Client Guides

A Definitive Guide on Mitigating Risks of Outsourcing IT Services

20 Jun 2018
128
10 min

Offshore software development has long been a winning strategy for companies that need to hire experienced tech specialists in the short term or just looking for a cost-effective way to develop a solution. Nevertheless, many entrepreneurs are still afraid to work with offshore companies because of outsourcing software development risks waiting around the corner. 

As a rule, such fear doesn't appear without a reason. Probably, you've heard dozens of stories related to someone's bad experience of collaboration with software outsourcing companies. However, most of these cases could have a happy ending. The key to this is careful selection of a partner and advance discussion of each milestone of your collaboration to mitigate risks of offshoring.

Of course, this can't guarantee you a 100% successful cooperation. Sometimes bad deals just happen even if everything seems fine at the first sight.

Nevertheless, the migration of software development outsourcing risks will help you to choose reliable partners and effectively collaborate with them. So, let's dive deeper into the topic.

Preparation for the project

The risks of outsourcing can be divided into three stages and we should consider all of them to mitigate maximum of possible pitfalls. These stages are:

  • Preparations on your side that implies defining your needs and demands;
  • Selection of a reliable partner who will breathe life into your project;
  • Cooperation with a partner throughout the development process. 

Let's start with you. Before jumping into searches of a software outsourcing partner, you have to identify what exactly you are going to outsource.

In case you have just an idea and want someone to build it from scratch, the answer is everything. You should outsource all the processes from design to development and everything in between. However, if you already have a team and the reason you're hiring tech specialists from the side is talent shortage (or any other), you have to think things through. For example, their skills and expertise as well as the scope of work and duties you'll task them with.

As soon as you're done with it, make sure your project has clear goals and objectives. This will help you avoid misunderstandings in future and minimize risks of outsourcing IT functions. Otherwise, things may get messy and lead to changes in the project scope and other aspects. Bear in mind that project scope changes are tricky as they may lead to delays and influence on final product's quality in case you have a set deadline.

In other words, it will be harder to successfully end up with the project without a well-thought-out planning from your side. To avoid this, document your objectives and points to focus on. You can write specifications or user stories to keep things aligned with your plan.

The first step to the outsourcing software development risk management of your project

Things to think through on your part before moving any further

Steps to minimize outsourcing software development risks

Now, you're aware of what exactly you need and can move forward to the selection of a partner. This stage involves a lot of IT outsourcing risk factors that should be mitigated. Otherwise, you may face them on the development stage.

Check reliability of a vendor

Check for how long a company is present on the market. It's the first thing you should do and, as a rule, this information is available on company's website or page on social networks (e.g. section 'About' on Facebook). If there is no such information, try to check posts over social networks to see the company's first activity and identify the approximate time of its foundation.

Mitigate IT outsourcing risks related to the choice of a partner and check foundation date

Where to find company's foundation date on the Facebook page

Next, evaluate the company's size. The easiest way to do so is to check its LinkedIn profile and see how many people are working there at the moment. To make sure those people are real, browse through their profiles, check whether they specified this company as their place of work, look through their endorsed skills and number of connections.

Mitigate IT outsourcing risks related to the choice of a partner and check company's size

Where to find more details about company's employees on LinkedIn

You can go further and pay your attention to the frequency of posting, number of followers, and even track public data of company's page via third-party tools to ensure it's not fake. In general, social media activity is a good way to distinguish reliable companies from unreliable ones and minimize risks of offshore outsourcing connected with this. One more good sign of reliability is the presence of blog or YouTube channel with the relevant content.

Monitor the company's rankings. You can do this on platforms like Clutch. There, you'll see not only different rankings but reviews from customers. This way, you will be able to understand whether the previous clients faced any difficulties of outsourcing while working with the company or not.

This simple check can prevent you from cooperating with unreliable companies and mitigate related risks of outsourcing.

Pick a vendor with relevant expertise

One of the strongest sides of offshore software development is that it opens the access to a wide talent pool of skilled developers who have expertise in different industries and technologies. Almost all companies specify their skills and expertise, though, let their works speak for themselves.

Case studies

Usually, these are articles where the company tells about one or another project they've worked on. It covers problems their customer wanted to solve, how the company managed to solve them, what technology stack they used etc. 

Testimonials

Reviews written by real customers are a good chance to learn strong and weak sides of the company.  

Portfolio

Again, it allows you to study projects the company has previously worked on.

It's worth mentioning that you should pay your attention not only to technologies the company uses but tools they apply to coordinate projects as well. This will help you understand how they are going to keep in touch with you and see their approach to outsourcing risk management.

All these steps can help you to deal with the risks of outsourcing IT connected with the choice of inexperienced partner. Now, you probably have a list of appropriate companies and it's time to discuss several aspects before cooperating.

Make sure your requirements are understood

Misunderstanding is the worst enemy of software development. In order to minimize risks of outsourcing, the vendor company should solve all possible communication gaps, but you should be ready to provide clear requirements.

For example, at our company we have separate specialists to minimize risks of outsourcing software development connected with requirements. Those specialists are requirement analysts and they are responsible for gathering and processing initial customer requirements. We ask our customers about what they expect from their product, what features they need, what timeframe they want us to fit in etc. This way, we collect a bunch of important data long before the start of development and minimize possible risks associated with this outsourcing stage.

Build strong communication with a team

Many of the challenges of outsourcing are associated exactly with communication difficulties. To minimize them, you should make sure your vendor uses advanced approaches to keep in touch with you all the time.

Fortunately, the market is full of collaborative tools and other related solutions ensuring effective exchange of information. Emails, messengers, project management software, real-time video chats are just a few of them.

So, you and your vendor should define the communication channel that would be convenient for both sides. For instance, we ask our customers about the most convenient way for them to communicate with our managers. This is a very important step to offshore risk management that will help you fight misunderstandings in future.

Regulate the management process

This mostly concerns those people who want to hire software developers to an existing team. That's because it can be quite challenging to combine managing of remote and in-house teams. The effective mitigation of management-related risks of offshoring requires consideration from both sides.

For example, we offer two management options to those customers who want to hire a dedicated team:

  • Partial management of a team from our side;
  • Full management of a team from the customer side. 

Talking about project management, most outsourcing companies use Agile methodology to build cost-effective and quality products. It also provides customers with ongoing communication with a team that, in turn, allows to minimize possible risks. So, specify whether the company works with other methodologies in case this one doesn't fit your project.

Solve the location-related issues

Location is another important factor to minimize outsourcing software development risks and choose the appropriate partner. In most cases, software outsourcing companies are placed far away from your native country. For example, many entrepreneurs choose Eastern Europe as offshoring destination due to low prices on software development, a high number of qualified specialist, and no language barrier.

Anyway, you have to consider a variety of factors related to company's location.

Time zone

Cooperation in different time zones adds a small complexity to the project. Ensure your outsourcing partner understand how to work in such conditions and both of you are flexible enough to overcome the time zone difference. 

Travel infrastructure

The opportunity to visit a company in person is quite valuable. So, pay your attention to country's travel infrastructure that offers a convenient way to get to the headquarter of your software partner.

Laws and regulations

You can also assess the level of government support for the IT sector of that country as well as look through the general stats of industry. 

that country as well as look through the general stats of industry.

Pick a cooperation model

Software development always implies certain risks connected with the scope of work and final price. To minimize these risks of outsourcing, there are three cooperation models suitable for different purposes and focused on cost-effectiveness.

Fixed price

Put simply, you pay a fixed price for the fixed amount of work. This model works well in case you clearly know the scope of the project as well as have a set deadline and budget. The fixed price model isn't the most flexible solution, so you'll face certain difficulties when changing the project requirements. 

Time & material

This is a pay-as-you-go model. It fits well for projects without clear requirements. This model provides great flexibility as there is no set deadline and defined scope of work.

!

Still cannot decide? Read this article where we describe pros and cons of each model in details or watch our short video below

Which Type of Outsourcing Contacts is the Most Suitable for Your Business?

Dedicated team

You hire dedicated tech specialists that work on your project. In this, you are totally involved in their work and have a control over the whole process. This model is flexible and can adapt to any changes.

Protect your intellectual property

In fact, the only sure way to protect your idea is to resort to the law. Specify whether the company signs a non-disclosure agreement. That's a common practice nowadays and we fully support it at Cleveroad to assure our customers there are no outsourcing security risks.

The second step to the outsourcing software development risk management of your project

Things to think through while searching for partners

Collaborating with a company

Greetings, you've chosen a reliable software partner! However, even if it's a highly professional company, the hardest part is yet to come. We're talking about the development process itself. It requires certain efforts not only from your partner company but you as a stakeholder as well.

The third step to the outsourcing software development risk management of your project

Things to do while project development

If you have any questions or want to discuss your project with us, contact our managers.

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