June 25, 2021


Outsourcing has become a standard practice for companies across all different sectors. Just take your car for example. The glass is manufactured in Portugal, the seats are produced in a factory in china and the software that makes parallel parking a lot less stressful is written in Ukraine. All the components were later taken and put together in a factory in Sweden. Depending on your product there can be a multitude of different outsourcing routes. Managing them is not always easy, since the outsourced production is no longer under your direct control. Therefore you lack insights into how the work is done, if the deadlines will be met and many other answers that are needed to plan ahead.

It’s no surprise that in software development around 20% of the outsourcing relationships fail within the first year. If you take a look at the years after it looks even worse: within 5 year 50% of all outsourcing relationships come to an early end. So here is a little how to outsource, telling you about the do’s and don’ts of outsourcing.

But let’s start with a quick definition of what outsourcing actually is. In software development this basically means hiring a third-party provider to handle certain projects. This can mean developing software that is used in your own company, but can also be software that is used by your customers. Also the size of the outsourced project is really up to you. You can outsource a few lines of code but also entire applications. Only limited by your own imagination and of course your budget. Outsourcing is done by almost all companies to a certain degree, no matter if it’s a startup or an established one. So let’s take a look at the advantages that come with outsourcing, after all there needs to be a reason why everyone does it.

The great thing about the age of digitalization is, that you no longer have to hire the world’s top developers yourself. You can simply outsource a project to them and get the spectacular results you were hoping for. Getting access to top talents and the latest technology from all over the world is a huge advantage of outsourcing. You are no longer limited to rely on the talents in your location but can choose an agency that has accumulated technical expertise by working with a wide variety of clients. Meaning you get a top notch software product without buying all the necessary equipment or even without having your own development team.

Cutting time and cost is the second and probably the main driver for outsourcing. By choosing to outsource you don’t need a long and perhaps costly process of hiring, training and onboarding for your team – you can start right away. For someone who wants their product out asap, this is a perfect fit.

The third big advantage is that instead of getting side tracked by extremely time consuming development projects you can focus on your core business. By cutting the workload for your own tech team, they can shift their full attention towards different projects that might suit their skill level more. The final product quality can also be considerably higher when a project is outsourced, since the agencies working on it often have a wide range of experts for different problems, while you only have your one developer. 

But the grass always seems greener on the other side. While bringing some advantages to the table outsourcing also has down sides. The first one is the information gap. A common problem in economics described in the principal-agent-theory. The dilemma occurs when the agent acts in their own best interest, which might not benefit the principal.

Communication can also become a problem. It happens all the time, before the ink is dry the outsourcing provider is constantly communicating with you. Right after, you don’t hear from them again. A sloppy customer service can be very annoying and frustrating. And even if they keep up communication, language barriers and time zones can delay the process.

Another tricky question is the one concerning privacy. Afterall you expose confidential data about your company to a third party that might not be as trustworthy as they promised. In consequence this can end in stolen algorithms or leaked data. So make sure to write up a waterproof contract.

If you have now decided to outsource parts of your development project keep a few recommendations in mind. Before you start, choose your provider very carefully – spend some time to read reviews and look at different alternatives. If their references sound promising you could launch a small test project with them to evaluate the overall quality of their work.

Now if you’re happy with the result, your real project can be started. Create a clear plan of what you want to get done including the smallest feature. Make it as detailed as possible. If you’re happy with it, share it with the outsourcing provider. Now is the time to eradicate any ambiguity. It’s better to explain yourself 10 times than getting a product you aren’t happy with. In this step you should also respect what is realistically possible. If the provider tells you that some parts of your product won’t work the way you dreamed they would, trust them and make changes accordingly. Also communicate a time table with them and make sure it’s realistic as well. Now make an official document with everything the product should include and give out copies to everyone. You now know what you can expect and the provider knows what is expected of them. Keep in regular contact with them to always be up to date. This will help to build up trust and a healthy relationship and also makes your planning process more realistic.

What else can you do to make sure your software development outsourcing process will become a success? Get Jonny Git, we will provide you with all necessary data so you know at all times what’s going on in the outsourcing team!

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