10 Things to Do While Software Outsourcing

10 Things to Do While Software Outsourcing

When creating a software solution, usually there are two options: hire an in-house team or find an outsourcing partner. However, most of the time, hiring an in-house team is an expensive process in general, and given that the average budget of a general start-up is quite limited, it becomes a difficult choice.

Software outsourcing was once thought to be a difficult and time-consuming process, but that is no longer the case. According to Statista, the global outsourcing market value increased from $45.6 billion in 2000 to a whopping $92.5 billion in 2019. This is a more than 100% increase, indicating that people and businesses, in general, are much more open to outsourcing than ever before.

However, working with software outsourcing partners requires communication and project management skills. Without caution, it is possible to overlook software outsourcing risks or fail to implement best practices such as delivery delays, communication gaps, and security risks.

In this article, we will go over 10 simple things to do while software outsourcing for the best outsourcing results. But first, let's define software outsourcing and discuss its benefits and drawbacks.

What is software outsourcing?

Software outsourcing is the practice of hiring a third party or external software development agency to perform certain services that were previously performed in-house by the company's employees. It is a common model used by software businesses as a cost-cutting measure. As a result, it has the potential to affect a wide range of occupations, from customer service and manufacturing to back office administration.

In a nutshell, it is having specific job functions performed outside of a company by third-party vendors. Companies use software outsourcing to cut costs and improve efficiency. Advantages and disadvantages of software outsourcing

Advantages of outsourcing

Outsourcing has several proven benefits, including:

  • Outsourcing reduces operating, labor, and overhead costs.
  • Outsourcing time-consuming processes to external companies save time; the company can focus more on its core competencies, increasing its competitive advantage.
  • By sharing business risks with third parties and forming meaningful partnerships, strategic outsourcing reduces business risk.
  • Delegating difficult-to-manage and-control responsibilities to outside companies increases flexibility and efficiency.

Disadvantages of outsourcing

The outsourcing strategy has some drawbacks, and it is always beneficial to understand both sides. Let's look at the risks of outsourcing and how to effectively manage them.

  • Outsourcing activities or processes to third parties increases the risk of sensitive data being lost and confidentiality being jeopardized.
  • By drafting lengthy contractual agreements with a lot of fine print, outsourcing firms may impose unexpected or hidden costs.
  • Inadequate quality control, because outsourcing firms are profit-driven and may fail to deliver expected results.

10 Tips for effective software outsourcing

Tips for effective software outsourcing

Practicing background checks

It is critical to be well-informed before making a long-term commitment to an outsourcing partner. Doing your homework and getting recommendations from trusted sources, reading reviews from previous customers, and evaluating their portfolios for technical competency and experience to see if they meet the needs of your project are all part of this process.

You can inquire about the hiring process or, if possible, assign it to your project on an individual basis. You have to make sure that your project is in capable hands, just like when you hire employees.

Being specific and defining a clear project scope

When working with people outside your organization, miscommunication is common and can derail a project. That is why any project requires a Scope of Work (SOW) document. Remember to tailor your list of criteria to the specifics of your project. This includes all of the vendor's tasks, duties, and responsibilities.

Creating milestones to track progress

When companies hand over all of the requirements to the outsourcing team, they make the fatal error of assuming the job is finished. There are numerous ways for this to go wrong.

Instead, specific milestones and mini-goals should be established for the entire lifecycle of the project. This makes it easier to keep track of what has been completed and what is still outstanding.

Furthermore, the various milestones allow you to see how your application works. This is significant because a functional section can identify issues, opportunities, and the overall flow of the software development process while increasing project modularity.

Monitor outsourcing progress and added value actively

A company or development team must have clearly defined key performance indicators (KPIs). These indicators can help executives determine whether or not their outsourcing strategy is effective. While these performance indicators may differ, a reputable outsourcing provider should be able to provide multiple indicators (assuming the client has already established clear outsourcing objectives).

Paying attention to security

When it comes to software development, security is crucial. Inquire about internal client project policies: How do they protect their client's data and intellectual property from theft?

To understand the company's cyber-vigilance, look at how it protects its work environment and IT networks. Anti-virus software, firewalls, and active network monitoring tools are employed. It is prudent to discuss code testing, penetration testing, and security management with your software partners.

It should also be stated upfront what the information can and cannot be used for once it is in the hands of the outsourcing team. In this case, a well-structured NDA (Non-Disclosure Agreement) will be beneficial.

Getting the financials right

It is critical not to have a strict budget that forces you to hire the cheapest available outsourcing company. Your expectations must be balanced with your willingness to pay for it. Once this is determined, the next step is to decide what will be paid and how it will be paid.

Any events that will result in payment should be clearly stated in advance. When outsourcing a project, it is possible that the budgeted amount will be exceeded. Because of unforeseen requirements, additions, or problems.

Opting for an engagement model that meets your requirements

When it comes to software outsourcing, there are generally three engagement models to choose from. You can select the one that best fits your project.

Hourly rates: The outsourcing team is paid a set rate per hour in this case. Because the lifecycle of a smaller software development project is likely to be relatively short, it makes sense to only pay for the time spent on it. This is also useful for projects requiring only minor changes.

Fixed rates: A fixed budget is established at the start of the product, with clearly defined goals, scope, and durations.

Dedicated: This term is typically applied to large projects or businesses that necessitate the hiring of a dedicated team of developers.

Reducing the risks of outsourcing

While there are numerous benefits to outsourcing, there are some risks that must be addressed (as already briefly discussed). By understanding and mitigating these risks, businesses can reduce their financial exposure while increasing the efficiency of the outsourcing model they choose.

Here are the most important things to be taken care of:

  • Trust and control: When a company outsources primarily using the onshore, nearshore, or offshore models, it frequently loses control. In this case, HR managers can foster trust by learning as much as they can about the IT staffing firm with which they are collaborating, speaking with previous clients, and ensuring that their vendor's outsourcing strategies are acceptable to them. These simple steps can assist a company and its outsourcing partner in developing clear communication protocols that foster cooperation and trust.

  • Quality issues: Outsourcing can raise quality concerns in addition to reducing or eliminating operational control or oversight. Companies can mitigate this risk by partnering with vendors who have a track record of quality control with previous clients and projects. In addition, have a comprehensive process in place to quickly resolve any quality issues that arise on-site or off-site with a creative or development project (using augmented staff).

  • Confidentiality and intellectual property rights: Intellectual property is important in today's world. Companies should require all stakeholders to sign exclusive work ownership agreements and NDAs rather than raising concerns about intellectual property issues (such as copyrights, patents, or trade secrets) that HR and legal executives may have about the supplemental staff. These contracts address clients' concerns about confidentiality while also protecting their intellectual property rights.

Creating solid client/vendor communication channels and relationships

Companies should seek out an outsourcing provider who takes the time to learn about a client's internal business culture as well as the management style of its engineering and creative teams. Because of this strong relationship, IT staffing firms are able to provide the best company-specific staffing solutions while remaining adaptable (due to ongoing client/vendor dialogue) to anticipate and address a company's future personnel needs.

Companies that lay out a clear blueprint for what they want from their outsourcing agency will be able to maximize the benefits while lowering any associated risks. Managers should lay out a clear path for implementing a sustainable and successful outsourcing strategy that will help them better meet their business objectives by developing a deliberate, precise approach to outsourcing from the start.

Using project management tools to effectively organize work

Because of their effectiveness in improving collaboration and streamlining software projects, project management tools are gaining popularity. Clients and software partners can use it to communicate and share files, keep track of various tasks, and meet project deadlines.

How Turing is leading the next generation of hiring remote developers?

Outsourcing software development has many advantages but finding the right outsourcing vendor is difficult these days. This is where remote developers come into the picture. If you want to rapidly grow your software development team and work with silicon valley caliber software developers. Turing is for you.

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There is no denying that outsourcing offers many benefits for businesses, but if not executed properly, it can also have serious consequences. This is why picking the correct outsourcing partner is crucial. However, the above-mentioned practical tips would definitely help you make the right decision and accomplish a successful software outsourcing collaboration.


  • Author

    Mohit Chaudhary

    Mohit is an Engineer turned tech blogger. He loves diving deep into the tech space and has been doing it for the last 3 years. He calls himself a cinephile and plays badminton in his free time. For more information, you can connect with him on Linkedin or Instagram.

Frequently Asked Questions

You should outsource your software development to reduce costs, speed up development, and access a world-class pool of software developers.

Outsourced software development is the outsourcing of specific or all activities related to the development and maintenance of software.

The factors to measure ROI varies from business to business, so it is not appropriate to straightforwardly say that outsourcing software development offers high ROI. However, it can be easily said that outsourcing software development can significantly reduce your operational costs and save you a lot of time.

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