Fear of the unknown: How to avoid the risks of outsourcing?

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5 min

We’re living in a rapidly changing world where all the markets are evolving every day. It’s caused by a variety of factors, such as tech trends, legal restrictions or money. Software development market is transforming all the time. And outsourcing is changing alongside, remaining unknown for many entrepreneurs. What are the risks of outsourcing? And, even more importantly, how to avoid them?

Digging for the information about the software development outsourcing seems to have no end. It’s a popular topic indeed. Among the articles, there are lots of texts about the risks of outsourcing. And on the lists of the most common, there are a few which often repeat. Communication, team management and process, low quality, security and hidden costs. Below, I’ll describe these concerns, try to explain the unknown and tell you why we shouldn’t fear the risks of outsourcing anymore.

Communication

The most popular outsourcing areas are India and Central and Eastern Europe (CEE). If you’re located in Europe, USA or Middle East and decide to offshore the software development to India, communication may be a problem. It can be caused by the time-zone differences or cultural divergences. That’s why so-called nearshoring is becoming more and more popular these days. Marcin Mazurek has mentioned this in his article, Why are Nordic companies falling in love with IT outsourcing?

“Nordic companies have recently realised that, instead of employing remote workers from offshore countries like India, they can outsource to their neighbours in Central and Eastern Europe.”

And this is pretty much the definition of nearshoring – a new trend which may help you avoid a lot of risks, with communication difficulties on the top. Also, if you’re uncertain if the vendor country speaks English fluently, you can verify it. There is a reliable website, EF EPI, which ranks all the countries accordingly to their English language proficiency.

Poland placed 11th in the EF EPI ranking

Poland is ranked 11th in the world according to EF EPI (Source: www.ef.edu)

Of course, you can still benefit from offshoring if you prefer. But it’s worth having a lot of experience in outsourcing, as Dave Hecker (co-founder of SourceSeek and a software outsourcing guru) says in our e-book Developing Your Software Abroad.

“If you have considerable experience in outsourcing software, you know how to manage projects and you are able to get on a plane and travel to oversee the work of the outsourcing team – you can do really well in low-cost regions such as India. If you need skilled management to help your project succeed, you will have an easier time finding it in Poland. Eastern Europe continues to be a top outsourcing destination, with Belarus, Ukraine and Poland leading the region. The combination of quality, price, management and stability is simply fantastic”.

All in all, it’s up to you to decide whether you prefer to off– or nearshore. Whatever you choose – communication doesn’t have to be an issue.

Team management and process

Another risk of outsourcing is connected to the team management and the process. If the software is developed by a third party, you may not be able to track the progress whenever you want (especially if you decide to offshore the project). Obviously, it may be risky but there are a few tips which can help you avoid the unnecessary stress.

First of all, it’s extremely important to understand the process beforehand. Verify whether the chosen vendor has a good plan and if they have “battle-tested” their methods on real, successful projects in the past. You should know what’s done on every step and what’s your role in it. If it’s not clear for you during the preliminary consultations and the company is unable to explain it in simpler words – you should consider changing the vendor.

People shaking hands after successful consultations

Arranging a proper preliminary consultation is crucial for a successful cooperation

Also, it’s important to secure a project manager. An experienced person, fully devoted to your project, will be an additional warranty for you. Also, they may be the main point of contact for you, whenever you need an instant information about your project. Moreover, if you’re tech-savvy, you may also consider talking to specific team members to know them better. It’ll be another warranty for you and it’ll let you check whether you can communicate with them freely later, during the project.

If you understand the process beforehand, arrange a project manager and speak to some team members, you shouldn’t worry that much about the process and about swift management.

Low quality

Some people say that there are so many software houses that it’s difficult to choose the one which offers a top-notch quality. Well, that was true in the past, when outsourcing was in its infancy and companies had difficulties with verifying if the chosen vendor met their quality expectations. Fortunately, it has changed a lot over the years.

"Top Developers Poland 2018" awarded to The Software House

The Software House named one of the top development companies in Poland by Clutch

Now, you can not only ask for proper references but also experience some of their completed projects or read through the actual reviews on review aggregators like Clutch. Moreover, you can always check whether the company is using the newest technologies and quality management standards. And it’s definitely worth doing.

Quality of the product should be a top priority indeed. But luckily, nowadays, there are many of verifying the vendor before we decide to outsource the software development. Still, you must remember to perform decent research.

Security

You must think about the security of your company and the product when outsourcing the project. All in all, you have no overview of all the third-party activities. The key to the successful relationship is trust. And finding a trustworthy vendor should be yet another priority for you. A level of reliability may be assessed on the basis of the reviews and the transparency of the process.

Link labeled "Security" in the web browser

When outsourcing a project, your data safety may be endangered. It’s important not to underestimate security matters

From the legal perspective, it’s absolutely indispensable to sign the confidentiality and non-disclosure agreements. You can always review the company’s security management policy and understand all the issues properly as well.

In addition, if your company is located in the European Union and you’re outsourcing the software development to the vendor from another EU member country – you’re guaranteed with plenty of legal restrictions. All of them, including GDPR, stand guard over the security of your company and the project’s confidentiality.

Security is extremely important and may be endangered at any time. But finding a trustworthy company, reviewing their policies and signing all the necessary documents will help you minimize all the potential threats to the lowest possible level.

Hidden costs

Last of the risks of outsourcing is related to money. If you’re running a company, you know that there’s no business with no cash. Even though “gentlemen don’t speak about it” – you definitely should. If you’re afraid that outsourcing the software development to the third party may generate a lot of additional, unexpected costs – you need to prepare yourself.

Lots of coins

No one wants to pay for what they don’t need. That’s why establishing a scope of work and its price is important

Besides the aforementioned trust, there are a few factors which you need to bear in mind. It will help you ensure that the vendor won’t generate any hidden, unnecessary expenses for you to cover. To avoid the exposure to the “fake” costs, you need to establish what exactly you need. Consider a scope of work, the total number of team members, the exact hourly rate and write down the cost list. Of course, you may want to extend the project, but again any scope extensions should be properly considered, discussed and counted.

But most of all: you should remember about all the previous points. If you find a trustworthy software house which has good reviews (for example on Clutch), transparent process and decent communication skills – it truly might be considered reliable.

Summary

Software development outsourcing, as everything, has its pros and cons. Even though there might be some risks of outsourcing, the key is to be aware of potential dangers and be ready to overcome all the possible blunders. Nowadays, doing the research is easier than ever before, so be sure to take advantage of that! Outsourcing is not “an unknown” anymore, so there’s really nothing to fear of.


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Tomasz Mróz

Tomasz Mróz

New Business Manager