outsourcing benefits

Source: Deloitte 2016 Global Outsourcing Survey

So without further ado, here’s our top 10 risks of outsourcing:

Broken promises

Most outsourcing companies talk of vast expertise and top-notch talent, but is there any credibility to their words? You might fear that the software contractor won’t fulfill your vision. Even worse, they might go out of business in the middle of development.

Mitigations:

  • Look at the company’s website. If they can’t develop a nice site for themselves, is there any hope they’ll do better for you?
  • Check case studies. Credible companies will proudly display their most successful projects listing the client’s background, their problems, and how they solved them. Although case studies aren’t a silver bullet, they can demonstrate the vendor’s expertise and point towards their former clients.
  • Look beyond the case studies. Check independent review platforms like Clutch.co. It allows clients to rate IT outsourcing companies and provide details about working with them.
  • Talk to their clients. It’s always worth a shot to request the references even if the vendor is bound by an NDA or the client is too busy to answer your inquiries.
  • Check the vendor’s activity on social media. Do they share knowledge with other developers? Do they take part in international conferences and local IT events?
  • Meet the team face-to-face. If possible, visit the contractor’s office. This will give you a window to their day-to-day life and allow you to speak to the people that will work on your solution.
  • Exercise due diligence. Add a clause to your contract that spells out contingency plans in case the development partner goes out of business. You should be able to take over the critical infrastructure and all resources used to build your system. Learn whether local laws and political instability can threaten your long-term partnership.

Commission a pilot project or MVP to assess the vendor’s technical prowess, attitude, and soft skills. A small scope of work will ensure you’re not wasting too much time and money on incompetent contractors. 

Subpar quality

If you ask a dozen people that abandoned outsourcing, most of them would tell a similar story. They all wanted to save money. They all went for the cheapest offer on the market. They all got a team of newbies in the middle of nowhere and a host of communication problems.

When the result is an undocumented mess of a code, all the possible cost savings go out of the window.

Mitigations:

  • There can be no compromise when it comes to quality. Ensure the software contractor has the same high quality standard as your own company. Check whether they understand the role of QA on the project and employ code review.
  • Look at the vendor’s technology stack (e.g. frameworks, libraries, testing and monitoring tools). Do they only focus on manual UI testing or can provide the full range of QA services including Performance testing, API testing, Test documentation creation, and extensive QA automation?
  • Learn whether the contractor uses state-of-art DevOps practices to speed up development and maintain great quality (e.g. continuous integration and delivery, containers, source control systems, build automation tools, etc.).
  • Have a tech-savvy person on your side. Outsourcing doesn’t free you from the need to have at least some technical knowledge. Embrace this responsibility and you’ll get a well-developed solution that meets the needs of your business.

Read more: How automated testing can save you 75% on fixing bugs.

Lack of domain experience

When the vendor has no experience in your business niche they will have to spend more time analyzing your requirements. Although many solutions are generic enough to be applied to different niches, the lack of domain knowledge can cause numerous issues during development and result in a product that differs from the industry standards.

Mitigations:

  • Learn about the contractor’s domain expertise. You can find this information on their website or request it directly (along with case studies as proof of experience).
  • Add a product discovery phase/workshop before the start of development. You’ll receive finished wireframes, use cases, and business processes – a blueprint for the technical specification of your product. What’s more, the workshop will reveal any gaps in the vendor’s technical expertise and soft skills. If you notice any red flags, you can simply take your blueprints to a more competent developer. This way, a small investment upfront can protect you from many risks down the line.

Unforeseen expenses

When you engage in outsourcing for the first time, it’s natural to worry about unexpected costs that might arise during the development. Although most expenses are easy to discover before the start of cooperation, some might be hidden from your eyes.

Mitigations:

  • Make sure you have clear requirements before the start of cooperation (alternatively, organize a requirements gathering workshop). This will help you define the scope of work and reduce the chance of unexpected costs.
  • Get acquainted with pricing models offered by the provider. Different companies may have different notions of fixed and non-fixed price contracts. Choose an engagement model that better fits your project.
  • Sign a Service Level Agreement (SLA) that lists services provided by the web development outsourcing company and their costs. Make sure you’re aware of all the hidden costs like integrations, hosting, on-site visits, working overtime, and buying the necessary plug-ins/hardware/software.

Loss of control

Losing control over the project is every manager’s nightmare. You know your business. You know when your employees need supervision and when you can trust them to make independent decisions. Working with a development partner is similar: you’ll have to build trust towards each other.

Mitigations:

  • Ask yourself which aspects of development you are ready to delegate before the start of cooperation.
  • Write a detailed management plan. List main stakeholders, their responsibilities and contacts; establish the processes to deal with changing requirements.
  • Manage the project together with your partner. Appoint a Product Owner that will be responsible for maximizing its value, communicating with the development team, and prioritizing their work.
  • Set up proper communication channels. Daily emails are great but regular video-calls, on-site demos, Slack channels, and access to bug-tracking/project management software are much better.

Follow the development process. If you abandon your project, the final product will likely differ from your expectations. Providing feedback at different stages is essential for success.

Miscommunication

According to Grant Thornton’s International Business Report, 88% of respondents consider communication the key to successful outsourcing. Different time zones, language barriers, cultural differences and the absence of face-to-face meetings can all impact the project outcome.

What’s more, going for short-term cooperation means there will be little time to learn about your needs and adjust to your communication style.

Mitigations:

  • Check the team’s English and their understanding of your requirements at the negotiation stage. Always insist on personal communication or online meetings. Their unwillingness to communicate directly can indicate language issues that might cause misunderstandings later on.
  • Learn whether the software contractor has experience working with your time zone. While the difference in 2-4 hours is negligible, 8+ hours requires a significant adjustment for IT outsourcing firms. For example, they might implement the code during your nighttime and then report about it in the morning.
  • Ensure the IT services provider has an established requirements gathering procedure and employs professional business analysts.
  • When working remotely, some blockers will last many days. They will emerge during the team’s workday, last until you can read their email in the morning, and be finally resolved during the next day. To avoid such situations, you can ask the team to shift their working hours so that you’ll have at least a couple of hours of overlap. Regular morning sync-ups can go a long way towards resolving any blockers.
  • Account for cultural differences. Different countries may have different traditions, norms of behavior, intonations, and gestures. For example, India, China, and Southeast Asia favor precise instructions and processes. They often go for Waterfall development. Latin America and Eastern Europe, on the other hand, are similar to Western Europe and the USA, where they tend to value flexibility and initiative of Scrum teamwork.

outsourcing success drivers

Source: Grant Thornton’s International Business Report

Lack of experience with remote teams

You might be hesitant to engage in outsourcing because you’ve never managed remote teams. In such cases, the contractor’s expertise plays a crucial role as an equally inexperienced developer is a recipe for a disaster.

Mitigations:

  • Select a partner that knows how to work remotely. Reputable outsourcing IT companies will usually build all their business processes based on the offshore location of their clients. This means they already know how to work in various time zones, understand cultural differences, and have all the necessary skills for successful cooperation.
  • Ask your partner to train your employees on how to work with remote teams.

Intellectual property issues

Working with a software contractor often means exposing your intellectual property. It’s natural to feel uneasy when you share sensitive information about your employees, business processes, and IT systems.

Mitigations:

  • Learn whether the IT outsourcing firm has experience of handling confidential data (especially in financial, healthcare, and government sectors). Ask about their data protection practices.
  • Sign a Non-Disclosure Agreement (NDA) before the start of cooperation. Research the local IP laws. If necessary, hire a legal consultant with experience in software outsourcing.
  • You might worry that the vendor will use the knowledge of your system to develop a competing product. This risk can be easily mitigated with a Non-Compete clause. For example, we recently signed a contract with a large recruitment agency that prohibits us to develop a similar solution for the DACH region. Such clauses are tough on IT services companies but can be necessary to protect your interests.

High turnover at the vendor’s company

Outsourcing companies can have a much higher staff turnover than local businesses. When you have to onboard a new developer every couple of months, the quality of output will inevitably suffer.

Mitigations:

  • Inquire into the average turnover rate of the outsource web development company. Make sure they can find a qualified replacement among existing employees if one of the team members leaves (you can also include a clause that binds the contractor to issue a warning ahead of such a loss).
  • Visit the contractor’s office to ensure they employ in-house developers instead of relying on a horde of interchangeable freelancers.

Technology dependency

Many companies fear that over time they would get so reliant on the outsourcing service provider that it would be almost impossible to switch to another vendor.

Mitigations:

  • Sign an agreement that secures your ownership over your codebase and data.
  • Research how easy it is to find developers that use similar technologies. Calculate the cost of switching to another provider.
  • Insist on documenting the development process.

Read more: Why MindK is a development company you can trust?

Wrapping up

With enough foresight, you can mitigate most outsourcing risks. Following these tips can save you a ton of time and money on remote cooperation:

how to mitigate outsourcing risks

A small initial investment in the form of a discovery workshop can protect you from lots of risks of outsourcing. But to get the most out of remote partnership, you’ll have to stay involved in the development process.

This simple rule will make your life much easier and ensure the success of your project.

If you have some questions about working with remote teams or need outstanding developers for your next project, don’t hesitate to contact MindK.

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