Software development outsourcing has been a common practice for quite some time. This business model has been adopted worldwide for many plus points, for example, tailored budgets, time savings, adding expertise, etc.
But anything with pros has its cons as well. You might have read about news headlines saying outsourcing is fading away; it is an old business model or how outsourcing can have negative consequences and outcomes.
Delegating IT services to 3rd party vendors is a universal cure for so many businesses. Things don't always go that as intended. The assurances of the desired result also include risks that can turn a seemingly decent idea into debris. Chief executives and Project Managers across companies have to brainstorm and develop technical challenges to stay on track with the ever-changing market ecosystem and consumer expectations. There are notable pain points concerning custom software development.
By now, you might be having second thoughts about outsourcing your IT project. But don't worry because although it is impossible to abolish all the negative factors associated with outsourcing, you can still put some anticipation and mitigation to work and bypass the issues.
A 2016 survey about outsourcing software development projects has marked out some specific pain points. Basing on the survey, the following are some common concerns regarding outsourcing software development and ways to address them:
Quality of Service
One of project managers' most frequent and biggest frustrations is the poor quality of service while dealing with software outsourcing services. Budget-centric outsourcing firms tend to supply inexperienced and cheap-to-afford software engineers. This strategy filters out the more talented cream of the crop who charge a premium for their skills. Sometimes, even teams tailored as per high skillset also fail to meet the expectations despite extensive recommendations. Now check out how to address this issue in the below-mentioned tips.
Tip 1: Too cheap rates
In a bid to save expenditure, don't sabotage your product. Usually, the cheapest ones are the worst. After all, it is the value in exchange for money. Selecting the most inexpensive services might compromise the quality of a product. Surf through various software development rates and calculate an average to regard it as a reference point.
Tip 2: Always ask for a free trial or opt for an MVP
Make sure you ask the 3rd party software service provider to demonstrate a free trial. It is done to judge code quality and their ability to meet the deadline.
There is another way, and it is known as a minimum viable product (MVP). MVP is invoked to test a business idea. Creating an MVP takes 3-4 weeks. MVP helps determine if the team meets your requirements — their update procedure, communication levels, time-zone constraints, and they have the necessary skills and expertise to get the job done.
Tip 3: Cite requirements in the contract agreement
Create an agreement document for the two parties. Define your quality requirements in the agreement. The agreement should mention coding standards, quality standards, criteria for the final product, the list of devices the product is supposed to work in, etc.
There are occasions where products work decently at first but start giving errors and malfunction in the next couple of weeks when the vendor has delivered and is not responsible anymore. Therefore, to avoid such headaches, fix a warranty period by negotiating, during which the vendor development team will correct all the bugs for no added cost.
Outsourcing often leads to uncalled expenditures you may have never expected. It is a common phenomenon. You might end up seeking advice and help from a contract lawyer or business analyst. Maybe some added business trips.
However, it has been observed, the significant causes of extra expenditures in outsourcing are the following aspects:
- The client didn't clarify their requirements.
- The client suddenly wishes to add new features not mentioned in the agreement or make changes beyond the agreement's scope.
Tip 1: Define your requirements and expectations clearly
When talking about large and complex and software projects, it is impossible to foresee every possible challenge and consider every detail. Throughout app development, requirements are often redefined, modified, and new features are added. If you clarify your needs at the starting phases, the cost estimate will be much more accurate.
Tip 2: Be prepared to pay extra if needed
Always be ready for minor changes that pop up during app development which can be implemented without using extra resources. However, if your project requires a previously unexpected new feature and you decide to enforce them, prepare a change request. These alterations influence schedule, scope, and budget will be revised and changed accordingly.
Tip 3: Create a clearcut legal document
Legal documents are pretty complicated to read since contracts or change requests must be as detailed as possible. However, the agreement has to be easy to read and understand. An agreement resembling a word salad with tricky legal jargon may not reveal the costs involved clearly. Carefully reading every clause and line before signing is a must.
Intellectual property issues
When you provide the outsourced team with confidential information, there's always a looming danger of information leakage. The outsourced partner might use your product or its elements as their own, or worse, give it to the next client. To overcome this, You should apply legal measures to protect your intellectual property.
Tip 1: Create a Non-disclosure agreement
An NDA is a legal method of protecting IP rights that specifies confidential information that requires serious privacy. NDA information encompasses business secrets, technical know-how, designs, ideas, customer lists, and other necessary information sent to the service provider. When the vendor signs the NDA, they agree not to exploit or reveal confidential information without prior client permission. In case of NDA violations, the agreement stipulates conditions of penalties and legal prosecution.
Tip 2: Include your final app in the agreement
The contract must specify the clauses mentioning the IP right regarding the final product, and all related aspects such as source code, algorithms, etc., must be transferred to the owner. To simply put, the product belongs to you after you've paid the bill.
Tip 3: Regard your service provider as your partner
One fact that could give you a sense of security is forging a long and trustworthy partnership with a well-grounded service provider. Once a business relationship matures and you start regarding each other as partners, the possibilities of IP rights infringement decrease. This mutual trust promises a sense of safety and utmost security.
The language barrier, Time zone differences & cultural fit
A thoroughly professional proficient English-speaking team is not easy to find. 3rd party services will give assurances about their team's proficiency in English, but it is not as accurate as they claim.
Time zone differences are a common and frequent facet of outsourcing software development, and occasionally, the outsourcing company sets the tone. But time zone differences also affect product delivery deadlines and seamless communication between teams.
Culturally fit is a significant pain point when hiring an offshore outsourcing vendor company. Too many cultural differences and diverse mindsets can lead to botched communication and drain your energy and resources.
Tip 1: Language focus as a criterion
Make sure your supposed service partner has a working environment that observes English as the working language, considering English is now the lingua franca. English language issues come up, especially when dealing with nations in South East Asia. In such cases, try conducting a one-on-one interview with prospects to know if you can understand each other.
Tip 2: Set a fixed time or Nearshoring
The best way to manage this is to know about the time zones of outsourced software developers and agree upon fixed online meeting hours. It has to be sorted out right when shortlisting possible vendor partners or even before signing the contract agreement. Nearshoring is another excellent choice since it presents lesser time zone differences.
Tip 3: Cultural compliance
A similar mindset is essential in business. Thus a more suitable outsourcing company would be the one that not only understands your work culture but culture as a whole.
Most of the risks mentioned above emerge when delegating a software project to a 3rd party developer team for the first time. A 3rd party service provider who can understand product requirements, client expectations, respect contracts, and IP rights, build a well-structured development team, and working model is a wish-cone-true. Being meticulous at the early stages will help you prevent mishaps and pain points. Also, it's about time you understand the importance of developing a partnership with your vendor.
Outsourcing software design and development has become a global trend in today’s fast-paced market. The market size of IT outsourcing has been estimated to be worth $66.52 billion in 2019. 59% of companies have resorted to outsourcing software development as a means of cutting expenses and approximately half of the companies based in the United States have resorted to software outsourcing practice at least once, for some reason.
In the dynamic technology market, the local talent pool often seems to hit the roof as the race for churning the best of technology keeps pacing up. Thus, companies often have to reach out and look for global talent across the world. As a software development project takes a considerable amount of time and money, an organization often falls short of required time, manpower & money. This is where assistance from an experienced professional or a dedicated outsourcing firm comes into play.
Assuming that your company has decided to finally outsource software development and considering how there are a plethora of software developers these days, finding a top-notch software development outsourcing company that meets your project requirements becomes increasingly more difficult. But be attentive, as the quality of your product depends upon the vendor you choose to work with. Normally, you would want the outsourcing partner to leverage their experience and set up a platform for the smooth integration of services. However, you being the owner/caretaker, must leave no stones unturned to ensure you have outsourced your work to the right party.
Let us go through a step-by-step process that elaborates how to outsource software development projects carefully and effectively:
Define Objectives and final goal
A famous quote says “a person without an aim is like a ship without a rudder”. Here, in this case, the person is your product and the aim is the outcome the way you wanted it to be. Your product will not take off or crashland in the middle if you do not set your goal from the get-go and define a pathway to achieve that. This is a highly important stage where proper communication is required within your own company first and then with the external partner to present a clear blueprint of how this is going to be.
Look out for the best firms for outsourcing and make a list
To make sure you work with the best, sort out and make a list of possible outsourcing partners whom you see fit the role on a glance. Don’t just stop with the local vendors but if possible, reach out and research specific countries that have a good outsourcing culture. Some good choices these days include Ukraine, Hungary, South Korea, China, and India. Note down the particulars regarding how much do the software developers charge in those countries per hour, the time difference between your location and theirs, the legal procedures in stipulated for making contract and the location of agency or developer to ensure smooth communication.
Research the best local software development outsourcing companies
Once you have a list of five to six agencies, start researching each company. Here are some of the factors you need to focus on while researching:
• Reputation: Check the companies reputation, both in their home nation and abroad. Go through reviews about them. Make sure you don’t count on manufactured reviews, hence try digging into neutral websites or technology forums with unbiased opinions of the company.
• Reviews: Seek out for their portfolio and carefully examine whom they have worked with and what kind of projects they have worked on. If possible, try finding out the outcome of their past projects. Check their customer testimonials, referrals and if you know someone from inside the industry, approach them with your queries and inquire about their relationship with the outsource software development company you are vetting. They should highlight the positive and negative (if any) aspects of the company which should tell you if you need to move to the next stage or abort.
• Financial Stability: Now this is a very important factor to focus on. The last thing you want is a financially unstable partner. A wobbly financial standing could be an indication of mismanagement, past project failure, lack of clients. Stability is an important factor and tumbling finance might throw your hopes out of the window.
• Marketing facet: Check for companies who run affiliate programs to promote their services and focus on their social media handles. Marketing campaigns require a lot of money and a lack of any distinctive marketing efforts means the company doesn’t bring in any substantial revenue. Check how often they post on social media and see if there is a significant number of followers. If you notice a decent, healthy engagement with their followers with most feedbacks being positive, there is a good chance the company is competitive and good enough.
• Attrition rate and relation with employees: High attrition rate has created a nuisance for many companies as employees always look out for greener pastures. A high attrition rate can be an indication of either a shaky workplace or a weak employee relationship. The attrition rate can be also be attributed to employee salary. However, it doesn’t matter whatever the cause may be, you certainly don’t want your project to be stranded in the middle sea with employees leaving and uncertainty looming over its outcome.
Contact Offshore software development agencies about your project
Now in the next step, reach out to the companies you have previously reviewed and shortlisted. At this stage, it is essential to communicate your product goals and requirements with the utmost clarity to ensure that you and the outsource software development agency are on the same wavelength. Take this time to share ideas and ask as many questions as possible.
Select the best software development firm to outsource
When an agency doesn’t respond to your queries for a week or longer, it is a sign of an unreliable partner. What you need is a prompt response from someone, especially when there time difference between you. One more fact, a “yes” and “yes we can” answer to every question should turn on the alert button in your mind. Nothing is perfect and no one knows everything. That is a sign of over-confidence, not truthfulness. After all, trust is the key.
Once you have finalized your choice, based on research and interviews you’ve conducted, put your agreement to paper (or an electronic one).
Here are a few documents you would want the outsourced to sign before taking off with project:
To outsource or not to outsource software development? only you can answer that question after a careful assessment of your company’s needs, manpower, budget, and a few other things. The choice is not that easy to make and you have to consider a lot of factors before you do.
IT software outsourcing and CAD software outsourcing are some of the largest industries in the 21st century. Software development outsourcing takes place for various reasons, ranging from requiring specialized software/professionals to creating a digital product or addressing a given task.
A survey report indicates 57% of US start-ups have already outsourced their software development process.
Regardless of cases, outsourcing IT & CAD software projects is a positive decision that accelerates and accomplishes a software development need. But there is some caution to this.
Anything listed on the internet as software development service is not necessarily a perfect solution to your projects. There are various factors to look into, which makes finding a software development service an uphill task.
To make it easier for you, let us have a walk of some of the best and widely advised practices to adhere to when outsourcing software development projects.
Conduct background check
The first step is to evaluate your requirements and look for various software development service providers. Prepare a list of candidates. It helps in assessing market costs for such services and allows you to fix a reference point.
Once you have a fair idea, go ahead and shortlist the outsourcing firms that fit best to product requirements.
Carry out extensive research on the shortlisted companies and sort your preferred ones out. You should assess them based on their proficiencies, average turnaround time, and client reviews/testaments. Remember, you are entering into a relationship with a 3rd party vendor, and you cannot leap of faith. It is essential to be wary of anything that concerns your project and requirements. Starting a business partnership is easy but getting out of it can be messy if things go downhill.
Sort out your expenses in the correct order
There is a factor called Value for the product. The cheapest of things out there doesn’t necessarily mean they are your best bet. Even with a fixed budget, it is recommended to look for quality and not just the cheapest outsourcing vendor available. It would be best if you struck a balance between your expectations and your expenses.
Once this is figured out, the next step is to figure out the payment process and payments intervals. Businesses often come across situations that trigger payment hassles, so such possibilities must be considered and discussed beforehand. There is also a high chance of crossing the stipulated budget when outsourcing a project due to unforeseen necessities or unexpected circumstances. Therefore, it is best to leave some space in your budget for such circumstances. After all, better to be safe than sorry.
Choose the most suitable pricing model
The next step after arranging finances is looking into different types of pricing models. In this case, the pricing model is about the payment structure agreed with the vendor partner. Here are some commonly used pricing models:
• Hourly rates: In this case, a vendor is paid a fixed rate per hour. This model suits smaller software development projects since their lifecycle are short; hence, it makes sense to consider it hourly. This model also comes in handy when you have projects that only require minute modifications.
• Fixed rates: Fixed budgets involve an arrangement with clear and well-defined goals, scope, and timeline.
• Dedicatedy: Large projects or companies require a fully dedicated team, and such models need teams to work on-site.
To find the best model that works for your project, sit down, and chalk up a plan of action with the 3rd party vendor partner.
Ensure tight security of your project and product
It is an important side many up-and-coming project owners might overlook. There are a few crucial security steps you should take to safeguard your product while dealing with third-party vendors:
• Enact a secure means of transferring information on the project.
• Implement a degree of access control over sensitive data.
Please enquire about the security measures and protocols the vendor partner has set up and how they plan to work with your data. Generally, a good NDA (Non-Disclosure Agreement) should sort this out. An NDA will clearly state the clauses regarding what is allowed and not allowed with the information once the vendor partner has possession.
Although in the software development process, various working models have been put to the test. The agile methodology is popular among all. The reason for such a working principle is that a project without a definite aim and timeline can end up in a catastrophe. Some companies have witnessed such malfunctions since they put all their hopes upon the vendor team. It is vital to fix certain milestones and mini goals, to keep a step-by-step approach on the total lifecycle of the project. It also prevents the project from becoming a cluster, and you can monitor, and track completed and pending tasks.
Record keeping has been an essential aspect from biblical days. Proper documentation acts as a footprint of how your project has evolved through the whole process. The reasons why you should have adequate documentation is because:
• Documentation makes it easy to retrace procedures in case of any hassle pops up.
• Documentation maintains a written record of all transactions between you and the vendor partner.
• Documentation is one of the ways to ensure there is no room for mistakes and errors over scope, requirements, materials, content, or responsibilities.
• If you have a particular outsourcing or in-house team, good documentation is essential to understand the steps incorporated and helps following up on pending work. It makes upgrading and modifying a less cumbersome process.
Establish communication outlets and time schedules
One of the most significant issues while working with 3rd party vendor team is the lack of clarity regarding instructions and misunderstanding when developing custom applications. Such issues lead to delays and sometimes render incomplete or botched software. To address this matter, the first thing to do is set up a suitable communication medium right at the beginning of the project. The project scope and deliverables must be clearly explained and understood by both sides. During the operation, both teams should cooperate, and there must be periodic meetings on progress, issues, actionable, etc. A steady flow of information makes it easier for both parties to stay updated. If you are dealing with a foreign-based vendor partner from a different time zone, make sure the time constraints are considered, and there is no language barrier.
Set realistic goals
Finally, you must consider human factors. Dealing with humans requires flexibility. It is impractical to give a gigantic project to a vendor partner and set a short time frame expecting delivery by the deadline. You will end up with patched-up software that malfunctions. Remember to allocate time and resources for unexpected occurrences. Again, better to be safe than sorry.
An application may look impressive, but if it fails to perform as intended, your investment can be considered waste. When engaging with a 3rd party service, the emphasis should be on the desired functions, features, and smooth, easy user interface over aesthetics. Once your product performs as it should be, you can focus on its appearance and finishing look. This paragraph here no way rules out the importance of attractive looking, well-presented product, but more than what meets the eye.
Entering a partnership with a new 3rd party software development team is a meticulous and time-consuming process. However, keeping the points mentioned above should ensure seamless cooperation between you and the partner.
There are two proven aspects tech organizations rely on to survive and outpace their competitors in the market:
Control, under which cost, resources, and capabilities are managed and Speed, which makes sure the product appears at the market. For these two ensure a steady flow of benefits and future bloom.
But it is not a case of black and white but rather, multiple shades of grey as making a product is not the only task you have to tend to. The aspects of management, marketing, sales, analysis, employee management come into play. Being a jack of all trades is appreciable but not practical when you are running your own company. You need a helping hand and this is where outsourcing software development comes in. Software development outsourcing is a process followed by companies that hire a third-party software contractor to do the particular software related task that could have been done in-house. Developing a complete software application in-house asks for both money as well as time and to be honest, not everyone has an extended IT team. In these circumstances, tech companies turn to Software outsourcing companies.
For the record, stats show that annual global revenue from the information technology field by outsourcing software development has been estimated to be around 60 billion $ as of 2019.
Outsourcing software development projects help businesses achieve a higher economy of scale and let them focus on their core competency without spending a considerable amount of time and money.
While you are considering outsourcing software development to a 3rd party, you are probably questioning about quality of work, the budget required, and the overall risk associated with outsourcing. This write-up intends to focus on the benefits of outsourcing software work. They are as follows:
Access to a large pool of skilled resources
Generally, outsourced companies have access to a larger talent pool of experienced and skilled specialists in the industry, owing to their years of collaboration with multiple firms from varied fields. Outsourcing helps you to find the right talents for the right project while shifting off your human-resource issues. Many companies also have an interviewing facility with an expert panel where you get an opportunity to select the expert candidates with the right skills and experience fit for your project. Most of the software application development companies maintain an extensive database of skilled employees.
Outsourcing software development allows for flexibility within business operations. Human resources are one such area which gets a breather, as you do not need to be attentive to recruiting and hiring procedures. Plus, you are worry-free about scaling your employees to change team size from one project to another project.
Save on time & cost
Outsourcing saves an immense amount of time spent on recruiting, training, and settling employees for in-house projects. And let us not kid ourselves, the biggest reason for people to outsource is to cut costs. Outsourced projects reduce development expenses by 60% – 70% less than in-house projects and help to reduce your workload. One of the important cost-saving factors is that you don’t have to perform upfront investment. Time-saving and cost reduction has always been the first choice of any business. And, outsourcing makes sure these issues are well addressed and taken care of.
Perks of advanced technologies
It is one of the prime reasons to hire a third party to develop a software application. Keeping up with modern technology space is a daunting task as it evolves day to day and keeps on introducing techs. By authorizing your software project requirements to a software application development company, you enable them to implement the latest technology for your project. These new trends and technologies are a result of such companies having years and years of experience with clients from various fields. Outsourcing has brought a new perspective to the workspace which encourages new technology put up by specialists who possess diverse technological expertise. Therefore, one need not worry about overhauls of ever-changing technology.
Outsourcing your software development task means you do not have to worry about risks associated with the development cost, resource allocation, on the failure of the development. As you hand over the responsibility to the 3rd party vendor, it becomes their prime responsibility to deliver the pre-defined outcomes for you. So outsourcing pretty much alleviates the risk.
While you go for outsourcing services, the outside firm guarantees high-quality services with zero downtime. And, they deliver quality results all the time. Outsourcing also opens up opportunities for up to-the-mark custom software solutions. The biggest benefits of outsourcing are high-grade services. This is the reason why more and more companies are selecting for outsourcing.
The team which worked on your software development is also capable of solving all the issues related to it. Hence, when faced with product complexities, the outsourced team will help you to fix it. A lot of outsourced companies have a 24×7 support team to assist you with issues about the concerned project. This ensures a hassle-free experience with great services. The service provider companies offer support, commitment, and maintenance throughout the project and also after completion of the project.
Transparent work policy
To obtain digital transformation and growth through innovation while reducing risks and increasing profit simultaneously, outsourcing software development is a great tool. It also helps businesses achieve competitive advantage without losing focus and efficiency. Your product remains in capable, trustworthy, professional hands, and you get to focus on running your business. It is a key step to helping your business take off.