Risks of Outsourcing Software Development: All You Should Know and How to Overcome

Risks of Outsourcing Software Development

Outsourcing is considered a business practice that involves hiring a third party to perform software development services or create the goods. However, companies can also employ in-house staff to complete the job.  A range of industries employs this practice. Some instances would include outsourcing marketing efforts, software development outsourcing strategies & implementation, manufacturing of parts, and more.

It is vital to thoroughly understand what outsourcing brings to the table and the risks and benefits within the scope of risk management. The below-mentioned are pointers involving a few considerations.

The Risks of Outsourcing Software Development

Reliability, Uncertainty, and Trust

Several companies openfeature their immense amount of experience, with promises of delivering some of the best projects. In contrast, some companies are talking about their services & vast skillset of their workforce. But before hiring them, you need to check their credibility.

Make sure to check whether they stand up to their claims or not? Are they professional and trustworthy enough to work with? Ensure that you are not handing over the project to just anyone!

Domain Expertise

One of the main risks associated with IT consulting services is the lack of domain experience, and that becomes important in hiring in-house professionals instead of outsourcing expertise.

Knowledge, Tools, and Proficiency

So, how do you ensure that when outsourcing software development projects, the developers of the outsourcing company have the skills and proficiencies they claim?

Before you outsource software development, it is imperative to check their skill levels. It is always advised to ask questions regarding how knowledgeable the team is, what tools will be used and how comfortable their in-house team is in using the said tools. 

Time-zone Adjustment

There could be concerns regarding the time zone when a project is outsourced. With offshore outsourcing, especially with companies located in the U.S., the time zone will be different, but it doesn’t have to be challenging.  With platforms like Zoom and Teams, time zone alignment becomes less of an issue. 

Hidden and Uncertain Costs

While you are outsourcing software development as there is a greater chance that you might find some hidden charges and extra fees.  Be sure and clarify upfront before signing any document what is involved in the cost of the software project outsourcing and what additional costs might be incurred.  The primary aim of outsourcing is to save costs and time. 

Service Quality and Performance

Every business wants to deliver outstanding results. There are no guarantees but communicating wants and needs upfront and with open communication, which is key, will help ensure a more successful outcome. 

How to Manage this Outsourcing Risk

The general focus on managing the outsourcing risk is through proper communication. Setting clear objectives, deadlines and outcomes will help achieve the desired results.

Positive communication between the outsourcing company’s primary staff members and an internal management team.

It’s a good idea to create a firm outsourcing contract or an agreement that your legal team should review to make sure you are safeguarded. It would also include an NDA or Non-Disclosure Agreement concerning confidentiality with which your outsourced partners would become acquainted.

Final Thoughts

Software development outsourcing arrives with its own set of pros and cons. It is often associated with risks in terms of the project outcome. However, outsourcing benefits are more advantageous than the associated risks.

One of the ideal ways to reduce software development costs is outsourcing. Outsourcing can help a business take it product or processes to the next level.  Make sure that you know how to mitigate the risks associated with the outsourcing business! To gain more insight into how an outsourced software development team functions, feel free to reach out to our custom software experts at VLink. 

September 22, 2022


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