Change is always difficult: change leads to uncertainty, and uncertainty leads to risk.
And the last thing any IT business wants more of, it’s risk.
Companies turn to outsourcing as a way to deliver projects while reducing costs and resources. But outsourcing comes with its own challenges that can be difficult or downright scary to manage.
Companies that don’t prepare properly can lose control over the direction of their projects, see reduced quality in their products, and face a plethora of hidden costs.
The software development outsourcing industry is constantly growing and changing. New providers come, old providers go, and each one offers their own brand of management. With all this uncertainty, companies need to know how to measure and minimize the risk they’re exposed to from the very beginning.
This post looks at four important factors in mitigating outsourcing risks. Managing these factors at the start will help create a smoother outsourcing experience.
Risk 1: Loss of Control
Nobody knows their business better than you and your employees.
Each day, your team embodies the practices and policies that make your company what it is today. You know what to do, and you know how to do it well. This doesn’t just show in your company’s success, but in how your team collaborates.
When outsourcing, you lose some of your managerial oversight to the outsourcing company. This can be unnerving at first, since it means losing insight into and control of your project. Not only is it no longer being worked on by your employees, but important decisions could be made without your direct oversight.
Naturally this is hard for a lot of companies to adjust to. Problems arise when businesses and providers aren’t working to achieve the same goals. This can jeopardize or even doom a project before it has a chance to get off the ground.
Before handing over control to an outsourced provider, consider what you are and aren’t willing to leave up to the provider. Create a management plan describing how you want the provider to manage the project and collaborate with you on updates. This plan should include:
- Timelines for meetings
- How and when the provider reports progress updates and issues
- Protocols for changes to business and operational goals, especially if either party can’t meet those goals
- Identifying key staff to contact on both sides
This step happens at the start of the project. Trying to negotiate a plan after the project has started will only delay the project and add confusion.
After hiring a provider, consider temporarily placing an employee in their organization. This gives you a direct connection to the provider so you can better understand how they work. It also leaves an open channel of communication so you can receive updates and provide feedback faster.
Risk 2: Compromised Quality
Software development is all about delivering high quality quickly. Your employees know the needs of the business, and more importantly, how it translates into the product.
When your employees commit to quality, the product shines as a result.
When outsourcing, you need to take that same commitment to quality and extend it to a third party. But outsourcing providers don’t have the same experience and insight into your business needs as employees do. This can cause concern for business owners who want to outsource a project, but are afraid of sacrificing quality as a result.
The goal is to find an outsourcing provider who’s just as committed to quality as you are.
When you’re evaluating an outsourcing company, make sure they share the same mindset as you. If they’re not already onboard with your ideals, they should at least respect them.
The best way to evaluate a provider’s commitment is to look at their past work. Sure, a provider can say their work is high quality, but where’s the proof? Talk with at least three of their past or current clients. Past clients are especially important, since they have nothing to lose by telling the truth. Learn what it’s like to work with the provider, the difficulties you might face, and how you might expect the final product to turn out.
If a provider doesn’t provide references, run. You need to know that this is someone you can trust, and without knowing their past work, there’s no baseline of trust to build on.
Risk 3: Hidden Costs
Outsourcing saves money, but if those savings come with hidden costs, then the benefit is completely lost.
Transparency is key here. Hidden fees can come from anywhere, including:
- Hardware and software upgrades
- On-site troubleshooting
- Charges for after-hours services not covered in the contract
Altogether, these charges could push the project far beyond its original budget.
When drafting a contract, make sure to include all of your expected services, and read carefully for any surcharges or extra charges.
Service Level Agreements (SLAs) can drastically reduce the number of surprise costs. SLAs list out the services, guarantees, and maintenance procedures provided by the outsourcing company during and after the project. SLAs answer:
- Whether the overall consulting cost includes new hardware and software
- Whether the provider offers staff training, and how much it costs
- After-hours services offered by the provider, along with their costs
- The cost and availability of on-site visits
Make sure your contract covers all of your needs and expectations to reduce the risk of hidden fees or extra charges. Remember to also specify the length of the consultancy so you don’t keep paying.
Risk 4: Legal Issues
Intellectual Property (IP) is your company’s lifeblood. IP includes anything your company has created, branded, patented, trademarked, or otherwise deemed uniquely yours.
When you work with an outsourcing company, you’re exposing your IP to a third-party. While rare, it’s possible that the company might steal, leak, or mismanage your IP or trade secrets. That’s why it’s important to protect these assets before there’s a chance for abuse.
Before negotiations even begin, have your providers sign a confidentiality agreement promising to safeguard your business secrets. If anything happens to your IP because of their actions, this makes them responsible.
Non-Disclosure Agreement (NDAs) are commonly used with outside consultants. NDAs describe the types of IP the consultant might be exposed to and how they’re expected to treat that information.
A good NDA reduces the risk and lessens the impact of an IP breach.
Don’t hesitate to ask a potential provider “why should I trust you with my IP?” A trustworthy provider can give you an honest answer and sign an NDA. If they don’t, look somewhere else.
Start Assessing Risks Early
The best time to weigh your risks is before the project even begins.
Understanding your challenges at the start will help you build a plan for assessing your outsourcing options. Before you even hire an IT consultant, research the challenges of outsourcing and learn what your company needs to do to survive the process.
The worst thing you can do is get stuck in an outsourced project after an unexpected turn. Don’t leave things up to chance; assess your risks at the start and give your projects the opportunity to thrive.
Once you’ve identified your risks, consider outsourcing to Ukraine. Ukraine has a rich industry of professional, reliable, and experienced software development outsourcing companies.