Software Outsourcing
The Ultimate Guide

Understanding software outsourcing is the first step to perfect execution. Here is an ultimate guide about what it is and how to do it properly.

Introduction

Outsourcing or Software Development Outsourcing has been one of the most talked about services for business development and strategies, especially after Globalization 3.0 (2000 – present) as technology has been advancing at an amazing speed and businesses are more competitive than ever. Outsourcing is now done seamlessly with the help of lightning speed internet and high-end communication tools, making it a must, rather than a “nice-to-have” strategy for most businesses.

If you are looking for a one-word answer to your business challenges, then outsourcing is the word. Outsourcing software development has proven to be a great success for many companies worldwide. It reduces your internal costs while allowing your company to focus on its core competencies.

However, if you are new to the outsourcing business, you might be in doubts, or full of questions. Will it really work? How do I go about it?

We understand your troubles, and through this ultimate guide, we wish to explain in depth what software outsourcing is about, and why is it a great strategy for your business regarding time, costs, quality, and competitiveness.

PART 1:
What is software outsourcing?

Software development outsourcing is the service of providing the software development to the client’s company from a third party.

In its simplest definition, software development outsourcing is to bring a project or tasks from inside the company to outside of the company and be delivered by a third party which is usually called an IT partner. In other terms, this means that a business is hiring an external software development company, or agency, to carry out a software development project, instead of doing it in-house.

In 2019, the global outsourcing market was worth $92.5 billion, with software outsourcing as one of the most popular outsourcing industries. The global IT outsourcing market is expected to grow by $98 by 2024, which is a huge number, as cloud technology has become mainstream and accessible for every business.

Expected growth of global IT outsourcing market in 5 years Expected growth of global IT outsourcing market in 5 years

Why is software outsourcing such a hot topic amongst businesses world-wide? Are you considering outsourcing your first software development project? Let’s take a look further and deeper into software outsourcing and why it can be a great addition to your business.

PART 2:
Software outsourcing as a global strategy

Since the end of the 20th century and early of the 21st century, outsourcing has been known as a way to strategize costs and time-to-market efficiently, especially software outsourcing, since technology is advancing as an amazing speed. However, not every business decision-maker knows the full potential of outsourcing and the difference between outsourcing cheap and outsourcing smart.

In order to outsourcing right, it is vital to understand outsourcing not just as a tool, but as a global strategy to stay competitive and relevant in the current market.

Brief history of outsourcing

The Industrial Revolution has taught businesses the idea of competitive advantages through increasing markets and profits. In the 1950s and 1960s, corporates started expanding into multiple layers of management to increase profits and take advantage of economies of scale. Then in the 1970s and 1980s, what we now call “outsourcing” was born.

Brief history of outsourcing - Image 1

Organizations started competing globally by increasing their flexibility and creativity through new strategies, especially by focusing on their core business and outsource the rest. It is not until 1989 that outsourcing was recognized as a business strategy.

The year 1989 also marked the first software outsourcing project, as Eastman Kodak approached IBM to design and set up a data center as IT was not their area of core competency. This shook the world as it was the first case of outsourcing when a company managed to ask a third party to manage the company’s own services

Brief history of outsourcing - Image 2

The offshore dimension

Outsourcing is the act of contracting out of a business function to an external party, which can involve the transfer of people, processes, and assets. This can be done both on-shore of off-shore, however, offshore outsourcing is usually the choice for better costs, depending on where the company is originally from.

The first offshore IT project was started by a global airlines company who offload their back-office work to India. Soon, many airlines followed this approach and it became a standard software development outsourcing business model which was later adapted by many other organizations.

Putting company’s operations away from the original country is made possible due to the ability to perform information-based activities anywhere in the world instantaneously. Even global manufacturing has made a big jump during the last decade and information can be shared and transferred at the speed of light.

Sometimes it’s not about the costs. Sometimes you just cannot find the right team, the right people for our project. Outsourcing gives you a chance to explore the world and meet new talent, who were trained to do exactly what you need them to do. This does not only save costs, it also saves time and resources, and reduce time-to-market, which is vital for your business’ survivability.

Another benefit of bringing your business oversea is the possibility of 24-hour services. This can be done even if you only have one outsourcing partner, or multiple, and is vital especially for services that need real-time communication 24/7 such as customer support.

As we have learned about how outsourcing became a global strategy and helped businesses advance further and faster in their industry, it is also crucial to learn the different models and scales of software outsourcing in order to find the best method of outsourcing for your business.

Models of software outsourcing

Outsourcing is considered the development of strategic partnerships. Most of the time, the non-core functions, which are the functions that do not give the company a strategic advantage or make it unique, can be outsourced to software outsourcing companies. These include customer services, financial services, and software development.

Software development outsourcing, however, is a must for staying competitive. With innovation and speed as the number one priority to every business in the world today, one must stay up to date with the latest technology, deliver at the fastest speed, and of highest quality, to be able to stay ahead of the curve.

There are 3 different software outsourcing models, which are:

Models of software outsourcing

Staff Augmentation

With most of the management and staffing rights lay in the client’s hands, staff augmentation is a method of outsourcing where the outsourcing company works together with the client to improve productivity by utilizing the client’s current resources along with appropriate outsourced services and contract employees, supported by the outsourcing company, to produce the best and high-quality end results.

Project-based model

Pretty straight forward from the name, this type of outsourcing is on a project-based basis. Project-based model is increasing in popularity due to its flexibility and full commitment to a single project.

The outsourcing company is given full responsibility for the project from start to end, as long as the goals and requirements are set. They can also aid you in figuring out the right technologies and expectation you should have for your software development.

This way, the client does not have to focus on the on-going process and deployment, but on the final product itself.

Dedicated team

A model of outsourcing where the outsourcing company takes care of most of the processes, including staffing, filing customs, scaling, controlling quality, managing team, etc. This model of outsourcing utilizes the strength of the outsourcing company to the utmost and confirms that the client does not have to worry about anything from start to finish.

However, client always has the right to directly manage and run the team, or control staffing, if there are specific requirements, depends on the client or the project.

Scales of software outsourcing and successful examples

In order to understand more about software development outsourcing and how to do it properly, it is vital to distinguish the different scales of outsourcing, which include:

Scales of software outsourcing and successful examples Scale raking of the outsourcing method

Out-tasking

The best method of outsourcing for control management is out-tasking. This method requires the business to break apart certain parts of a project or a function, and only outsource an aspect of development or certain services. For example, instead of outsourcing the whole customer service department, you are only outsourcing the call center to handle live support.

This method of outsourcing is perfect for businesses that want to keep the responsibility in-house and avoid potential risks related to third party such as privacy. This way, you can monitor the delivery and process of the project personally yet reliving your in-house workload and utilize third party’s skill sets.

A very surprising success of this outsourcing method is Alibaba. You probably would never expect a business in China to outsource to the U.S. Well, Alibaba was the first to prove that it is not always about costs. Alibaba outsourced their website development to developers from the U.Sto create a website that speaks to native English speakers. This makes sure that their content is well received and delivered correctly, which in turn boosts their global revenue to $56.152 billion in 2019.

Outsourcing

At its basic form, outsourcing means to make internal work external. This might involve transferring a series of tasks, a project, or a function outside of the main business to be handled by a partner or a third party.

The third party is responsible for most of the tasks – whether planning, developing, or implementing. The main business’ sole purpose is to monitor the third party’s performance against specific KPIs to make sure that all requirements and objectives are fulfilled.

A successful example of this approach is Whatsapp. Known for its cross-platform messaging, VoIP platform that Facebook has bought for $19 billion USD, Whatsapp was actually a software development outsourcing project. When the founders came up with the idea of Whatsapp in 2009, it was then entrusted to professional teams from Eastern Europe to develop. The platform then topped the rankings on Google Play, App Store, and almost won against mobile SMS services.

Multi-sourcing

The ultimate form of outsourcing – have you heard the term “the best of both worlds”? How about “the best of multiple worlds”? This is exactly what multi-sourcing is about. By splitting work into separate elements and handing them over to several specialized partners to come out with the best possible result.

For example, to develop an IoT device for hospitals, you outsource the software to a third party who is specialized in IoT software, then outsource the device making process to another third party who has better connection with part suppliers, and then sell and implement your devices through a distributor with great medical network.

One of the most successful companies that uses this kind of outsourcing method is Google. Due to the area of technology Google covers, they have to outsource thousands of different IT jobs because of their scale. They work with multiple third parties that are specialized in software development, IT infrastructure management, and so on, to create the best solution for all their software needs.

Why it works? Because you have the freedom of choice and can pick only the best of the best software outsourcing companies and services without compromising any quality. You can also reduce the responsibility from your end, and the risk of ending a contract early by the software outsourcing company is by far way less impactful and stressful.

Why it does not work? Because the procedure itself is complex. Software development is not a simple process. Working by yourself is tough, working with someone is also tough, imagine working with a group of people who must go through you to get every single piece of information. If you are a beginner at outsourcing or make a single mistake, the outcome can possibly drive you crazy.

Which method of software development outsourcing is for your business?

Every business is different, just like every development project is different. It is vital to know which method of outsourcing is best for you based on a variety of concerns such as project size, privacy, control management, quality, or experience.

Even though multi-sourcing is considered the optimal solution for large-scale projects, it requires more experience and responsibility compared to the basic outsourcing method. For smaller scale projects, out-tasking is usually considered ideal as there are minimum changes and most of the process is handled internally.

If you are considering a smaller development project with short-term and reliably fast result, a project-based model might be your best pick, while having a dedicated team can take a lot of weight off your chest if you are going for a long-term IT investment.

Developing a global outsourcing strategy

Before outsourcing, you have to understand whether software development outsourcing is a choice for you. Software development outsourcing usually saves costs even for start-ups as building an internal team is very expensive and time-consuming.

First, you need to establish a clear software development outsourcing strategy following these steps:

Step 1

Set the goal and vision of the project

What is the outsourcing project about? What kind of software do you want to develop? What do you want to get out of the outsourcing project? Are you trying to cut costs or save time? By how much?

Step 2

Identify potential Outsourcing areas

Can this project be done with just one partner or multiple? Can a part of it be done internal or the whole process is outsourced? Is it a staff-augmentation, project-based model, or a dedicated team project?

Step 3

Identify potential Outsourcing models

Outsourcing, Multi-Outsourcing, Out-tasking. This is usually based on the project’s scale and size.

Step 4

Set up realistic and expected KPIs

Even though it is good to dream big, it is also good to have a realistic goal so there are no false promises.

Step 5

Bring the plan into execution

Once the outsourcing strategy is established the next step is to bring strategy into execution.

Before finding your first software development outsourcing partner, it is also vital to understand the strengths and drawbacks of software outsourcing to fully grasp what you should expect from outsourcing your project and be careful of potential risks.

PART 3:
Pros & Cons of software outsourcing

Software Outsourcing Pros

Pros & Cons of software outsourcing - Image 1

Costs

One of the biggest benefits of outsourcing is probably costs. This does not mean you are under paying people or rushing work. The difference in salaries across the globe is the sole reason why outsourcing can save you millions, or billions of dollars. Instead of paying someone $50 per hour in the U.S, another person can do the same amount of work, with the same quality, and given the same amount of time, for $20. This is not unethical in any way as different countries have different costs of living, and you are paying your outsourced employees their normal pay, if not higher.

Flexibility

When you outsource, you do not have to spend time to recruit, train, and house your employees for projects. You also don’t have to worry about scaling your employees in case your labor size changes project-to-project. One of the best things about outsourcing your software is to find talent that fit perfectly for the position, but without investing into a permanent position.

Speed

Outsourcing your IT projects can reduce your time-to-market greatly. This can be done even faster if you are multi-sourcing, where you split your project into separate processes and use multiple third parties to oversee specialized tasks. Your outsourcing partners can also work together with you around the clock to make sure that all your products are up-to-speed and can be delivered with the least amount of time.

Skills and experience

As a company, you might not be specialized about a certain aspect, such as IoT, Machine Learning, or web app development. However, outsourcing your software development project makes sure that your software is in good hands.

Outsourcing companies are specialized in a certain area and they make sure that the results are up to good quality, since their reputation relies on the success of their projects. Software outsourcing developers also have more experience with dealing with a variety of projects, which leads to flexibility in their knowledge and they can adapt to different tasks easier.

Responsibilities

The larger the scale of your business, the more responsibilities you have to take care of. Sometimes, it can be very overwhelming, especially to monitor tasks that are not in your expertise. Outsourcing your software can make sure that your project is in good hands.

Most IT outsourcing companies have years of experience of working on different IT projects, developing different software, and they are committed to providing the best IT solutions for businesses of all scale. This can take some weight off your chest knowing that someone capable is handling your problems.

Improved Compliance

By outsourcing your software development, you gain access to international talents without the legal compliance that most companies must go through from hiring employees. Your outsourcing company can take care of all the legal paperwork and customs so you can focus on other things that matter.

Software Outsourcing Cons

Pros & Cons of software outsourcing - Image 2

Cross-cultural issues

Whether it is time-zone, language barrier, or cultural difference, it is understandable that offshoring your business will create certain issues, especially the geographical distance for best communication. This problem worsens if the main business is also located in a non-English speaking country, as finding an outsourcing company that can communicate in another language other than English is tougher. Good thing is, most professional outsourcing companies are fluent in English, and are flexible with time-zone requirements.

Security

Exchanging information creates the risks of security and authenticity. Outsourcing in itself is already a risky step, as it means to hand over control to another company. The first step before outsourcing your software is to look at the outsourcing company closely, and not just taking their words at face value. You can mitigate risks for your business by choosing an outsourcing firm that has a high-quality project management system and a tried-and-true process for developing applications.

A good indicator of an outsourcing company with good security is their working standards, such as ISO 27001 for information security. It is also vital to check what part of the business the certification covers and who did the accreditation for best result.

Miscommunication

Due to the constant exchange in communication and potential barriers such as language and geography, loss of information is expected when you outsource your projects. This can be reduced greatly however, by double or triple checking all the information and processes. It is also the outsourcing company’s responsibility to make sure that their product is up to expectation and of the highest quality. Both sides have to act immediately if something seems off or abnormal.

Legal problems

Laws are different depending on the country where the company resides. You need to make sure that you understand the country laws for where you are offshoring to, and vice versa. There are also international trading laws that you have to take note of and the time it takes to resolve any dispute between the two companies will be much longer compared to national cases. To have a smooth operation, businesses need to make sure the teams aware about the difference in legal system and devise a management plan to deal with it; having an in-house legal team is a big plus.

As we can see, even though software outsourcing has its drawbacks, its benefits far outweigh the risks, and the existence of software outsourcing is vital to stay competitive in the market, for both time, costs, and quality. Next, we will go through the most common myths about outsourcing and explain each of them in details.

PART 4:
Software Development Outsourcing Myths

Software outsourcing means poor quality

This is a horrible myth. Yes, software outsourcing can be much cheaper, but that doesn’t mean low quality. Cheaper is comparative here – if you are outsourcing to a country where salaries are much lower, you are saving the cost difference between the two countries’ living wages.

Does this mean they are spending less time on the product? No. Does this mean their employees are less experienced and talented? Also no. Most of the time, they are more trained to do certain things which leads to better quality as well. Especially IT outsourcing where it is vital that the team working on the project is up to date with the latest technology and trends. Like Ryan Khan, Founder of The Hired Group has said, “Master your strengths, outsource your weaknesses”.

Software outsourcing is for companies to cut costs

Yes, software outsourcing is a great way to cut costs. That, however, doesn’t mean cutting costs is the sole reason for outsourcing. Another big reason for companies to outsource their software is the time it takes to deliver the product. All business decision makers know that time equals money.

In order to stay at the top, it is vital to response to the demands and trends of your consumers. You cannot waste time and be out-of-date, that’s a one-way-ticket to failure. It takes time to recruit and train a group of talent to handle your software project, and outsourcing might just be the greatest solution for all your needs.

Software outsourcing compromises your privacy and security

Before sharing any information regarding your project, a confidentiality agree should be written and signed by both parties, which legally binds the two or more parties not to disclose certain information. These are usually known as an NDA or non0disclosure agreement. This should cover the punishment for a breach of confidentiality, or violation of confidentiality, which is the unauthorized disclosure of the confidential information.

Most of the time, it is the termination of employment and contract between the two parties, along with a hefty fine for the guilty party. If the damages can be calculated, the guilty party may be responsible for the entirety of the loss, if not more. That’s why, in order to make sure that the privacy and security of your project are ensured, you have to always make sure to sign a legal NDA and make sure that your outsourcing partner has a credible certificate such as the ISO 27001.

Software outsourcing is for big companies

Most large corporations and companies are outsourcing their software, especially to keep up with the trends and innovation. “If you deprive yourself of outsourcing and your competitors do not, you’re putting yourself out of business”- Lee Kuan Yew – Former Prime Minister of Singapore.

This, however, does not mean small to middle sized businesses should not turn to software outsourcing. Outsourcing is “a powerful tool to leverage talent, improve productivity and reduce work cycles” (Azim Premji). Outsourcing your software increases your scalability and output efficiency, while leaving you more time to do what you do best and outsource the rest.

Software outsourcing is a short-term solution

Some people believe that outsourcing is a short answer for a long question. This is in fact, not true. Obviously, some companies turn to outsourcing due to their lack of staff and knowledge, and while outsourcing, they do build up their own in-house department to handle on-going projects that are being outsourced.

However, various companies have chosen software outsourcing as a permanent solution. They are building offshore software development centers that are in contract with them for multiple years, or permanently. In the long run, software outsourcing gives you more freedom and resources for your continuous growth.

Software outsourcing reduces your control over your projects

If you are a CEO, and your employees are working on your project and taking your input, does that mean you lose control over your project? The same thing applies for software outsourcing. Taking the workload outside of the company does not mean you will lose any control over your product. You just need to make sure you have a strict guideline, clear and obtainable KPIs, and mutual understanding between you and your partner. Unclear milestones are the worst thing to have when you try to manage any project, internal or external.

Once you have cleared your doubts regarding outsourcing myths and are ready to outsource your first project, the next thing you should think about is where you should outsource your software to.

PART 5:
Software Development Outsourcing Locations

So, it comes to the question of “Which countries are best to outsource to?” Each outsourcing company is different, just like how each outsourcing country is different, when it comes to working style, costs, time-zones, quality, and culture.

It is better to understand and differentiate between the popular outsourcing locations across the world to first find out the best location to outsource your software to make sure that all your requirements are met. This can be done by going through the strengths and weaknesses of each location, along with the price difference.

North America

The most popular outsourcing project in North America from an oversea company is from Alibaba, where they outsourced their web development and localization to an outsourcing company in America. Foreign companies actually do bring new outsourcing jobs to America by bringing their businesses to the area. Usually, these are physical projects such as robotics, devices, or automotive, as the costs of bringing the parts oversea are much more expensive compared to building everything on land.

Even though the costs of hiring developers are much higher in North America compared to certain areas in the world, it is the most prominent IT hub in the world. If you are looking for a top-notch quality software despite the budget, North America is your choice.

Hourly outsourcing cost for a senior developer in North America: $78 - $125

North America Source: Accelerance

South America/Latin America

South American is a more popular software outsourcing destination compared to North America, due to its considerably lower software developer rates and closer distance to North American businesses. If your company is located in North America, outsourcing your software to South America is a good choice as the time zones are similar and it’s easier to travel. For businesses outside of America, though, it might not be an optimal outsourcing destination compared to Eastern Europe or Asia.

Hourly outsourcing cost for a senior developer in South America: $32 - $65.

South America/Latin America Source: Accelerance

Eastern Europe

Eastern Europe is one of the top IT hubs in the world. It is also known for the ability to produce top-notch software without compromises. The region is well-known for its density of software developers which is 1.3 developers per 100 people.

Ukraine is among the fastest developing countries in the region, for IT wise, with over 200,000 software specialists, which is second only to Poland with 255,000 software developers.

Hourly outsourcing cost for a senior developer in Eastern Europe: $30 - $59.

Eastern Europe Source: Accelerance

South Asia

India is considered one of the top outsourcing destinations for many services, software development included. Known for their competitive prices and ability to use and understand English fluently, businesses tend to look for Indian software outsourcing companies when they are looking to outsource an IT project. The hourly cost of a developer in India can be negotiated down to as low as $15 per hour.

India also has a variety of outsourcing company choices that have years and years of experience in the outsourcing industry. The only biggest issue that Indian outsourcing companies have is the lack of privacy and security laws. This means signing an NDA is a must before you start any project.

Hourly outsourcing cost for a senior developer in South Asia: $24 - $33.

South Asia Source: Accelerance

South East Asia

Another big player in the software outsourcing industry is China, with a large number of software engineers - which is similar with a variety of other Asian countries such as Vietnam, Malaysia, and Indonesia. South East Asia holds a large pool of IT experts – more than 10 million developers. Of all the regions, South East Asia has the lowest labor costs for software development outsourcing.

Vietnam especially has a young population – 70% of the population is under 35 years of age, and a concentration in IT, focusing on Machine Learning, Artificial Intelligence, and Mobile Application. Vietnam is also a middle-income country and one of the most dynamic emerging countries in East Asia region, which means cost of labor will be affording and the education level is growing rapidly.

Hourly outsourcing cost for a senior developer in South East Asia: $32 - $65.

Once you figure out a good location to offshore your business, it comes down to the next question: How to choose a vendor you can trust?

South East Asia Source: Accelerance

PART 6:
Vendor Evaluation and Selection

Proper evaluation and selection of offshore vendors are vital for your business’s success in overseas outsourcing. When you outsource important business functions, you will inevitably lose some control over the project, including its quality standards, budget, and timeline. That’s why it is so important to select the right offshore partner, who will not only complete the work to your standards, but also have a compatible working culture and high ethics.

A good way to find out whether a vendor is a good fit is to start off by researching and listing all potential partners that can provide the required services and send out the RPP (Request for Proposal). By sending out the RFP, you can check and make sure that the vendor can fulfill your requirements and expectation. Here are a few qualities that you should look for in an outsourcing vendor that can usually be found through bidding:

"Vendor Evaluation and Selection"

Quality of service and availability

Look through their past case studies and achievements to find whether they are experienced in similar projects or are experts in certain technologies that you need for your project. You should also look closely for their service hours and whether they can be reached out of office hours for constant communication. Are they going to be available for 24/7 support? Can they meet your request ASAP or only at certain times of the day? Make it clear in your proposal that you are looking for a 24/7 vendor or a normal 9-5 one.

Reliable certifications and security

The ISO 27001 for Information Security Standard and ISO 9001 for Quality Management are a good indicator of quality to start with. Then, depends on what type of project you are looking for, you can look for other certifications, such as PCI DSS, or SOC 2. If a vendor possesses reliable certifications, there is a higher chance that your project will come out successful.

Value for money

As outsourcing is a great way to cut costs, it is reasonable to look at the value the vendor can provide you compared to the price. However, cheaper labor doesn’t necessarily mean cheaper costs. If a company is charging you $10 an hour, but takes 100 hours to complete a project, it is much more expensive compared to a company that is charging you $75 an hour, but only takes 10 hours to complete a project.

Financial stability and insurance

A big risk for software outsourcing is the fact that the project might not come into fruition due to external issues, such as pandemics, natural disasters, or simply, the third-party going bankrupt. Make sure that your potential partner has a reliable professional liability insurance, or other ways to make sure that nothing can stop them from finishing your project, or at least minimizing the potential impact.

Vendor Agreement and Terms

During the evaluation and selection process, your business should also address each of the following considerations with potential offshore vendors.

Intellectual Property Rights

Within the confines of the laws of the onshore and offshore countries, your business and the overseas vendor must reach clear agreement about who will own the information transferred during the project, as well as the final software product. A detailed contract is essential for mitigating disputes that could otherwise arise during the course of the project.

Protection of Proprietary and Confidential Information

Your chosen offshore vendor will have access to a significant amount of confidential and proprietary information from your business. You must be confident that your offshore vendor can protect the safety and security of your information during every stage of the project, from exchanging data at the project outset to storing it after the project has been completed. Your business should be intimately familiar with the offshore vendor’s security policies and practices and have strong guarantees that confidential business information will not be shared with other parties without prior written authorization.

Termination Clauses

Your business should look for a stable, long-term relationship with an offshore vendor for at least the full duration of the project. However, in the event that disagreements arise or conflicting commitments or a changing market environment that requires early termination, it is critical that your outsourcing contract includes an adequate termination clause that addresses the legal environment in both the onshore and offshore countries.

An appropriate termination clause should result in significant financial losses for the company that terminates the agreement, providing an incentive to carry the project to completion. And your company should always have a contingency plan for completing the project just in case the chosen vendor decides to quit working on the project before it is finished.

Regular Progress Reports

Clear communication and regular, thorough reporting are essential for keeping your business informed about the status of the offshore development project, and for keeping the offshore vendor informed about changes in your project needs.

A clear reporting structure and schedule should be defined and agreed to in writing before the project begins. An adept project manager will be able to monitor the project’s progress and quickly inform your business about milestones and obstacles, as well as any anticipated deviations from the terms of the contract. Your contract should explicitly address who will be involved in communication and reporting at each company, and to what extent.

Great! By now you should be able to draft out a list of potential partners. The next step is to go through your checklist to make sure that your options are solid, and the project can be carried out flawlessly.

PART 7:
The top 5 things you should know before you outsource your software development project

1. Cheaper doesn’t mean better:

If you are expecting to pay someone $1000 to make the next best social media… well, that’s not going to happen. Some people will promise you what you want, but trust me, it won’t be what you want. Another thing is, outsourcing employees might be more expensive than hiring your own employees. However, you are free from the permanent position investments such as benefits, bonuses, training, taxes, etc. It is vital to hire an outsourcing partner due to their experience and competence, not their prices (even though it is a bonus).

2. Find a partner who you can visit:

To make sure that your outsourcing project can be carried out flawlessly and with the least possible miscommunication, it is vital to work in-person sometimes. This also makes sure that you and your partner can understand each other company’s culture and vision, to make this work better. You can also see how your team is working during normal working hours and what can be improved immediately. Talking and demonstrating are always preferred over hundreds of direction emails.

3. References are helpful but remember to read their case studies and do your own researches:

When possible, it is always best to work with a partner that has worked successfully with someone you know personally. If not, you should always do proper researches on your potential partners. The best way to increase your project quality with a partner is to increase your relationship with your partner. When someone likes you, they will always make sure you get the best quality out of their services.

4. Create a roadmap:

Make sure you have clear expectations and deadlines for your outsourcing partner. Know what you want and when, and how. This helps you both in estimating your budget and managing your project. With a roadmap, your outsourcing partner can also make sure that they know the deadlines and what exactly you expect, to deliver your project on time and fulfill the right requirements.

5. Always remember to take proper security measures:

You need to know and control your resources. Make sure you have all the proper contracts ready and have back up options if anything unexpected happens. Having an in-house legal team is a bonus but a reputable legal firm can handle your problems right away if you are prepared ahead of time. Always read the contracts before signing them and make sure that there is an insurance even in case of failure from your outsourcing company.

The top 5 things you should know before you outsource

PART 8:
The top 5 things you should do to outsource successfully

1. Meet your team regularly:

It is recommended that you have face-to-face meeting at least once with the outsourcing team before starting the project to bridge the gap and break the ice. This also helps you in knowing the team and bettering your relationship with your outsourced partner. Having regular meetings either face-to-face or online can definitely improve and speed up the outsourcing process, as all miscommunications can be voided, and all instructions are clear and responded to immediately.

2. Be involved with the team personally:

When you are outsourcing your software, usually, there is at least one person from the outsourcing team who will work closely with you. Most of the time, this person is either a team leader, a project team leader, or a dedicated team member. You can learn about the on-going project by keeping direct and constant communication with this person, but it is also suggested to talk to other members of the team and encourage them reaching out to you on the spot if there are any unexpected issues or unclear instruction for fastest support. You should also be invested in the outsourcing team, which involves training on business domain, or working on knowledge transfer, in order to speed up the outsourcing process and make it smoother for both sides.

3. Be transparent in communication and give honest feedback:

The clearer and more transparent your instructions and expectation are, the better the result of your project. Set up a clear goal and KPIs that your team can follow and be vocal and descriptive in what you want for your project. There should be no beating around the bush or vague expectation such as “I want the best software that can compete against all other software in the market”. It is very crucial to be direct and apparent in your goals and communication, so everyone is on the same page. Also, be direct and honest with your feedback and don’t hesitate to bring up any potential issues you see with the outsourcing vendor. This way, both sides can see eye-to-eye and improve the collaboration.

4. Schedule management meetings:

Besides keeping constant communication with your outsourcing team, it is also good to schedule management meetings bi-monthly or quarterly to go through the on-going process, the goal, accomplishment, and any changes in KPIs or unexpected errors that occurred. These meetings should be reported back to the higher up especially for your business, so they are in touch with the outsourcing process. This also can help in handling any unpredicted outcome and be prepared for any alterations.

5. Acknowledge the outsourcing team as your own:

Your company should be prepared to have an external team working along with the internal team for your project. Think of the outsourcing team as a part of your business instead of a third-party. This should also apply to the outsourcing team as well. Only when both teams are dedicated to the same goal and vision, that’s when the project can be ultimately successful. Your business should also be on the same board about the outsourcing project and other departments should be ready to support you and your outsourcing team when needed.

Now you have known most things regarding software outsourcing. The next thing is to actually bring these steps into execution.

The top 5 things you should do to outsource successfully

PART 9:
So, you are ready, what is next?

Are you ready to outsource yet? Hit your potential partners with a welcoming email, open yourself to a new partnership opportunity, and watch your business transform over the next few years!

Do not hesitate to ask for an expert’s opinion. All outsourcing companies will give you inputs on your projects. Take this as an advantage to further understand what technology is needed and which type of process is the most fitted for your project.

And above all, always have a back-up plan. You cannot foresee all the risks. Be ready for the unexpected, and you can overcome all challenges.

Now, let’s outsource!

Topics: Software Outsourcing

Linh Nguyen

Technical/Content Writer

Linh Nguyen is a technical writer who conveys technical matters and information into writing

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