Today, software development is not limited to the in-house format. Companies invent new ways of delivering quality products cheaper and faster. One of the popular formats in this regard is hiring outsource developers to work on your product.
You can choose from different types of outsourcing: offshore, nearshore, and onshore. Offshore companies provide services from distant countries with stable economies, adds cost-efficiency to their benefits, as you can save on local taxes. Nearshore vendors reside in neighboring countries, which minimizes time zone concerns. The last type is onshore providers, which work in the same country, which is why they are available at the same hours you are and there will be no language issues in your communication.
Outsourcing development provides your business with multiple opportunities and benefits. One of the most attractive here is a chance to increase the efficiency of the team while keeping the project budget-friendly: all due to costs reduction for average expenses in countries with weaker economies. Another benefit outsourcing provides for your business is the flexible capacity of teams with close responsibility focus, which is also cost-effective. Plus, reliable outsourcing can help you discover entirely new capacities of intellectual resources beyond your company staff. Finally, vendors keep you posted about processes in the project.
However, along with the decisive benefits outsourcing suggests, there are some risks to it, which you should know as a business owner, manager, or any other stakeholder.
What is an outsourcing risk?
Risks of outsourcing IT services are about anything that can go wrong and potentially harm your product, income, or business. Some of them are minor and others may be fatal if the circumstances are wrong enough. So, let’s see what can go wrong when you work with a team overseas.
TOP 10 outsourcing risks in software development
Before we start, it is important to mention that not all the risks are about the format itself. Some are about the human factor and mistakes, and most of them are avoidable. So, here are the most significant ones.
#1 Loss of control
Probably, the most problematic risk you take as a customer of outsourcing service is the lack of control you have over the processes within the team, and as a result, in the final product. Software development is a complicated process that must be supervised and monitored. Since the success of the final product is your stake, you need to be involved in the activities of the team to make sure and prevent possible problems before they grow grave. However, it can be difficult to do with an outsourcing team due to the distance between your headquarters and the team’s office. In-person meetings are impossible and information moves slower between you and your outsourced employees.
How to minimize this risk? It is especially challenging if you work with outsourced developers for the first time and the paths for smooth communication are not paved yet. However, with the right approach to the responsibilities of everyone involved, this risk can be minimized. Scrutinize the roles with their responsibilities, and make sure all reports are there.
#2 Communication barriers
Communication barriers are another sore spot for many companies working with outsourced teams. They can go in different shapes and sizes. For example, the insufficient English of such developers can hurt understanding between you and your team, which may later result in the need for more practically avoidable revisions, reviews, and fixes. Another barrier in communication is the difference in time zones. Due to the schedule gap, problems, issues, questions, and requests may come with a delay. It is not as important in every particular case, but altogether such instances slow down the process if it is compared to the way an in-house team would handle the same challenges.
How to minimize this risk? Handling such an issue involves understanding the possible risk and including it in the working plan. It will help you avoid delays in deadlines and provide the team with the space for developing comfortably. You can mind this issue as a possible black swan, so, when it is the first time you collaborate with a team, give them extra time and see if the barriers are of any issue.
The most attractive thing about outsourced developers for businesses is the opportunity to save the budget and gain a competitive advantage from the very start. It does save your budget, but there are still things to consider while planning it. As affordable as it looks, outsourcing has its potential costs you need to keep in mind, such as рardware or software spendings, purchase or upgrade, relocation or redeployment of the team, other after-hours services, and instant troubleshooting. These are the same expenses you would have with an in-house team, yet they are not often taken into consideration at the budget planning stage.
How to minimize this risk? You can avoid this one with the right budget planning. The main idea is not making it too tight and investing a bit extra in all the unexpected. Even with such sudden expenses, your company will still profit from having a reliable outsourced development team. Bring this question to the table while discussing the details with your manager and make everything clear, so that the expenses are adequate and no more unexpected.
#4 Lack of experience with remote teams
If it is the first time you work in such a format, you are most prone to facing the risks we are talking about due to the lack of experience with outsourced teams. Even if the team is all experienced professionals, the novelty of the model for your company will bring about a certain disruption you will have to manage.
How to minimize this risk?
- Here, your task number one is finding a team that you can actually trust. Take your time at this stage and study carefully what the market suggests. Talk to vendors about their conditions and your expectations and only then make the weighted decision. But what to look for while searching for the one?
- Check the technology your provider uses. Definitely, it must be up to date, since it speaks about both the professionalism of the developers and the involvement of the vendor in the market they work in.
- Make sure the team is experienced in your field and can handle the level of complexity your project requires. If the team is also passionate about your particular project, it will also be a huge plus.
- Make peace with the time zones difference. If it is significant, weigh all the pros and cons again to make a weighted decision.
#5 Quality of the outsourced product
Another significant advantage of working with outsourced teams is time efficiency. For businesses in a progressive and fast-moving environment, time is an extremely valuable source, which. However, one of the dangers of outsourcing here is the possibility that you will be disappointed with the final product quality. This risk is determined by the level of autonomy that the team has since you don’t all work together in one office. The distance and the lack of control may result in the product turning out not being quite as expected. Sometimes, the team’s expertise and skills have nothing to do with it and the matter is just on the difference in vision and approach.
How to minimize this risk? Unexpectedly poor quality of the final product is a major risk, but it can be prevented. First, ensure your outsourced team has the necessary competencies. Second, protocolize the processes and agree on checkups with the manager. With enough involvement from both sides during the initial stages, the final product will not be a surprise for you.
#6 Challenges to find the perfect provider
In the ever-globalizing world, the outsourcing development market is quite saturated. If it is the first time you try working in this format, you need to put some extra time on research of the possible vendors, their portfolios, and the services they provide, since not all the vendors are on the same level. If you venture to work with a new provider, it may still be a gamble, so finding a reliable one is a matter of your success in the future. Or a source of experience for the next try.
How to minimize this risk? Initial research is necessary to at least shortlist potential vendors. Don’t forget about recommendations from your colleagues and consider what clients say about their vendors. Yes, it is always easier to trust if you know the person who says so. Then, let the interview and conversation with your manager help you make the decision.
#7 Your company’s security and data privacy
Data security is another crucial point in the list of risks of outsourcing work. It is easier with an in-house team, as all the office employees know and follow physical and digital security protocol, but can you be sure they do it overseas?
How to minimize this risk? This is also a big one, especially the first time—when it feels like a leap of faith. Before signing any type of agreement with your vendor, make sure to inquire about security policies they follow and ask them for guarantees, if possible. Nonetheless, the power of the human factor is extreme, and leaks may happen even among an in-house team. So, then again, find the provider you can trust and the one that trusts their employees.
#8 Key product outsourcing
Your major product is usually the crown jewel of the company, so you need to be aware of the potential risks of outsourcing it if you are up to doing so. This risk includes all of the other ones mentioned here, as it is much harder when something goes wrong with your core projects. However, companies rarely trust the main product to a new time at the very start. If you have worked out the trust between your company, your vendor, and the developers working on your product, it is easier to let them handle your gem.
How to minimize this risk? Don’t outsource your key product before you are 100% sure about your team. It requires time, so it is necessary to take this time and crash-test the team with smaller or secondary projects.
#9 Missed deadlines and delays
Due to the lack of control we discussed in the first point, IT outsourcing risks include messy timing. Sure, anything can go wrong and the team can miss a deadline or two. But if the deployment or any other stage of the project is paramount to complete on time, make sure the time is planned wisely. Plus, even in-house teams face the same timing challenges sometimes, so there is not always the format to blame.
How to minimize this risk? If the issue is systematic, it is best to look for another vendor or fix the project management approach.
#10 Geolocation issues
Another type of risks of outsourcing IT causes the loss of control as well, and it is the location of your team, their distance from your country, and the time zone differences that may once become an issue. In fact, as the world is already accustomed to remote work, the graver problem is to do with different working hours.
How to minimize this risk? If you understand that sometimes you will need a quick reaction from the team or want to be updated as soon as possible, it is wise to choose a team that’s closer to your home country.
How to Minimize risks of outsourcing software development
All the risks we mentioned above are potential, not bound to come true. However, if you know what can’t wait for you in the new format of work, you will be ready to handle it.
The first thing to do to avoid any of these risks of outsourcing software development is to research the market and put the time into finding the best suitable vendor. Consider the peculiarities of your product and articulate what you expect from the collaboration.
Then, if you have found some interesting options, discuss everything that may concern you with the manager before signing the contracts. It is important to see that the manager is on the same page with you regarding your expectations, vision, and ideas.
Finally, keep the risks in mind while planning time and budgets. Even the most reliable teams might face unexpected circumstances, so it’s always better to be safe than sorry.
Be prepared to meet any risk!
The outsourcing IT market has great potential and a lot to offer you as a customer. It is a cheaper and more efficient way to get your product or MVP out there, but there are still outsourcing risks to keep in mind. All the risks we mentioned happened to dozens of companies in the world, but there is as much luck in it, as there is research. Most of them are to do with the work format and are defined by the physical distance between your office and the teams working on you. And with enough preparation and an objective attitude you can avoid them or handle them properly.