Software development outsourcing has become a go-to option for building teams. The main factors driving the IT outsourcing market are the demand for cost-effective software development and staying up to date with the rapidly emerging technologies. As per a Deloitte survey, 76% of executives “indicated their IT services were delivered via third-party models.”
Many organizations have leveraged software development outsourcing and have seen positive unit economics. But on the flip side, there are potential risks of software development outsourcing landscape. You cannot start smoothly without any fear of mistrust and things going south.
Now you must be thinking about where to start. How to navigate the potential risks associated with outsourcing software development and what mistakes to avoid while outsourcing software development that work for you? Don’t burden yourself.
In this article, we’ll explore the top risks of outsourcing software development and guide you with solutions on how to mitigate them, how to solve problems of outsourcing and how to avoid software development outsourcing mistakes.
Let’s move further to solve the problems with outsourcing software development with solutions to overcome the risks involved in outsourcing.
Outsourcing Software Development means when you choose to outsource software development services, you’re essentially entrusting either specific components or the entire software development process to a remote or offshore outsourced team. This decision can bring significant advantages to your business.
Explore different IT Outsourcing models for software development.
offshore outsourcing means entrusting your software development to a different country or city, where the combination of lower labor costs and high-level expertise becomes a valuable asset.
Businesses strategically adopt this approach to effectively cut their costs by enlisting the services of software development partners or third-party teams to fulfill their software development requirements.
The advantages of offshore outsourcing are clear:
When a company decides to outsource its software development to a neighboring or nearby location, it’s known as nearshore outsourcing.
In simple terms, businesses team up with external software development experts who are nearby. This setup offers some great advantages.
Closer to Home: You work with teams who are not too far away geographically, making it easier to communicate and collaborate.
Lower Costs: It can save you money since labor expenses might be more affordable in your neighboring area.
More Talent Around: You have a bigger pool of skilled people to choose from who share a similar culture, which can be a big plus.
Hybrid outsourcing is a unique way of getting your software development done. It combines both on-site and offshore developers. This special blend gives you the best of both worlds – flexibility and control over your business. Think of it as one of a supercharged software development outsourcing model that combines the strengths of different approaches.
Cost Savings: You can benefit from lower labor costs, making it cost-effective.
Boosted Efficiency: It increases your overall effectiveness, making things run smoother.
On-Demand Scaling: You have the freedom to adjust your workforce as needed, giving you the ability to grow when you want to.
When you decide to hand over your entire software development tasks to an external third party, there are potential risks associated with outsourcing you should be aware of.
Let’s explore outsourcing risks and mitigation, what are these software outsourcing risks are and learn how to steer clear of the issues and problems in software outsourcing.
One of the common risks of outsourcing software development is not finding the right developer. Now you must be thinking about how one cannot find the right developer when the skillset of the developer matches your requirement. So, here’s the thing.
Organizations usually hire developers based on the languages and technologies they know but do not assess the type of projects they’ve worked on before.
For instance, you are developing a fintech app and the person hired knows the tech stack required for the project but has not worked on this type of project before. So, your project is going to be his first project.
Hence trial and error methods will come into play. In this scenario, you can’t expect the quality as you would from an experienced developer.
Another outsourcing risk is misaligned vision. This means there is no clear understanding between the client and the outsourcing company related to the vision and goal of the project.
If they are not on the same page, there’s no moving forward. This can happen due to several reasons:
One of the biggest risks of outsourcing a software development project, especially working with an offshore software development team can pose challenges like cultural conflict.
For Instance, if you are a company from the US working with an offshore team from India, you will feel a striking difference in the culture and work ethics. Like:
Management issues are typical problems of outsourcing. There’s no substitute for in-house project management. By management issues we mean
This happens because, in software development outsourcing, a project manager from the vendor side usually oversees everything. Now there’s always a chance you get a person who lacks management skills.
Also, distance plays an important role in this matter. When things are out of sight, you cannot expect them to happen as you want them to.
Hiring an outsourcing partner means sharing the private data of your company. This can pose data security and privacy risks as you are sharing sensitive data and code. You can also lose intellectual property rights.
For example, A hospital hires a third party to develop and update its application. The developers can access the personal and financial data of the patients. That means you are not only risking your reputation but also the privacy of your patients.
Most of the time, the contractor promises you more than what they have. They overestimate the capabilities of their resources and when they start working on your project, they get stuck. As a result, they start experimenting on your project which is a nightmare.
Also, you may not get the resources that are shown at the start. For example, they show you one candidate in the interview who is an expert with strong domain knowledge and then give you the other who is less competent.
This is not the issue working with big and well-known IT outsourcing companies. However, if you hire new or small vendors, they may lack enough tech infrastructure. The reason is:
Limited access to cutting-edge technologies due to geographic location
Payment challenges are also some of the potential risks of outsourcing software development. The payment terms are pre-decided yet there are instances when disagreement can be caused as the project progresses. Here are some of the outsourcing issues that clients face while outsourcing software development:
User testing or usability testing is one of the critical phases of software development. This identifies the shortcomings in the software or ensures that the software is aligned with users’ needs.
Now in software development outsourcing, this phase can face delays for the following reasons:
Here are some of the potential pitfalls that should be avoided while outsourcing software development. These are some of the critical mistakes that companies make but with slight care, they can save you in the long run:
These outsourcing mistakes can be avoided if:
The outsourcing software development outsourcing market is projected to be worth 98 billion in 2024. This proves that the benefits of software development outsourcing are far more than its risks. If businesses take the above-mentioned measures the risks of outsourcing can be minimized, reinforcing growth and success.
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