6 Outsourcing Software Development Risks and Tips to Offset Them

Are you comfortable with delegating tasks? Especially, when it comes to crucial business milestones, like software development, legal process (LPO), etc.?

In today’s connected world software development outsourcing is a dynamic trend. Affected by globalization, outsourcing agencies become more reachable and open for customers who are looking for talented experts that they don’t find internally. Hiring a dedicated team with extensive tech expertise and having the ability to scale as the project grows is both time and cost-effective. In the subcontracting pros and cons debate, the benefits seem to outweigh the cost.

Yet, is outsourcing software development such a good idea? And what are the pitfalls one may encounter?

Here are the heads up about outsourcing software development risks and tips to offset them based on our first-hand experience.

Being a web & mobile development company, Apiko knows all the pitfalls inside out. When cooperating with a customer, we always strive not only to concentrate on high-quality code development, but take into account unique needs, peculiarities, trends, and the overall nature of the industry, and respond to them quickly.

Besides, unexpected happens. All these risks presented below aren’t experienced by default, so we've decided to take a look at the 6 milestones of the software development lifecycle, define possible pitfalls and sketch out how to avoid their harmful impact.

So, what is software development outsourcing?

Thus, businesses delegate some or all of their software development projects to third-party vendors. Often they do it with the aim of high-quality scaling of their own team. It provides

• immediate access to the expertise required 
• faster time to market
• more time for the inhouse team which they can dedicate to other core business initiatives.

However, outsourcing also comes with challenges, such as potential communication issues, quality control, outsource vendor management, and concerns over intellectual property security. In this article you will learn how to effectively bypass or mitigate the risks related.

Missing out on proper vendor evaluation

So, how do you successfully outsource software development?

Doubtlessly, your thorough preparation is the key. Before choosing your IT vendor, it’s necessary to get a clear and detailed vision of your project concept and requirements.

What are your primary outsourcing goals? Is it an entire project or some specific part that you need technical assistance with? Which experts do you need to cope with the selected tasks? Should it be full-stack, backend, or frontend development outsourcing for code implementation? Do you need a DevOps engineer to create robust IT infrastructure, a UI/UX designer for creating tailored designs or giving new life to your software as a part of legacy app modernization, etc.?

Having answered the questions above, you should be able to form the project requirements. It’s misleading to hope that your visions and abstract ideas will be fully and precisely understood based on a vague oral description. You may consider presenting the concept of your prospective project as a request for proposal (RFP). 

This lets the IT vendor be more accurate with defining the must-have features and additional requirements, and estimating the development budget and timeline. It also streamlines the project discovery phase, which is a starting point of your cooperation with a dedicated team. This stage sets the course for your future work and helps to avoid misunderstandings from the very beginning.

To get full answers to the questions above, you need to have someone with a technical background on your team. It’s great if you have such expertise yourself, otherwise it would be great to have a project CTO on your side. It’s necessary for having complete understanding of your software project development, and for “speaking one language” with your outsource vendor, and the last, but not the least, for proper vendor evaluation. 

All set? Great! Now you can proceed to IT vendor selection criteria. Of course, software quality, budget, and timeline are the key points you will compare. But, actually, there are many more details you have to bear in mind. 

Be clear and straight to-the-point regarding what your first priority is. Do you have short time spans and need the project to be done ASAP, no matter what the price is? Are you focused on premium quality and put everything else on the back burner? Or maybe your very limited budget forces you to go with what’s available?

Intellectual property security

Before signing a contract with the outsourcing company, make sure it clearly defines the key aspects of your collaboration. Besides containing the non-disclosure agreement (NDA) which prevents data breaches, it should state that you are the owner of the intellectual property. The IT vendor can get these legal rights only as a consequence of breaching the agreement from your side, e.g. failure to pay for the services provided. 

In addition to the intellectual property regulations, make sure the contract fully enlists all the services the vendor should provide you with, and details the responsibilities both for the vendor’s and your (if you have an inhouse team) teams. The contract termination and dispute settlement procedures should be described in full as well. 

Check out the example of a software development contract at Apiko.

 

Software development contract and statement of work example

Secure your software development partnership by learning the key aspects that should be configured in the contract:

• The full scope of provided services
• The rights and responsibilities of both parties
• Pricing and payment details
• Intellectual property rights 
• Terms and conditions, including non-solicitation, confidentiality, termination, and more.

Take a look at how we do it at Apiko!

Get the PDF

Miscommunication and reporting issues

When outsourcing software development, communication is vital for staying on the same page with your IT vendor. Hence, the quality of your interactions with the tech partner cannot be compromised. 

Software development project manager is the person who ensures establishment and running of effective communication between the project stakeholders and the outsourced team. As a rule, IT companies that have been on the market for several years have their business processes established. They will suggest a communication model, and you definitely will be able to adjust it to make it more convenient for you.

Anyway, make sure there are regular meetings with the team. At Apiko we run them on a bi-weekly basis. Define the agenda in the most informative way for you. You need to know what has been accomplished during those 2 weeks, what parts of the scope are completed and how much budget is spent, are there any deviations from the planned schedule, any blockers or active risks. It’s a good practice to finalize such meetings with the reports, including all the mentioned data.

Demo meetings with the software user audience are nice to have. They provide valuable feedback and insights for the product refinement, enabling you to build the application its users really need.

Besides their direct purpose, such regular meetings and informative reports contribute to healthy project dynamics and prevent unplanned timeline extension and resulting cost growth.

Deviation from project cost estimate and timeline

Software development may take more time, and, consequently, budget, than it has been planned initially. So, what to do if you see that the timeline extends? And is there anything that can prevent this from happening, or mitigate the risk? 

Let’s start from prevention. Double check your communication effectiveness (see the paragraph above). Do check the reports you receive. Do they demonstrate any deviations from estimates, are any blockers listed? How does the team reason these deviations?

It’s a good practice to check the feasibility of your software idea implementation by proof of concept (PoC) development. It will allow for much higher accuracy of the initial project estimates. 

Feedback from the user audience is crucial, so it definitely makes sense to build MVP first. The most significant timeline growth occurs when some functionality needs to be rebuilt completely. So, get the app validation by real users at an early stage of development. 

What if you have done all from the above, and still the application development is lagging? You need to find out how far you are behind the initial schedule, and what the reasoning is. Was the risk predicted and what measures have been taken to mitigate it? Or was it entirely unexpected by the IT vendor? Only after finding the answer to these questions will you be able to make any constructive decisions regarding the further development.

Reality vs expectations mismatch

It’s truly discouraging when you’ve been working hard on something, but the result is way lower than your expectations, or just entirely something different. We certainly want to avoid this situation.

The #1 thing that excludes this scenario is the project discovery phase. Your active involvement is necessary here. That’s when you tell about the current state of your project, explicitly describe the requirements. It’s crucial to have someone with technical expertise on your team, so the project discovery is more streamlined and efficient. It also ensures that the stakeholders and the outsourced team see the project and its implementation plan eye to eye.

The software development business analyst processes your business goals to form the product vision most suitable and market-fit for achieving them. An important accomplishment during the discovery stage is that you get the detailed designs, estimates, work breakdown structure, and 1st sprint requirements and plan of implementation. It’s a solid preparation for the development stage.

#2: Start with an MVP. You may be worried that just with the basic functionality and without all those additional great features you plan to develop, the application may not get the warm reception by the user audience. But here’s the truth: MVP is more than enough for a good first impression if that is what the users need.

#3, but still very important, is to get user feedback as soon as possible. Do not be afraid of scope change requests. They are your key to refining the software, and ensuring excellent user experience. And the sooner you see what needs to be changed, the less it will impact your project timeline and budget. 

Regular demos for your user audience are a great way to double check if the project is heading in the right direction and to steer it if needed. You may consider iterative workflow for bulky projects, especially when it’s hard to outline the entire project scope right from the start.

Poor software development progress

You are sure that all the best practices have been implemented when hiring and managing the outsourced team, the discovery phase has been completed successfully, and the contract is explicit and well-built. But there are constant delays with commitments, the code quality is low, the deliverables are incomplete, and there is no relevant reasoning from the team.

These are the red flags of a critical situation when you should change your IT service provider. 

It is necessary to plan the project transition to a new vendor. Spare time to transfer the knowledge and ensure your data security. Approach selecting a new vendor constructively, taking into account the best practices and your former experience. Establish clear and transparent communication right from the start.

Let’s wrap it up

Software development is a fairly broad and complex process. Based on our own extensive experience in outsourcing software development, we’ve covered the most common risks, questions, issues, and tips for building a successful project. 

Though simple, the importance of the practices described cannot be overstated. They certainly mitigate the risks, and help you complete the application development on time, while achieving the highest quality possible.