Offshore software development is attractive for so many reasons. From the ability to access an entire world of potential resources to save money on most operating expenses, bringing in third-party developers gives a business a substantial competitive advantage. The challenge of delivering a successful digital product lies within the list of potential failed partnerships, as most of them will look great until you sign the contract and get to work.

The IT outsourcing industry is growing quickly, and with projections estimating that will continue to grow at a rate of over 8% on an annual basis for several more years to come, the growing number of low-quality outsourcing agencies makes it harder than ever before to find a true professional offshore software development company. The days of finding a developer because of their brochure or presentation are long gone. To protect your investment, you need to do thorough research on potential developers in order to identify any critical indicators of the company prior to signing the agreement.

1. Communication & Transparency Red Flags

Effective communication is the heartbeat of remote development. If the "vibe" feels off during the initial consultation, it will likely deteriorate during production.

The "Yes-Man" Syndrome

In the field of software development, working with a partner that says "Yes" to all requests creates potential risk for both parties. Knowledgeable software developers understand that a business has specific goals in relation to a given project and that there will be times when those goals and technical limitations will conflict with each other.

• Red Flag: Finding a partner that will agree to create a complex, multi-platform solution in an unrealistic timeframe and without first asking for specifications.
• Green Flag: Finding a partner who is willing to question your assumptions about how you want something built and who can propose a more appropriate solution for accomplishing your goal than what you have thought of.

Lack of Project Management Infrastructure

A vendor's inability to be transparent with you about their technology choices will prevent effective collaboration between the two organizations. According to McKinsey & Company, agile teams demonstrate superior performance when working together using real-time collaborative tools. When evaluating potential collaborative partners, ensure that they are using established industry standards such as Jira, Slack, or Confluence as part of their technological toolbox. Furthermore, make sure you have direct access to each of these vendors' Lead Architects in order to facilitate effective communication between your organization and their organization throughout the duration of your joint project(s).

2. Technical Quality: Spotting "Spaghetti Code" Early

Risks of software outsourcing are frequently concealed among the software code itself. Quality code provides an opportunity to grow in scale and will be seen as an asset; however, low-quality code becomes (otherwise referred to as "Technical Debt") an expense that will put your project into a state of bankruptcy.

The "Black Box" Development Approach

You should never accept a company’s decision to deny you access to its code repository (GitHub or Bitbucket) until the project has been completed; therefore, if they refuse, walk away from the project.

Why it is important: You must have “read access” to the repository from the beginning of the project so that independent code audits can be performed, and you can determine whether or not the project is on schedule.

No CI/CD or Automated Testing

In today's world of software development, developers utilize CI/CD (Continuous Integration, Continuous Deployment), and in addition to that, if there is no automated testing (because all testing should be automated), when you "fix" something in one place, it is likely to break some other part of the system somewhere else. If a team cannot tell you about their QA process, then your product will be very unstable!

3. Legal and Security Dealbreakers

When you outsource, you aren't just buying code; you are entrusting your most valuable business assets to a third party.

Ambiguous IP Ownership

Having a clause in your agreement that clearly states who owns their respective IPs is of utmost importance. It is also crucial you find a vendor who cannot claim ownership of the "base framework"; this is a method used to keep you from easily switching vendors in the future. 

Data Privacy & Compliance Ignorance

 you're dealing with any sort of sensitive information, then you need to show that you comply with standards like ISO 27001, GDPR, or HIPAA. IBM’s Cost of Data Breach Report shows that breaches caused by vendor partners are among the top most costly areas when breaches occur. If your vendor cannot stand behind their data encryption or secure coding, then there is too much risk associated with your brand.

4. The "Bait and Switch" Financial Trap

The "cheapest" quote is almost always the most expensive in the long run.

Seniority Fraud

Agencies that provide an unusually low rate for 'senior' development resources may be participating in seniority fraud. This type of fraud happens when the agency closes the deal by presenting resumes of professionals to demonstrate expertise, while the individuals assigned to perform the actual work are much less qualified than those presented as possible candidates in the proposal.

Ignoring the Total Cost of Ownership (TCO)

It would be unwise to only focus on the hourly rate when paying for an MVP. If you receive an MVP that doesn’t meet your specifications and it has to be completely rebuilt, then your total cost of ownership will essentially have tripled. Therefore, always consider value and longevity of the code, as opposed to just the first invoice.

5. Reputation & Social Proof Warning Signs

Having a great looking website is only part of determining the true value of an offshore partner. Conduct research about their history to guarantee that you have a trustworthy partner based on past performance. 

• Ghosting Clients: A legitimate company will have active clients that you can chat to over a video conference to verify their work history. If they make excuses using “strict NDA’s” for not being able to give client contact information, take that as a red flag.
• No Independent Reviews of the Company: Check out independent review sources to find independent verification of their work history. If a company has NO independent reviews, and indicates that they have been in business for several years, their portfolio may not be what you think!

Summary Checklist: Green Flags vs. Red Flags

Conclusion

Selecting a software provider from overseas is a defining moment for your company. Noticing the red flags below will lead your attention away from “saving money” to “growing value.” Finding the least expensive coder, as opposed to finding a business partner who shares the same level of concern with respect to the outcome of your product, should be the focus.

About the Author

Akshay Tyag

Technology content writer

Akshay Tyagi is a content writer at NetClubbed, a web development and SEO agency helping startups and SaaS businesses build with offshore teams. He writes about software outsourcing and digital product strategy.