6 Main Software Development Outsourcing Risks and How to Manage Them

There are several reasons for a company to consider outsourcing its software development processes. One of the most significant outsourcing benefits is faster time to market. Many also associate reduced costs and higher quality with these outsourced services. However, like any other outsourcing service, there are some software development outsourcing risks that you should consider before investing.

It is a great idea for all organisations to familiarise themselves with outsourcing risks and formulate mitigation strategies accordingly.

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What Are Some Major Software Development Outsourcing Risks?

Outsourcing has been around since the 1970s and 1980s, and there have been many lessons for us along the way. Let’s take a look at some of the most common software development outsourcing risks and ideas to resolve them:

6 Main Software Development
Outsourcing Risks and How to
Manage Them

Risk 1

Selecting Inappropriate
Software Development
Outsourcing Supplier

Risk 2

Preparing a Bad
Software Development Outsourcing Contract

Risk 3

Systematic Quality

Risk 4

Building Unsatisfying
Communication Ties

Risk 5

Using Unsafe Data
Processing Methods

Risk 6

Not Defining Exit
Path for Contractors

Risk 1 – Selecting Inappropriate Software Development Outsourcing Supplier

Choosing an inappropriate supplier can be a barrier to project completion. An inappropriate software development supplier lacks the required expertise, tools, and equipment needed to produce quality results and drive a business’ success. As a result, the company expectations and deadlines are not met. Some suppliers also fail to understand the scope of a project and oversell their technical skills to get better-paying projects.

Most companies prefer placing a trial order to assess and evaluate the supplier’s competencies and skills. Additionally, companies and internal project managers must create a clear project brief highlighting all the work that will be handed over to the supplier. It will also be good to analyse a pool of suppliers and ask them for reference work before signing a deal. 

Before choosing a software development outsourcing supplier, all the required goals, technologies, and programming languages should be identified. 

A designated internal team can create a list of selection criteria and develop scoring methods to choose the best supplier based on the company’s budget, software development needs, and the experience that they are looking for. Evaluating the external company’s maturity level and assessing its case studies will also prove beneficial.

Risk 2 – Preparing a Bad Software Development Outsourcing Contract

Several companies, especially startups, don’t want to waste their money and resources on hiring legal help for the procurement process of software development services. However, less scrupulous suppliers can use a loosely formed contract to their advantage to find, and exploit,  loopholes that will work in their favour.

A bad contract can create many problems such as sudden contract termination, and unnecessary changes in the contract. So, it’s best to create a thorough legal agreement that includes all the necessary details, including pricing, deadlines, and privacy policies.

You can include other important details such as penalties for not meeting deadlines, assigned workforce, and positive reinforcements. It will be helpful to also create a separate Master Agreement that includes strategic plans and a Statement of Work that highlights project-level conditions.

Risk 3 – Inappropriate Systematic Quality Control

Inappropriate systematic quality control in software development can lead to poor customer experience caused by bugs and coding flaws. If these issues are not spotted and fixed promptly, they can lead to costlier processes and software development services. To avoid this issue, both the supplier and the company need to have a hands-on approach during the entire process.

You can appoint an in-house tech expert with extensive knowledge to ensure all bugs and flaws are caught early. Additionally, suppliers with vast experience in Quality Assurance should also be preferred over less experienced alternatives. No matter the extent of your project, you should look for a supplier with a dedicated QA team.

A well-formulated test plan will also ensure that you and the supplier are not devoting oo much time to development and too little to quality control. This test plan can highlight all the required testing methods to ensure efficient quality control. Software development outsourcing can include integration, acceptance, unit, functional, and load testings.

Risk 4 – Building Unsatisfying Communication Ties

Poor communication is one of the most significant issues clients face, especially when there’s a considerable time difference and language or cultural barriers. The vendor can end up not understanding the project’s scope, or the client can set higher expectations than required. To ensure your project requirements are not overlooked, you should create a communication plan.

The communication plan can include frequency and time of review sessions, reporting, and communication methods. Some suppliers provide their own portals for communication and have a designated project manager to fill any gaps or problems in communication.

Risk 5 – Using Unsafe Data Processing Methods

If you’re not careful when outsourcing software development services, the company can face data leaks, breaches, and even suppliers who sell your ‘bespoke’ software to other companies. If you want to avoid this risk, it’s better to pay attention to the supplier’s privacy and security policies.

Most companies make the mistake of focusing too much on service-level agreements and ignoring these privacy concerns. You can assess the supplier’s code ownership and security policies and acquire signed copies of the documents. Creating a risk management plan will also prepare you for any future risks and strategies to implement while handling them.

Risk 6 – Not Defining an Exit Path for Contractors

An Exit Management Plan, also known as EMP, prevents future litigation costs and the unwanted extension of partnerships. If you don’t have an EMP, you can face severe issues with project completion, the transition of services, and continuous delivery. So, it will be helpful to create and highlight the Exit Plan in the initial outsourcing contract.

The EMP includes service requirements, security and privacy policies, transfer of documents and knowledge, costs, and personnel details. Having this in the contract will ensure that all the transition and completion processes are as efficient and smooth as possible. The transition period and plan, termination notice, and exit reporting are also a part of the EMP.

Concluding Thoughts

We hope that you now have a clear understanding of some of the most common software development outsourcing risks and how you can manage them in a time-efficient manner. You can enjoy the benefits of software development services if you learn how to eliminate hurdles and hindrances. The outsourcing market is expanding globally and for a good reason. If you haven’t already considered outsourcing processes such as software testing, development, and start analysis, now is the perfect time to do so.

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