How do you minimize risks when you outsource software development?

Published on: March 05, 2021
Last updated: October 18, 2022 Read in fullscreen view

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It’s impossible to outsource without taking any risk. But that’s not because outsourcing companies are bad. It’s because everything includes some inherent risk. Even if you build an in-house team of handpicked developers, you can’t guarantee that none of them will share your internal information with competitors or do something that may harm your company’s reputation. And even pros can make coding mistakes that may cost you a lot.

A big issue is also that many entrepreneurs are not very experienced in terms of software development, so they tend to trust blindly the partner they choose. However, sometimes companies only think about their profit and they don’t really care about quality.

So let’s talk about minimizing risks, not eliminating them.

The first question that comes to mind is as follows: "Can the selected company carry out the required tasks properly?" Many companies shout from the rooftops about their "first-level" technologies, capabilities, and abilities in almost everything digital, but a month later you simply get some piece of sh**code that ultimately costs you time and money.

Here are the things to look for when selecting a contractor:

Consider company size when choosing an IT outsourcing vendor

The IT vendor’s size often affects the outsourcing relationship so you should choose the company that would be the right fit for your needs. Outsourcing to large companies has many advantages such as professional management, more resources, greater capacities, broader and deeper expertise, bigger portfolio, and more. However, it does not mean that bigger scale meets the needs of every company perfectly.

A medium-size company with a smaller scope of work may lack attention from a large software development vendor. Every company wants to be treated as a very important customer (VIC). Therefore, many enterprises cooperate with medium-size companies to be their top clients and get VIP treatment. On the other hand, if the vendor is too small, there may be a lack of experience and resources. Moreover, for small companies, it is more difficult to staff a project, and it takes longer.

Company Website and activity

A well-made website is a good sign. If the company can’t even make themselves look good, how are they going to make you look good?

Another good sign is social media activity, which suggests that the company is ready to share its knowledge and to communicate with clients.

Participation in global industry events also tells you a lot about a company.

Another problem with outsourcing that dedicated teams address is high turnover. Usually, outsourcing firms are used by new graduates as a stepping stone into a fulltime career. You don’t get to work with the same team for a long time. This also brings in the problem of after sales services.

If you are looking to outsource your development work, I’d suggest looking at companies that help you hire dedicated teams of developers rather than ‘software houses’ that prioritize quantity of work and employees over quality of work delivered.

Case studies and testimonials

These should include general descriptions of their clients, the history of cooperation between them, the problems the client wanted to solve, the challenges that emerged, the solution itself, and the technology stack used.

It’s important to note that most of their clients require NDAs, so if you see at least one major customer in a portfolio, it typically means that you’re dealing with an experienced team.

Your contacts

Your colleagues may be able to tell you a lot about companies they have worked with.However, companies aren’t usually forthcoming about outsourcing their development, so it may be hard to find an advisor.

Public ratings & reviews

Check up a few outsourcing directories. I’d suggest clutch and goodfirms. The ratings there are trustworthy and based on real customers reviews, when in smaller listings companies are able to effect their own positions.

A few other things to take into an account when you finally select your dream team:

Require full project transparency, including the work schedule and the assignment of developer tasks. As a customer, you must have direct access to all project-related data and communication tools. Just note that no one will give you access to code before receiving a payment.
Make sure that all of the important things are included in the contract. Pay attention to cooperative terms; that is your first line of defense against scum and incompetence.
And get an NDA if needed.

Company exit

How long has the company been in the market? What is the average size of the projects they’ve worked on? How many employees do they have? Companies with fewer than 50 employees don’t usually have a competitive technology stack, and experienced developers prefer bigger companies. Still, small companies may be good in a certain niche.

Cooperate/align with long-term vendor on building effective management processess

Even if you hire the best engineering team, your project may fall under risk due to poor management. Apparently, managing remote and distributed teams is challenging. That is why make sure that the company you choose has established management system which would comply well with your management practices.

Nowadays, there are many proven ways to manage a remote team and make the working process productive and clear. For instance, you can use the Agile methodology and the Scrum framework. The Agile methodology provides continuous feedback as well as efficient ongoing communication with the whole team.

Scrum is based on active work of cross-functional teams within fixed-length iterations known as sprints. Regular stand-ups, sprint planning, retrospective, and other Scrum elements enable fast feedback, more precise work estimation, and fruitful teamwork. Also, it helps to swiftly react to market changes and manage the constantly changing requirements.

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