Outsourcing has become an ordinary thing for many businesses: from startups to enterprise-scale companies. Besides saving time and money, some outsourcing solutions open new opportunities, such as looking for a software development company abroad. This option is called offshore outsourcing, and sometimes, it becomes the only way to get access to seasoned developers at reasonable rates.
Some may consider outsourcing a perfect way to get high-quality and cost-efficient software. However, like every other business strategy, it involves particular risks that are pretty easy to overcome. So let’s discuss the essential pros and cons of outsourcing and see how you can minimize the most frequent issues when delegating your tasks to outsource software development companies.
Why choose outsourcing?
One of the main reasons businesses entrust software development tasks to third-party companies or freelancers is that outsourcing saves money. For instance, the average annual salary of a US backend software developer is $115,135, which is approximately $50 per hour, so an entire team requires a significant investment. Meanwhile, the same-level developer in Europe or Asia will charge only $30-$40 per hour, which essentially cuts costs in the long-term run.
What is more, a company doesn’t always need to outsource literally all IT tasks. Sometimes, a local or offshore software development outsourcing team helps with a range of particular duties: tech support, maintenance, design, etc. It takes some burden off in-house staff and helps avoid hiring new full-time employees, especially for short-term projects.
Besides, a business owner needs to find, interview, hire, and onboard developers to build an in-house team from scratch. It is not much of a problem if the business is developed and wealthy enough to maintain HR managers. But what about early-stage startups or small companies with tight budgets? Despite the particular disadvantages of outsourcing, it might become a rescue for those who need a ready team — a kind of an out-of-the-box solution. It might be beneficial for beginner entrepreneurs who strive to shorten their time-to-market and get the first version of their product as soon as possible.
Finally, US and European business owners suffer from a lack of professional IT specialists. As a result, outsourced offshore software development is sometimes the only way to hire experienced people with deep tech expertise at reasonable rates.
General outsourcing risks and how to overcome them
You have similar risks when searching for an outsourced team in your country or partner with a foreign offshore vendor. However, dealing with a team abroad might cause some more specific issues, so we’ll mention them separately a bit later. For now, let’s focus on the most common outsourcing risks: they may arise even when your partnered team is located just around the corner.
Reliability and trust problem
You may know little of your vendor when you just have contracted with it. Thus, you have no idea of how reliable it is. For instance, it sometimes turns out that an outsourcing agency is not involved in your project: instead, they outsource your tasks to another provider.
What is even worse, a company might simply disappear. Imagine a startling situation when no one picks up your calls, and you have already paid the first deposit. Sounds like a nightmare, doesn’t it?
The most obvious solution is to follow someone’s recommendation — nothing is more reliable. However, you don’t always have a reference, so what do you do?
- Take your time to check the reviews. What do real customers say about your future vendor? Of course, scam agencies can fake positive reviews, too, so try to embrace as many independent platforms as possible: check Clutch, Upwork, GoodFirms, DesignRush, and other business reviews websites.
- Try contacting the team’s customers. For instance, GoodFirms allows you to reach a reviewer via LinkedIn.
- Check developers’ certification, and feel free to ask for proof of their skills. Don’t forget to check if their licenses and certificates are valid and genuine: for example, find their IDs on BadgeCert.
Lack of expertise or tools for your needs
Suppose you want to partner with an experienced IT company: it has been on the market for some time, gained a loyal customer pool, and has an overall evident reputation. Yes, it seems a perfect match — but don’t rush to sign an agreement. Sometimes, even the most experienced developer might feel like a fish out of water at your task: nobody knows the ropes in every existing industry.
Before you go, check the company’s portfolio: what are its strongest sides? For instance, if you want to launch an eCommerce website, make sure your prospective vendor has successfully managed similar tasks. When you need to establish an MVP of a mobile health tracker and show it to investors within a couple of months, check up if your future team knows the ins and outs of launching tech startups. For instance, a company’s Clutch.co profile allows you to see its main expertise areas:
Such basic research we just showed you is not always enough. To ensure the product’s quality and developers’ expertise, you need to dig into details. So, consider hiring someone who knows the ins and outs of software development even if you are in the earliest stages of launching a business and don’t have a tech-savvy employee in your in-house team (or probably a team at all) process.
Such a person might help you to get the following insights:
- Does a team have all tools that will be optimal for your tasks?
- What tech stack does it use, and is it the best solution for your needs?
- Do they test software properly? What are the principles and methods of their quality assurance approach?
The list might go on, depending on your project or development tasks.
Hidden and unforeseen costs
Two essential facts about outsourced software development pricing and payment plans:
- Avoid depositing full prepayment before the work even began;
- Unforeseen costs and contingency work are the norms, especially when developing complicated projects. However, it must be a separate clause in your agreement.
There are two most widespread payment plans you can stick to with your vendor.
The first one implies a turnkey option when your outsourced team offers a fixed price for a project. It might sound like a very convenient solution until unexpected hiccups like the need to purchase some extra plugin or spend more time on particular tasks. However, if you are not engaged in the development process much, you never know if these spendings are reasonable or a kind of a scam.
A much more transparent approach implies paying for hours spent on your project. Ask your vendor to provide you with a detailed cost sheet with estimated hours for every development stage and discuss the maximum possible delays and unforeseen costs. For instance, this is how a fair and convenient estimated pricing list might look:
Read our article to make sure your vendor gives you fair pricing.
Sensitive information and code authenticity
One of the worst risks a company might face when outsourcing software development is data leakage and copyright infringement. What might happen if you are not armed enough with information?
- An outsourcing company might claim rights on your code. If you’re not a code owner, you can’t update, maintain, or integrate your software with any other platform. Instead, consider purchasing your repository on GitHub. Developers will use this repo for creating the code, and you’ll ensure your copyright.
- When you use outsourcing to extend your existing team or bring your startup idea to a third-party agency, you risk that it will steal your private data or your thoughts. In other words, you hardly want to see your project idea released by another brand or find your know-how successfully used in your opponent’s business. To avoid it, check the contract you sign: it must contain the NDA (a Non-Disclosure Agreement), a document that prohibits disclosing any private data or sensitive information. Don’t save on an experienced lawyer who will help you draw the right contact.
Lack of internal control
When you have an in-house team, you need to manage it. The main advantage here is that you can manage your team: all developers are your employees and you can personally see what and how they do.
Outsourced development implies a ready team with its management strategies, workflows, schedules, principles, and values. Of course, they mainly share your views in a perfect scenario, but you still can’t control this team every step of its way.
Here is a checklist that might help to feel more secure about what is happening with your software development processes:
- Use planners and task managers to see all process stages: Trello, Asana, Jira, WorkSection, etc.;
- Have a technical specialist from your side that will be an intermediary between you and the team. It will help stay engaged in the development process and be aware of all possible issues;
- Agree on regular meetings/video calls with a team/project manager.
Difficulty in finding the right vendor
Now when you know so many risks of outsourcing, you might feel even more concerned: how to find the team that will fit all my needs, will be fair, and offer competitive prices? Luckily, you don’t need to hire IT specialists from your country: when you find it hard to search for the best quality-price ratio, try exploring the outsourcing market overseas.
One more checklist for you: we’d call it ‘What to look for in an outsourcing company”:
- Relevant portfolio with cases similar to your project;
- At least a couple of years in the industry;
- Strong communications skills, ready to talk and discuss;
- Great reputation and fair reviews;
- Willingness to answer all questions and give as much information as possible.
Read our guide on how to hire the one team that will be a perfect match.
Specific offshore outsourcing risks
When you struggle to find a perfect IT partner in your country and opt for offshore development, you must be ready for extra difficulties. Remote work has become almost an everyday thing recently, but the risks of offshore outsourcing involve some more aspects you need to know.
They are not just about your language. Of course, you must speak the same language with your offshore partners, or both have fluent English, but it doesn’t permanently save you from miscommunication.
A helpful tip: don’t use any specific slang when talking to non-natives: it may cause much misunderstanding and slow down the whole process. You may have heard a story when a large corporation bore tremendous losses due to a translation mistake, so help your vendors and avoid any double meanings. Overall, it's better to stick to the most straightforward vocabulary.
Another possible issue: some nations prefer agreements in writing, while others are more into verbal arrangements. Our tip here is to insist on fixing everything in planners/messengers/emails and have every vital detail in the written form.
|Not so good||Much better|
|— CMIIW, but…||— Correct me if I'm wrong, but…|
|— Put it there! Agreed!||— I’ll fix it all once again in a follow-up email after we finish this video call.|
It’s pretty obvious: when an American business hires contractors from, say, Eastern Europe, regular communication becomes an issue. There are barely a couple of daily working hours that coincide: what shall you do?
Most outsourcing companies try to meet their customers’ needs: shift working hours, stay behind after them, or start earlier. However, if it creates a significant issue for your vendor, try changing your schedule, too — at least once or twice.
As a rule, developers at Geomotiv work with a 4-hour overlap with a PST time zone. However, the majority of our specialists have flexible working hours and can provide the maximum overlap as they value real-time collaboration above all.
As you see, outsourcing risks are not so scary or discouraging. The right approach and a little bit of patience will pay their way: your software development project will be in safe hands. For example, you can reach us: we guarantee the top-notch quality, reasonable price, and extensive experience — to name just a few things we are proud of.
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