Technology August 26, 2020 Last updated August 26th, 2020 1,824 Reads share

Offshore Software Development: Top Risks and How to Mitigate Them

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Many companies worldwide choose to outsource their software development to other countries, as it’s a much more cost-effective option. Offshore software development opens brands many attractive opportunities and undeniable benefits like cost-effectiveness, faster time-to-market, focusing on their key business goals, etc. However, before setting a partnership with an overseas software development house, you, as a client, should be aware of the top risks of such a decision and how to mitigate them. In this article, we provide an ultimate guide that will help you apply a low-risk approach to your software project.

Data Privacy and Security Risks

In today’s digital world, many businesses deal with sensitive customer information like user names, credit card numbers, email addresses, etc. Thus, the security question should be your top priority when choosing an offshore service provider. Pay particular attention to what policies and security rules your project requires and check whether a specific software development team claims following these regulations on its corporate website.

Also, it’s critical to sign security protocols and non-disclosure agreements before sealing the partnership. These essential yet straightforward measures will help protect your company’s data from possible infringement.

Hidden Costs Risks

In general, offshore software development is a cost-effective solution that offers brands many advantages. However, you should also be aware of the possible extra-costs that may arise during the development process in case of unexpected project adjustments. They are commonly known as “hidden costs.” Mostly, software service providers are aware of them in advance but may not inform you about them to not lose your company as a potential client.

That’s why it’s essential to initiate a discussion about hidden costs before signing the agreement. It allows you to estimate all the implicit and explicit costs more precisely and manage your budget more effectively.

Communication Risks

Be sure your vendor can offer you a well-set communication process. You might be surprised to hear that communication is not only the key to successful project implementation but also one of the top risks in offshore software development. The English language has become a gold standard in IT business communication. Companies across the globe use it as a primary means of setting understanding between the clients and vendors.

Although this language is an essential requirement for efficient collaboration between companies, many offshore teams can’t fluently speak or write in English. It may be caused by the inefficient level of education in countries that have become popular destinations for offshore software development. It may create additional obstacles in the process. So, before signing a contract, it’s advisable to set a call with the offshore company’s representative. It will help you evaluate the English proficiency level of a key contact person who’ll communicate with you over the development process.

Organizational Structure Risks

While we can see a more flat and independent workplace structure in the US today, it still is hierarchical in many other countries. Commonly, a hierarchical system means less creativity, more control, and fewer new views and ideas. It doesn’t necessarily mean that the overseas vendor you’ve chosen works according to the same model or can’t offer you innovative solutions.

However, it’s recommended to learn more about the organizational structure of this company. If you’re looking to build ultra-innovative solutions, it likely would be a better option to choose the company that works on a more independent basis, implying that every teammate can fluently share project-related expert opinions and ideas. It allows your project to absorb more valuable expert insights, take more risks into account, look at the specific issue from different eagles of view, and deliver a more successful end-product.

Government Regulation Risks

Many companies often overlook this type of risk, so be sure you do not. Even though all of us live in a highly globalized world, some things still differ significantly in many countries, such as laws applicable to intellectual property and data protection. When outsourcing your software project to an offshore team, you must be ready to meet that particular country’s IP and data security laws.

Before setting the partnership, it’s highly recommended to conduct due diligence research of the laws that may affect your project somehow. Make sure that our outsourcing partner follows all the government regulations and provides full transparency of the process.

Service Delivery Risks

An offshore software development team may fail to deliver a project on time with even the best intentions. It may happen due to a large number of reasons. However, the most popular of them are ineffective or old-fashioned project management models. So, before choosing your offshore outsourcing partner, try to clarify what methodologies they use when working with clients. Today’s most effective and well-known teamwork models include Scrum, Waterfall, Feature-Driven Development, Agile, Extreme Programming, and Lean. Is your vendor using one of them?

Another reason impacting the delivery time is related to the team’s insufficient expertise and domain knowledge. Software developers can be real masters in particular programming languages, technologies, and industries. However, when it comes to something more specific (e.g., a narrow niche or rarely used technology), they may need more time to complete the project.

Thus, it’s better to choose the team that has already experience with similar projects in the same industry. You can find out more about the software developer’s expertise and domain knowledge in a portfolio and customer testimonials. These two sources usually provide enough information to decide whether this service provider suits your project.

Offshore Development Risk Management

When considering whether offshore software development is the best option for you, it’s crucial to consider all of the risks mentioned above. Try to weigh the advantages and possible risks of offshore software development models, analyze them thoroughly, and define if you’re ready to accept them. We also recommend setting key goals, perspectives, and expectations of your software project. It will help you see the overall picture of your business and its genuine needs more clearly and choose an appropriate technology partner.

Keep also in mind that effective communication, seamless collaboration on the project, and client-vendor mutual understanding are key to project success. Don’t forget about the legal side of a process. Ensure your outsourcing partner complies with all government and data protection regulations to secure your customer and corporate data from possible infringement.

Hopefully, this brief overview of the offshore software development risks will help you find a reliable outsourcing partner who can confidently guide you throughout all the industry challenges, help you avoid plenty of pitfalls, and enter the market with an award-winning software product addressing your customer needs and business goals.

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Dana Kachan

Dana Kachan

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