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How To Overcome High-Risk Problems of Outsourcing Software Development

Tapan Patel

Dec 24, 2020

10 min readLast Updated Dec 18, 2023

Outsourcing software development

Despite 2020 being massively affected by COVID-19, the global spending on IT services is expected to cross $1 trillion in 2021! Clearly, more and more businesses are planning to get into the industry in the coming years. A lot of them have been relying on outsourcing to meet their software development needs for almost a decade now. However, software outsourcing is a tight rope and you need to balance a lot of things to reach your end goal. If you are not careful, you will fall prey to many high-risk problems of outsourcing software development and lose a lot of money.

In this article, I list down the most common pitfalls of outsourcing software projects. You will also find valuable lessons on how to avoid or overcome these challenges. So let’s get started!

Common Problems of Outsourcing Software Development and How To Overcome Them

Outsourcing Software Development

1. Not scoping your software project accurately

Project Mind Map

Before you entrust an external team to deliver the right software, you have to ensure that they know what exactly you are looking for.

The biggest reason why software outsourcing fails for so many businesses is the failure to communicate the project requirements clearly. And in most cases, this happens because clients don’t have a clear understanding of the project themselves.

In the absence of a carefully vetted project plan, the vendors present you with a time frame and budget estimates that they aren’t able to stick to eventually. This may have serious repercussions if your project is time or budget sensitive.

Outsource software development using an effective RFP document

A great way to avoid this common software outsourcing problem is to draft a detailed Request For Proposal (RFP) document. An RFP document requires you to organize project information in the following sections:

Executive Summary - Brief highlights of your business, your target market, your product strategy, the software project goals, potential roadblocks,  and the ideal solution.

Project scope and deliverables - Infrastructure requirements of your project, functional design of the software, product features and capabilities, and security requirements.

Timeline and format for responses - Information on how long you are accepting bids and what the bidders must mention in their proposals.

Ultimately, an RFP document will help you specify details of the project for yourself and for the vendors. It will also help you only from the vendors who can fulfill these requirements.

RFP for Software Development: How To Write an Effective Request For Proposal

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2. Filtering vendors on the basis of cost instead of value

basis of cost instead of value

I understand that cost-effectiveness is the very reason businesses opt for software outsourcing. However, cheaper doesn’t always mean better. A grave software outsourcing pitfall is filtering and hiring vendors solely on the basis of their quotes.

It’s possible that a vendor with lower rates isn’t the right fit for your project. Sometimes, they may not have the relevant expertise, or they may not have a fair understanding of the industry your business operates in.

If you end up hiring the wrong offshore partner, the initial lower development costs may result in higher software enhancement costs. Or worse, you may have to let go of the messy code and start all over again.

How to avoid hiring the wrong outsourcing partner

If you have prepared an RFP for seeking bids, you will most likely receive bids from the vendors capable of delivering your requirements. Now, you only need to filter these vendors on the basis of how well they can deliver the solutions.

To avoid the problems of outsourcing software development in the future, hire a vendor who:

Understands your market well - Building the right software requires an in-depth understanding of who the customers are, how the market functions, and what are the latest industry trends.

Has relevant experience - I always emphasize the word “relevant” whenever I talk about vendors’ experience. Some companies may have been operational for a decade but they may not have worked with a client similar to you. On the other hand, a two-year-old startup may have worked for clients only with similar requirements as yours.

Understands your vision - The most important consideration while hiring an offshore software development team is their capability to understand your vision. The consultants should be able to translate your business goals into technical specifications to get you the desired results from your business app.

In essence, the only criteria for evaluating vendors’ bids is how much value they will bring to the table instead of how low their development rates are.


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3. Not signing an elaborate software outsourcing contract

software outsourcing contract

Many small businesses feel hiring a lawyer to draft a software outsourcing contract will only add to the already high outsourcing costs. They do some quick research and draft a contract using a common template.

However, one or the other loophole surfaces after the contract has been signed and the client has to put up with whatever the offshore partner delivers.

Ultimately, there are significant losses the client has to bear and all the money they tried to save while drafting the contract? That, and much more, goes into rebuilding or taking care of the mishaps that occurred.

So it’s wiser to invest some money initially into drafting a tight contract that protects you from any possible legal loopholes in the future.

Here are a few best practices for drafting and signing a software outsourcing contract:

Opt for a feature-based contract - Time-based contracts are likely to result in discrepancies in the development process. On the other hand, a feature-based contract leaves no room for ambiguity. Such contracts also make it easy for developers to stick to the planned timeframes.

Schedule payments based on milestones - A sure shot way to avoid overpaying is to include milestone-based payments in your software outsourcing contract. This also avoids any payment related conflicts in the future.

Ensure confidentiality and intellectual property protection - This is the most common element of any software outsourcing contract. However, I’d like to point out one thing - don’t sign the NDA just with the company, but with everyone working on the project. It eliminates the risk of an individual developer leaving the company and stealing/sharing your software idea with others.

Other important clauses to include in your software outsourcing contract are the indemnity clause and termination clause. These are just off the top of my head. I strongly recommend you hire a lawyer to guide you on this. Legal loopholes are one of the most common problems of outsourcing software development.

4. Not establishing project management and communication channels

Project management and communication channels

If you do not establish how you want the project management to be carried out, you are in for very serious communication barriers during the development process.

It’s the vendor’s team that is taking care of the development but it’s your business that understands what the actual progress looks like.

So not establishing how you want to be communicated about the project progress and potential roadblocks is one of the most common problems of software outsourcing.

Clarify your desired project management practices and tools in writing

To eliminate any ambiguity or conflicts in communication, always clarify how you prefer project management practices to be.

Project management tools - Depending on the development methodology you like to follow, mention the right project management tools that your offshore development team must use to track project progress.

Communication channels and schedule - Clarify the communication channels you prefer to use. Also, it’s vital that you have an agreement with your offshore vendor regarding the hours of the day both teams will be available for real-time communication.

Meetings - Mention the type and frequency of meetings you want to hold with your offshore team. Don’t shy away from demanding daily run-through meetings on how much is covered each day. Also, always follow up every meeting with an email to eliminate the risks of ambiguity later.

Have an in-house technical lead - Even though your offshore partner has their own project manager, you need someone in-house to supervise the project. They will verify whether the standards are met regularly and help resolve the bottlenecks if any.

5. Not setting code quality and QA standards

Characteristics of good quality code

Ensuring code quality is the biggest software outsourcing challenge because there are no strictly defined code quality parameters. So you can’t just ask your outsourcing partner to write quality code. The term may mean different things to you both.

In the absence of a quality code, maintaining and scaling an application becomes extremely difficult. Moreover, if for some reason, the developer working on the software has to leave, the new developer may have to re-invent the wheel if he doesn’t understand the previously written code.

How to ensure code quality while outsourcing software development

Be very clear with the fact that you want a code that is easily maintainable and scalable. You could ask the following things from your offshore software development partner:

List the formatting best practices - Work with your internal team or a development expert to prepare a comprehensive list of code formatting best practices. Any deviation from these standards should not be accepted or approved.

Regular code reviews - Verify whether your outsourcing partner firm carries out regular code reviews internally. The reviews have to be done by both - the developers’ peers and their superiors.

Check for code consistency - Have your in-house technical lead check whether the code is written is clear and consistent. If any inconsistencies are found at any stage, ask for a revised code before it’s too late.

Additionally, your software outsourcing partner must also carry out the unit and functional tests of your app at regular intervals.  These quality assurance best practices are vital for minimizing bugs and code-rewriting efforts later on.

6. Hiring a freelancer and not a full-service company

Hiring a freelancer

Suppose you have hired a few different specialist developers on a freelance basis. You have transformed them into a team and have been constantly invested in the development project.

One day before the launch of the project, one of the developers just vanishes into thin air. You can’t contact him via skype or his phone, you can’t go to his home to check where he has been.

Your entire project becomes a lost cause in the blink of an eye!

Now I know it might seem very unlikely or rare to you but it’s not. So many businesses hire freelance developers to save costs but end up ruining their projects every year. That’s because the unreliability of freelance developers increases the problems of outsourcing software development.

Therefore, no matter how enticing it is to hire freelance developers with lower rates, always keep the consequences in mind while making the decision.

Why you should hire an offshore software development company

Hiring costs are reasonable

Yes, you read it right. Hiring software development companies is a more affordable option even though they have higher hourly rates. That’s because their fee doesn’t just include the development services for the software.

It also includes charges for finding and retaining the best talent, training them, and familiarising them with the project requirements and goals. They also take care of all the admin and project management processes.

Thus, an experienced offshore software development company in India and other cheaper countries can provide you high-quality deliverables at much more reasonable rates.

You don’t need to look for additional service providers

More often than not, a freelance developer is a specialist in one or two core technologies. So if you hire them, you will have to look for more experts to take care of other aspects of the project.

When you hire offshore developers from a software house, it will be a one-stop solution for all your project needs. They have holistic teams with experts in UI/UX, front-end and back-end, testing and QA, etc.

Assured post-development support

Association with an offshore development company is often longer and more professional than with freelance developers. If you hire a software house, you can rest assured of all the post-development support your project needs.

Most software development companies promise assistance with the software launch, its upgrades, and other maintenance concerns.

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The Bottom Line

The most important way to overcome the problems of outsourcing software development is to hire a vendor who has the relevant experience and shares the same vision for your project.

Secondly, don’t just rely on your vendor’s expertise. Scope the project entirely from your end first and list down the deliverables with timelines. Be clear with your preferred project management methods and channels of communication. Always have an in-house technical lead supervise the project for code quality and consistencies.

Ultimately, software outsourcing is about cost-effectiveness. So evaluate the hourly rates of software houses across the globe. Compare the quality of their work, their service offering, and rates to hire the right offshoring partner for your dream project.

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