25 Jul 2019
How to avoid risks when outsourcing software development?


How to avoid risks when Offshore outsourcing software development?

Cost reduction is usually among the top reasons that lead business organizations to outsource their software development project to offshore companies. However, before embarking on the outsourcing endeavor, companies may find that there are a number of potential risks that could affect the overall success of such projects. Thus, it’s important that companies identify and have a plan to address or reduce those risks before launching their outsourcing partnership.

In this article, we examine some of the most common pitfalls of offshore software development and how to address each one in advance, in order for organizations to achieve a successful cooperation outsourcing partnership with offshore software development company.

Development Costs

As mentioned previously, low development cost is among the main reasons that make business organizations outsource their development projects to offshore software outsourcing companies. However, it could be very easy for organizations to go over budget without taking into account all of costs factors of their project. For example, it’s highly recommended that companies consider the additional expenses for travel, and other management into the overall budget.

More importantly, it’s critical to choose the correct outsourcing engagement model that fits with your company’s project type and specific business requirements. Generally speaking, when it comes to offshore software development, there are a number of cooperation models and the most popular ones among them are: fixed-cost model, time and material model, and dedicated team model. Let’s consider each model:

  • Fixed-cost: under this model, budget, project timelines and milestones, as well as scope of works are all pre-defined in advance, with no further changes allowed. This model is more cost-effective but less flexible compared to others, any further changes after project starts will be considered as separate works with budget approval.
  • Time and materials: this engagement model is more suitable for organizations that require the flexibility to incorporate changes in the later stages of the development project. The overall development cost would be calculated based on the tasks, time and resources spent during the entire project. Thus, to avoid the unexpected increase in the final budget, it’s best that organizations define the budget limit in advance, before starting the project.
  • Dedicated development team: this engagement model is most suitable for organizations that looking to outsource their large-scale development project in long-term timeframe. By hiring dedicated team of software developers, business organizations will have full control of the dedicated team and this allows them to develop a growing knowledge base of the organization’s core products, thus can operate as an extension and work alongside the in-house team.

Additionally, this model will be an ideal fit for projects that need long-term support, maintenance, and progressive development work that are expected to be flexible and easily scale.

Thoroughly evaluating the project requirements and scope will allow organizations to fully understand, and choose the best suitable cooperation model for their development projects, ensuring project stays within budget and development expenses are all accounted for.


Even if the project stays within budget, it’s also equally important that the final product meets quality standards and function well as intended. The outsourcing team must perform their work with a high quality standard without requiring constant supervision from customer companies.

Therefore, it’s important that organizations carefully choose a reliable software development outsourcing company that is experienced and can help solve all the technical challenges when it comes to their development project. This can be done by asking the potential outsourcing partner about their past projects, case studies, and previous works done and find out if they have the worked on similar projects or in your industry. This ensure that product quality will not be compromised and the final product itself will perform well.

Objectives and timelines

For many business organizations such as startups or newly established companies, being able to quickly launch their product into market would provide them with a competitive advantage, allowing them to capturing a larger market-share. Thus, the offshore outsourcing partner should clearly understand the objectives and timelines of project, making sure they work closely with customers and get all the business requirements right the first time around. For example, many cross-platform application development project these days require the final app to be responsive and renders perfectly well across a wide range of devices, including a number of outdated Android devices with different screen sizes. Understanding this allows development team to deliver a user-friendly and easy-to-navigate UI/UX to the target audiences.

In order to achieve this, both customers and the offshore outsourcing partner need to work closely together in order to identify the specific goals and detailed requirements. A well-structured plan, together with a product requirement document (PRD) with clearly identified objectives and development timeline will allow for a straightforward development, meeting the final goals.

Project management

Project management is a crucial element in ensuring the success of development project. However, managing a remote, offshore team could be challenging. By combining a well-structured process with some advanced communication tools, organizations can establish an effective management methodology in order to eliminate potential risks in offshore software development.

For starter, customer companies and development team need to have frequent communication to keep both on the same page of the project progress. Communication tools for audio/video conference such as Zoom and Skype can be used for this purpose. Other than that, organizations should also look for offshore companies that use Agile/Scrum for their management methodology.

Read more about: using Agile methodology in project management.

Through this, organizations can effectively manage, and monitor the works of multifunctional and remote teams, providing them with necessary feedbacks for improvement and/or enhancement throughout the process.  Consider the geographical distance and time-zone difference, Customer Company should regularly conduct online meeting with the development team (at the minimum weekly) or making on-site visits to meet with the team before beginning the project. This helps avoid misunderstandings and provides a smooth coordination during the entire project.

Data Security and Intellectual Property

One of the main concerns when business organizations hire an offshore software development company is about their handling of sensitive data (such as: intellectual property and patents, personal information including payment information, etc.). To avoid running into such risks and ensure security standards, it’s in the best interest of bother parties to sign NDAs (Non-disclosure agreement) and security protocols before starting the project. Furthermore, a well written-contract covering all the aspects of intellectual property hand-over should also be considered before software outsourcing takes place.


To increase the chance of success with offshore software development, companies should be aware of all the possible pitfalls in order to avoid or eliminate them. This way, organizations will be able to build a long-term and reliable partnership, achieving the maximum benefits from outsourcing.

Overall, a clearly defined project goals, together with an efficient management strategy and frequent communications are key to a successful software development project.


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