Top 7 Risks Of Outsourcing And Best Practices To Avoid Them

More than 50% of companies are the reason for ending outsourcing partnerships. These issues are far from the only risks that could befall your outsourced software project. We’ll help you get started with your risk assessment by covering the top 7 risks we see time and time again when teams outsource software development. Manage them and you’ll be well on your way to protecting your project and ensuring successful software delivery.

Risks of outsourcing

Lack of control

Dealing with external suppliers is probably nothing new to you. But handing over a check to an unknown seller can be unsettling. When outsourcing software development, it is important to consider the risks associated with not controlling the day-to-day management of the project.

Communication problems

A recent study showed that nearly 90% of businesses consider communication to be one of the key challenges in the outsourcing process. Some communication problems are inherent when working with distributed teams, but the root of the problem often runs deeper. Differences in national and organizational culture and language barriers may be at play.

Poor quality of software and services

One significant risk of outsourcing for many companies is the risk of receiving a poor end product. The problem is that you don’t know 100% what you’re going to get when you work with a new supplier. Any goal to cut costs or save development time could be thwarted if you have to start over with a new company.

Lack of domain knowledge

A shared understanding between the client and the software team is essential if you want to achieve high quality software. It is important that the client and the service provider have adequate knowledge of the area and industry. It is important to understand that there is a risk of insufficient domain knowledge on the part of both the client and the service provider. On the client side, you may become dependent on an external supplier. If you outsource many projects or even all aspects of a single project, you may start to lose your expertise and core competencies over time.

Unexpected costs

It is often expected that using an outsourcing model for development will lead to cost reductions. Vendors can offer economies of scale with a fully staffed development team. Some companies may also offer lower labor rates, especially if you are looking overseas.

Lack of experience with remote teams

We live in a time where remote work is becoming more and more common. Many businesses are completely remote. Remote teams help companies tap into a larger talent pool, allowing everyone to work where and how they are most productive.

Breach of security and protection of IP

You must be aware of the risks associated with the supplier’s mishandling of your data or IP. Whenever you share sensitive information about your IT systems, you are inherently reducing security. This is often a risk that must be taken, but it’s important to think through the consequences before dealing with vendors. Ultimately, you must be willing to hold any outsourcing vendors accountable for the security of your data and IP.

Conclusion

Outsourcing services can prove to be a very cost-effective way to achieve your goals. However, there should be a detailed risk management plan. Risks should be recognized and mitigated to protect your business and ensure successful project delivery.