and reduced.
