Risks of Outsourcing Software Development and Tips on How to Avoid Them
Let's take a deep dive into the most common software development outsourcing risks and ways to solve them.
Let's take a deep dive into the most common software development outsourcing risks and ways to solve them.
If the past year and a half has taught us anything, it’s that many jobs can happen anywhere. Remote work, distributed teams and project outsourcing are now the norm in many industries. IT (and customer service) are some businesses that started the trend to move whole departments across borders before the pandemic, but now it’s clear that the trend is here to stay and only deepening.
Hiring a vendor abroad can be tempting. Saving on labor, gaining a competitive advantage or simply finding skilled and available developers are some of the main reasons companies decide to outsource. Not to miss the opportunity, thousands, if not tens of thousands of vendors have emerged to fill the gap. While contracting a project out can be beneficial — especially for startups — the process doesn’t come without risk.
Some outsourcing risks are common business risks, just with the added complication of not occurring under the same roof. Other risks are more about choosing the right vendor. It’s essential that you know what risks to watch out for in outsourcing a software project and ways to avoid common pitfalls.
Many risks of outsourcing software development revolve around breakdowns in communication. Slow response time, mutual mistrust and delays can all combine to frustrate an end client and the developers they hire. It’s not all, of course, but as we move to more remote, distributed modes of working, our communication styles should evolve with it, especially if you want to complete a successful development project. Some of the few risks of outsourcing involve:
• Failing to build strong communication ties
• Hidden and unforeseeable costs
• Failing systematic quality control
• Use of unsafe data processing methods
• Failure to deliver
• The overall quality of the outsourced product
• Failure to understand the scope of the project
I’ll discuss these risks in more detail and tips to avoid them, ensuring that you find an outsourced project which you can truly be proud of.
When dealing with outsourced projects, communication can be difficult. Since developers aren’t working in the same building, it’s difficult to communicate feedback to them regularly. Along with that, there are also multiple factors to consider, such as overcoming the problems associated with different time zones, languages, and cultural norms.
Communication barriers lead to mishaps due to unclear expectations in the development process, and these mishaps cause delays. Often, this lack of strong communication leads to developers being alienated in the process and unable to efficiently get work done.
A good tip to avoid this is to establish strong communication ties from the beginning. Be sure to work with vendors who set up dedicated channels like Slack or other messenger platforms and who are proactive about meeting schedules. Designate a product owner who is available to answer questions and be the point of contact between your business and developers. Regular standup and retrospective meetings are also vital methods to building strong communication ties. Encourage them to give you insights on the project regularly so that if any mishaps do occur, you’d at least know about them.
Many outsourcing companies bill in strange ways. Some charge a fixed fee, or bill on a retainer. Stil, others may try to retain intellectual property and try to sell you your product back. These charges can vary significantly and can cause you to go far over your budget with some projects. Though we are very direct with our costs as we simply charge per developer hour, many companies, however, tend to exploit client billing deep into the development process. For this reason, it’s often difficult to dispute the charges as they already invested time and effort into the project.
A simple solution to this can be to communicate with your vendor. Make sure that both parties understand the billing model, and that they can agree on a fair estimate of the financial structure of the project. A non-disclosure agreement or scope of work contract should be specific about billing. Ensure that this structure is adhered to throughout the project, and create legal insurance for it if necessary.
You must be clear about your outsourced project as many companies tend to have their views and ideas which can’t possibly happen without all the information. Some companies release small snippets of information, in fear of a vendor knowing too much. A lack of a full picture leads to an unsatisfactory product.
Fears are understandable no doubt, however, to please both parties, non-disclosure or non-compete clauses protect confidential information as well as competitiveness. As a client, you would always have the right to include protection of intellectual property in your contract, and companies can then adhere to this accordingly. There should be no excuse to share the full scope of the project with us, as without it, we wouldn’t be able to assign the appropriate skillset to reach your required expectations.
Delays can be a direct result of a developing company’s failure to understand the scope of the project. As with unclear understanding, there are unclear deliveries, which are then redone with delays.
To avoid this, you should once again ensure that there are strong communication ties between you and your vendor. You can do this by giving or asking for information in structured timelines, which include regular sprint monitoring and following a basic project flow. Both parties should always know what’s happening in the project through regular demos, regular backlog refiners, and retrospective meetings. Defining a definition of done for your vendor can also help avoid delays. A clear DoD will limit last-minute change requests further streamlining the project.
Obstructed feedback is also a major pitfall as, even if communication is established, instructions can still be unclear. An easy fix for this, however, can be to establish target communication channels with the vendor. This would allow you to be continuously updated on the progress of the team, and subsequently provide clear feedback based on that.
Outsourcing can be a major source of tension when regarding data confidentiality. Your originality, especially amongst software development companies, is highly favorable and can lead to reasons for outsourced developers to exploit your trust. Other than that, communication ties can also be unsafe, especially with data transfers through email and the risk of losing code repository due to it.
To resolve this issue, as stated earlier, there are legal contracts such as confidentiality agreements, termination clauses, and indemnity clauses that can help protect the rights to your project. Along with this, there are also general intellectual property rights, based on your region, that protect your project in case any terms are violated.
Unsafe communication lines are an easy fix as well. Simply encrypt all data before you transfer it, and ensure that the project is regularly backed up in case of any potential loss.
Having an outsourced vendor adhere to code quality is one of the most difficult challenges in outsourcing. This is mainly because there is ambiguity in the term “code quality,” and each company tends to have its own definition. This is partially due to the ambiguity of coding, and there being no exact definition of what “good” or “bad” code is. In personal experience, code is normally based on how it is run and managed in a project. Systematic quality control is dependent on the communication you provide to the vendors, and their ability to then meet that standard you provide them.
When dealing with this, a project manager or team leader has one of the most crucial roles to play. They should be able to communicate feedback to the client based on the standards set for the project. This includes dedicating time to contact the client and address issues about the project, and ensure that these issues are then capable of being overcome. Project managers should be able to overlook each process of the project and then ensure that the code is “good” according to the standards of the company.
There are three main cases by which a project may lack quality, all of which were discussed above previously: the project is either outsourced without a team leader or project manager in charge, individuals in the project are alienated, or the vendors lack complete knowledge of the project.
Resolving a lack of team leadership, oftentimes, can be quite hard as the outsourced vendor can also additionally outsource a third party to ease his own workload. This causes information to be misinterpreted along the way and consequently be quite confusing to deal with later. To overcome this challenge, we suggest the use of an internal PM who can monitor the outsourced team with weekly or fortnightly meetings. This ensures that regardless of how large the project becomes, it remains manageable at a macro level.
Individuals from the outsourced team being alienated, on the other hand, can be a direct result of a lack of motivation, irregular feedback, or a lack of contact. When an individual is bored or demotivated, it tends to show in the quality of their work. To overcome this simply ensure that team members have the support they need. This can be done by employing more than one developer per task and through positive reinforcements throughout the development process.
Finally, a lack of knowledge of the project can be resolved by communicating required expectations and laying down the quality of milestones in advance. Through regular briefings, you can stay on top of the development efforts and then act accordingly based on progress.
To conclude, the foundations of efficient outsourcing can prove to be extremely useful for the strong communication ties, conveying your expectations for pricing and quality, and regular meetings to ensure that expectations are met. You have to understand that, though outsourcing comes with its own set of risks, there are still obvious benefits to outsourcing including a visible decrease in costs, an increase in delivery speeds, and being able to free up the workload on your internal team.
Outsourcing is a common practice which has been carried out for decades now, and the benefits are clear reasons why. The blessings of outsourcing tend to make the process worth it, but only if it is efficiently run and managed. If correctly communicated and regularly monitored, an outsourced project can reap returns beyond expectations and in half the time and effort!
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