Risks of Outsourcing | 5 Common Software Outsourcing Risks

Software outsourcing is quickly becoming the go-to option for companies in need of tailor-made software. Outsourcing, after all, is more cost-effective than recruiting a team of in-house developers. However, there are major risks of outsourcing.

At present, it is estimated that between 30% and 50% of outsourced projects fail. Some sources even suggest that a staggering 80% of projects fail. Naturally, this calls into question the benefits of outsourcing in the first place.

Why Does Software Outsourcing Fail?

It might sound simple. However, the primary reason most outsourced software development projects fail is simple. In many cases, businesses make the mistake of outsourcing tailor-made software development projects to the lowest project bidders.

It can seem tempting to outsource to places like India where developers can charge as little as $10 per hour. Typically, though, budget developers overseas will charge budget prices for a reason.

- Budget developers may have poor English language skills which make communication difficult.

- Developers are in high demand all over the world. Developers charging rock-bottom rates will, therefore, usually be fresh graduates or self-taught software engineers will little practical coding experience.

- Even in the best case, a budget developer may have exceptional skills. However, they may lack the discipline to work following a well-defined development process.

Poor Team Leadership Risks of Outsourcing

After hiring budget developers, risks of outsourcing software projects can also stem from developers not being guided by a strong team leader.

Only in rare cases is it possible to outsource development of a tailor-made software project to a single developer. Typically, developers work as teams. Moreover, every team needs to be led by a strong team leader. ⁠— Specifically, someone capable of translating your project goals into tasks they allocate to the right team members.

- If you have no software development experience, you will struggle to project manage development of your app yourself, even with the right team in place.

- Team leaders are responsible for keeping development on track and on budget.

- Risks of offshoring and outsourcing increase exponentially when team leaders who lack necessary leadership oversee projects and/or are completely absent.

Thankfully, poor team leadership risks when outsourcing can be mitigated to a degree.

Experienced team leaders will have a track record of delivering projects on time and on budget. They will also often have communication and leadership specific qualifications. All businesses considering a development team need to do is vet team leaders accordingly.

Protect Your Code and Have Developers Sign an NDA

So far, we’ve looked at risks of outsourcing which typically result from businesses outsourcing projects to the wrong offshore development teams. However, just as many problems can manifest post-production of new pieces of software, as they can during development.

Have you recently outsourced a tailor-made software project successfully? If so, are you sure that the code and any company intellectual property contained in your app is fully protected?

Risks of offshoring include the potential for your intellectual property to be misused or appropriated without your consent by a third party. This is thanks to often poor adherence to copyright law and patent law in some non-Western countries.

- When outsourcing software development, always have developers sign an NDA which explicitly includes protections for the code used in your app.

- Wherever possible, put checks in place to make sure that the codebase used in your project hasn’t been appropriated from an existing application already on the market.

- Always consider outsourcing to countries like Romania where things like copyright law and patent law are more rigorously enforced. (In comparison to places like India and some parts of Asia.)

Time Zone and Culture Difference Risks of Outsourcing

Silicon Valley in California is widely appreciated as being at the forefront of modern tech trends. This is important to keep in mind when outsourcing software development overseas. It won’t always be the case, after all, that developers you outsource to are up to speed with the latest tech trends.

As well as being behind on current tech trends, overseas developers will often be located in different time zones. This can make communication difficult. Moreover, as anyone familiar with doing business in Asia will be aware, cultural differences can also impede successful communication.

- In some parts of the world, it is customary to ‘save face.’ Business associates and software developers can, therefore, be reluctant to acknowledge or make known problems which might arise during the development of a new product.

- Saving face and other cultural differences can result in developers pitching to work on a project, even if they lack adequate skills necessary to bring a project to completion.

- Data privacy and security laws are widely different in different geographic areas. It is, therefore, essential that businesses only outsource to developers who know what security standards need to be incorporated in an application.

Outsourcing Risks Posed by Unrealistic Expectations

Before you commit to outsourcing development of a new software product, you need to understand whether or not your overall expectations are realistically achievable.

When outsourcing, cultural and communication difficulties like saving face, can result in development teams agreeing to take on any project. In reality, some may be impossible to deliver. (Regardless of how competent a developer or team leader is.)

In 2018, surveys found that having unrealistic project expectations is the leading cause of failure when outsourcing software development. It can, therefore, be a good idea to consult with a local developer before outsourcing a project. This will ensure that when you do outsource, the end product you are expecting will be more likely to be delivered.