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Top risks of Software Outsourcing and How to mitigate them

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The conventional justifications for outsourcing offshore software development are also evolving over time. A few years ago, businesses mostly selected software outsourcing to decrease the cost of software development. However, as the globe becomes more open, the factors driving companies to outsource change.

As someone who has never outsourced before, you may be concerned that remote collaboration would cost you too much time and money. These concerns are understandable when the development team has yet to gain your confidence. Although it is impossible to eliminate all hazards associated with outsourcing, the majority of them are easily mitigated.

This post will highlight the top dangers associated with software outsourcing and how to minimize them.

Why software outsourcing?

Outsourcing is similar to task delegation. Companies need it since certain jobs have a high learning curve and, if not completed correctly, may result in a lot of trouble for their company. And, if the current in-house team is already overburdened, recruiting specialists in the area is both costly and time-consuming.

IT outsourcing allows companies to concentrate on the key components and procedures that they excel in. Concentrate on your abilities and delegate the rest. However, like with any other choice in our world, outsourcing software development has dangers!

However, in the vast majority of instances, stakeholders believe that outsourcing is in their best interests, with 78 percent of companies seeing their outsourcing partnerships favorably.

So why software outsourcing is risky when there are a lot of benefits? Well, everything has its limitation, there will be some problems. The next part will tell you the top risks.

Unrealistic expectations

It is not unreasonable to anticipate outstanding results. But don’t be a daydreamer. Your job should be done in tandem with your abilities and resources.

For example, a guy told an IT agency that he wanted to change the world. He aims to create a better version of Facebook’s social media platform. And he has a budget of $1000.

So, see what occurred there – this is implausible. If someone agrees to create this innovative software for $1,000, catastrophe is written all over it!

Unrealistic expectations are a major impediment to software development outsourcing success. We are often requested as software businesses to provide time and cost estimates without any previous discussion or assessment. In such a scenario, we have no clue what the whole image is.

You can’t expect an architect to tell you how much your home will cost unless you give him precise requirements, can you? So, why should you have the same expectations of a software development firm?

As I previously said, there is always someone who would nod in agreement to a $1,000 Facebook app creation. And it is here that you take a risk, even before your project begins.

If your budget does not allow for all of the features you want, split it into stages. This will save your software development expenses while also ensuring that your outsourcing runs smoothly. You can go through this process to balance it: 

  • Make a thorough list of all the features you want to include in your software program.
  • Please share this with prospective software suppliers.
  • Allow them to contact you with any questions or concerns they may have (I’m sure a competent software company will have many).
  • Sit down with them and go through every detail of this project with them, leaving no room for misunderstanding.
  • Proceed with the development after you and your partner have reached an agreement on what to accomplish.

Working with a comprehensive software outsourcing company will help you reduce the risk and better define the goal. A professional team will handle difficult problems and provide the best solution for your product, enabling you to concentrate on strategy, company development, and user growth without worry.

Communication and management


Even if you cope with the expectations and begin working, there will be more issues. Projects for major brands may also fail if the project lacks pace. Poor communication and missed deadlines may stymie a project to the point that it is no longer useful or relevant.

You expect a project manager to handle this when you outsource software development. Your project manager should be your go-to person for any and all issues. It is the project manager’s duty to provide the team precise instructions. They are in charge of assigning tasks and resources, monitoring overall project progress, and disseminating pertinent information to customers.

Modern and intuitive project managers will offer frequent real-time updates on the project’s status. The most essential qualities of a successful project manager are leadership, communication, and technical competence. A project manager is the project’s skeleton. He or she is essential to the project’s success or failure. Poor leadership and communication may have a negative impact on outsourcing.

To mitigate this problem, you should:

  • Understand your team. When it comes to trust and communication, a small team offers many benefits. When your software business is tiny, you have direct one-on-one interaction with CXOs such as the CEO or CTO.
  • Hold frequent meetings to keep track of the project’s development. Make sure that your selected communication methods are functional and not a nuisance with needless automatic interruptions in the world of iterative development, multinational teams, and various time zones.
  • If your project is split into milestones, demand will be updated after each one. Binaryfolks offers video updates once each milestone is completed so that the customer may witness firsthand what has been created and contact us if they have any concerns.

Moreover, you also need to ascertain that the IT services provider has a well-defined requirements collecting process in place and employs experienced business analysts. By ensuring this, the next problem will be less serious. 

Quality of Software

Everything revolves on the quality of your program. Everything you’ve worked so hard for is the software’s quality. In the event of a software malfunction, it may have a major effect on your company, beginning with a delay in project launch since engineers will need to go back and work on your software to repair those problems. If the flaws are found after the product has been released, you may suffer a significant damage to your image and may not survive long in the market.

To avoid this issue, you should: 

  • Test extensively and early. This will aid in the detection of bugs and make them simpler to deal with. Testing towards the end of the process and finding problems implies having to redo a large portion of your work as well as any future processes that rely on it. Bugs may appear at any point, but frequent testing makes it more cost-effective to address them sooner rather than later.
  • Conduct a comprehensive code review to ensure that it has quality code in place. The code must be straightforward and uncomplicated.

Unforeseen expenses

When you outsource for the first time, it’s normal to be concerned about unforeseen expenses that may emerge throughout the development process. Although most costs are obvious at the start of the collaboration, others may be concealed from your view.

Three stages to reduce the unforeseen expenses:

  • Before you begin working together, make sure you have a clear set of expectations (alternatively, organize a requirements gathering workshop). This will assist you in defining the scope of work and reducing the possibility of unforeseen expenses.
  • Learn about the price models provided by the supplier. Different businesses may have different ideas about fixed and non-fixed pricing contracts. Select the engagement model that is most suited to your project.
  • Sign a Service Level Agreement (SLA) outlining the services and prices offered by the web development outsourcing firm. Check for any hidden expenses, such as integrations, hosting, on-site visits, working overtime, and purchasing the required plug-ins/hardware/software.

More than ever, you should have a backup plan for this before signing the contract. Working with a consultant of the team carefully is also a good idea to measure and better deal with this.

Ever-changing requirement spec

The issue arises when development is proceeding apace. Customers, on the other hand, were wondering whether they could possibly implement a whole new authorization access control and discard the one that had previously been established. It’s not working for us!

There are two issues with this: First and foremost, you spent a significant amount of money for a critical feature that you want to totally demolish. And you’ll have to spend a lot more to redevelop it. Second, this will substantially lengthen the development time.

Keep in mind that your software engineers are not Superman! They just have two hands, and that is all they have to offer you.

The risks of altering software requirements are that you will go back and forth a lot, which will slow down the whole process. Estimates, both in terms of cost and time, will skyrocket, and the project’s chances of success will begin to dwindle.

The most useful solution for this are: 

  • Conduct market research on the characteristics you need for your application. Examine which characteristics are needed and which are not.
  • Before deciding on the main features, make sure you discuss the whole user path and user engagement with your software provider.
  • Create an MVP. Run it by your users.


Most outsourcing risks may be mitigated with adequate planning. Following the suggestions above may help you save a lot of time and money on software outsourcing.

Trusting an external team with the right skill set to develop a high-value product for consumers has great potential to pay dividends. It is now simpler than ever to locate third-party experts ready to work on a project-by-project basis — and every business should take advantage of this sooner rather than later.