The Top 7 Problems of Outsourcing Software Development

Why Not Outsource Software Development? ??‍♂️

Usually, you can find many materials praising numerous reasons to opt for IT outsourcing, such as access to a wider pool of tech specialists and the considerable financial efficiency associated with this business strategy. 

Nevertheless, there exist certain software outsourcing challenges that raise concerns among company executives and hinder the wider acceptance of IT outsourcing in the high-tech industry.

In this article, we’ll consider the most popular problems with software outsourcing services and offer some solutions to help you overcome these issues while fully enjoying the benefits of IT outsourcing.

Many IT outsourcing partnerships fall short of expectations due to several key risks and challenges. Poor vendor evaluation is a major issue, with 96% of firms failing to meet client expectations. Communication problems, responsible for 17% of project failures, further complicate these relationships.

?? Quality control issues also play a significant role, causing 22% of partnerships to end within two years and 48% within five years. Additionally, nearly half of companies terminate deals due to performance issues, highlighting the need for clear expectations and consistent oversight.

Despite all IT outsourcing problems, it remains a vital strategy for American companies, allowing them to hire remote software development teams, reduce workforce costs and overhead, keep their projects financially sustainable, and gain access to technological expertise.

The major types of IT outsourcing include:

• IT Staff Augmentation
• Dedicated IT Development Team
• Project Consulting
• Managed Services.

Here’s a table presenting the most important and widespread challenges of software development outsourcing:

Challenge	Description
Faulty Vendor Evaluation and Selection	Inadequate assessment of vendors leading to suboptimal partnerships.
Unclear Delivery Expectations	Ambiguous or poorly defined project goals and deliverables.
Cost Underestimation	Failure to accurately predict the total costs involved in the project.
Risk Management	Ineffective strategies to identify and mitigate potential risks.
Quality Control Issues	Problems in maintaining consistent quality standards throughout the project.
Security Breaches and IP Risks	Vulnerabilities leading to unauthorized access and intellectual property threats.
Loss of Control	Reduced oversight and control over the outsourced project.
Time Zone Disparities	Challenges in coordination and communication due to different time zones.
Compliance Issues	Difficulties in adhering to regulatory and compliance requirements.

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Common Challenges and Solutions in Software Outsourcing

Outsourcing software development can offer many advantages, but it also comes with its own set of challenges. Understanding how to choose the best outsourcing strategy for your business and how to address these organic challenges is key to a successful partnership. 

Here are some common challenges in software outsourcing and ways to overcome them:

#1. Choosing a Trustworthy Software Development Partner ??

⚠️ Challenge: Selecting a partner based solely on cost.

The major concerns about software development outsourcing include selecting a trustworthy software development partner. Many companies make the mistake of choosing the right outsourcing company based solely on cost, which can lead to subpar results and project failures.

➡️ Solution: Comprehensive research including experience, customer feedback, and technology stack.

To avoid this pitfall, it’s crucial to conduct comprehensive research. Look into the potential partner’s experience, customer feedback, and the technologies they use. 

Platforms like Clutch, GoodFirms, Google Business Profile, and many others can provide valuable insights into their reliability. A thorough understanding of their expertise and past performance can guide you in making an informed decision.

Tips: Visit company headquarters, observe communication and work environment.

If possible, visit the company’s headquarters to see their operations firsthand. Observe their communication practices and work environment. This can help you gauge their professionalism and how well they might align with your project needs.

#2. Cultural and Time Zone Differences ?⏰

⚠️ Challenge: Misalignment in work habits and schedules.

Cultural and time zone differences are common problems of outsourcing software development. Misalignment in work habits, communication styles, and schedules can lead to misunderstandings and delays.

➡️ Solution: Choose a partner with minimal time zone differences or overlapping hours. To mitigate these issues, choose a partner with minimal time zone differences or ensure overlapping working hours. 

This can facilitate smoother communication and coordination. For companies in the United States, this might mean using nearshore custom software development services by partnering with IT service firms from LATAM countries such as Brazil, Mexico, Argentina, and others.

Tips: Foster understanding and respect for cultural differences.

Fostering an understanding and respect for cultural differences is also essential. Encourage open communication about cultural practices and create an inclusive environment where all team members feel respected and valued.

#3. Communication Barriers ??

⚠️ Challenge: Differences in time zones, language, and work habits

Communication barriers, such as differences in time zones, language, and work habits, are significant problems with IT outsourcing and can hinder effective collaboration and lead to project delays.

➡️ Solution: Establish clear communication channels and regular meetings.

To overcome these barriers, establish clear communication channels from the outset. Regular meetings and updates are crucial to keep everyone on the same page and ensure smooth progress.

Tips: Use collaboration tools and choose partners with strong English proficiency.

Utilize collaboration tools like Slack, Zoom, or Microsoft Teams to facilitate communication. Additionally, selecting partners with strong English proficiency can significantly reduce misunderstandings and improve overall communication efficiency.

#4. Unclear Objectives and Poor Product Specifications ?❓

⚠️ Challenge: Vague project goals and specifications can lead to confusion and misaligned expectations between you and your outsourcing partner.

➡️ Solution: Clearly define project requirements and objectives from the start. This helps ensure everyone is on the same page and working towards the same goals. Regular check-ins can help ensure that all parties are aligned and that the project stays on track.

It’s crucial to identify specific technologies or tech stacks required for the project, such as React.js for web-based frontend development in combination with C# .NET architecture for the backend system. The availability of specialists and their appraisal of the work required will also affect timelines and overall project planning.

Tips: Discuss your ideas thoroughly with the development team and prepare detailed project specifications. 

#5. Hidden Costs or Fees ??

⚠️ Challenge: Additional costs not initially accounted for can blow your budget and lead to project delays. This is one of the common IT outsourcing problems.

➡️ Solution: Conduct a comprehensive cost analysis and clearly define the project scope to avoid unexpected expenses. 

It’s also necessary to use a shared work management platform that keeps all assignments and time tracking under control. For example, TATEEDA maintains its custom product for team management that ensures project transparency and helps clients avoid overspending or confusion.

Tips: Negotiate fixed-price contracts to keep costs predictable and track expenses regularly. This can help you identify any potential cost overruns early and adjust accordingly.

#6. Project Management Gaps ?️?

⚠️ Challenge: Lack of communication, unbalanced expectations, and undefined procedures can lead to project delays and frustrations. These are significant IT outsourcing problems.

➡️ Solution: Use agile or scrum methodologies and central project management tools to keep the project organized and on track. 

Engaging a skilled project manager, who can track timelines, allocate workloads, prioritize tasks, coach the team, and manage other activities, can be highly beneficial. Such specialists can be sourced from IT outstaffing service vendors.

Tips: Organize short-term goals and long-term plans effectively. Regular stand-up meetings and sprint reviews can help keep the team aligned and focused on delivering incremental progress.

#7. Security Risks and Concerns ??️

⚠️ Challenge: Potential exposure of sensitive data is a significant concern when outsourcing software development.

➡️ Solution: Carefully vet your outsourcing partners and implement strict security protocols to protect your data.

Engaging a DevOps specialist can significantly enhance your control over the security and efficiency of outsourced projects. DevOps can implement and manage continuous integration/continuous deployment (CI/CD) pipelines, automate security checks, and ensure consistent application of security policies.

Tips: Use non-disclosure agreements (NDAs), encryption, access controls, and regular security audits to ensure your data remains secure. Regularly update your security measures to address new threats and vulnerabilities. 

Practical measures include:

• Regularly resetting passwords and using multi-factor authentication (MFA).
• Removing or blocking accounts and credentials of former employees immediately.
• Monitoring and logging all access to sensitive data to detect and respond to potential security breaches quickly.
• Ensuring that only authorized personnel have access to critical systems and data.

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Best Practices for Overcoming Outsourcing Challenges

Successfully navigating the challenges of outsourcing requires adopting best practices that ensure smooth collaboration, such as clear communication, shared expectations, and alignment of methods, as well as effective project management. Here are some strategies to help you overcome common outsourcing issues:

Invest in Software Management Tools ??️

Using the right tools can significantly enhance communication, collaboration, and efficiency in outsourced projects. Here are some essential tools to consider:

• Communication Tools: Platforms like Slack, Google Hangouts, and MS Teams facilitate real-time communication, allowing teams in different time zones (e.g., a company’s leadership in the U.S. and their outsourced engineering team in Ukraine) to stay connected through chat, video calls, and collaborative workspaces.
• Source Control Tools: Tools like Github, Bitbucket, and AWS CodeCommit help manage code repositories, track changes, and collaborate on code efficiently, ensuring that multiple developers can work on different parts of the project simultaneously.
• Task Management Tools: Tools such as Asana and Trello allow you to organize tasks, set deadlines, and monitor progress. These platforms ensure that everyone is on the same page, with real-time updates and notifications that keep projects on track.

Start with Small-Scale Projects ?️?

Starting small can be a strategic way to build a successful outsourcing relationship. Here’s how you can approach it:

• Begin with Smaller Tasks: Start by outsourcing less critical tasks, such as developing a small feature or a minor module of your application. This helps build trust and allows you to evaluate the vendor’s work quality and adherence to deadlines without significant risk.
• Gradually Increase Scope: As you gain confidence in the outsourcing partner’s capabilities, gradually increase the scope and complexity of the projects you outsource, such as integrating more complex functionalities or handling larger parts of the project.

Implement Additional Methods for Success ??

To further enhance your outsourcing strategy, consider these additional methods:

• Regular Performance Reviews: Schedule regular performance reviews to assess progress, provide feedback, and address any issues promptly. For example, conduct bi-weekly meetings to review project milestones, discuss any roadblocks, and realign priorities. This ensures continuous improvement and alignment with project goals.
• Clear Documentation: Maintain clear and detailed documentation for all project requirements, processes, and changes. For instance, use a shared document repository where all project-related documents are stored and updated regularly. This minimizes misunderstandings and keeps everyone on the same page.
• Cultural Sensitivity Training: Offer cultural sensitivity training to your team to foster better understanding and collaboration with outsourced partners from different cultural backgrounds. For example, training sessions can help your team understand communication styles, holidays, and work ethics specific to regions like the U.S., LATAM nations, and Ukraine.
• Risk Management Plans: Develop comprehensive risk-management plans that identify potential bottlenecks, mitigation strategies, and contingency plans. For instance, identify risks like potential delivery delays, and plan for alternatives such as having backup resources or adjusting timelines proactively. This proactive approach helps manage uncertainties effectively.

By following these best practices, you can overcome common outsourcing challenges and build strong, successful partnerships:

Challenge	Solution	Methods
Unclear Objectives	Clearly define product specifications and objectives	Identify specific technologies and tech stacks, assess the availability of specialists, and appraise the work required.
Hidden Costs	Conduct a comprehensive cost analysis	Use a shared work management platform (e.g., TATEEDA’s custom product) to track assignments and expenses.
Project Management Issues	Use agile or scrum methodologies and central project management tools	Engage a skilled project manager for tracking timelines, allocating workloads, prioritizing tasks, and team coaching.
Security Concerns	Vet outsourcing partners and implement strict security protocols	Use NDAs, encryption, access controls, regular security audits, and DevOps practices for CI/CD pipelines and security checks.
Additional Methods for Success	Implement regular performance reviews, clear documentation, cultural sensitivity training, and risk management plans	Conduct bi-weekly performance reviews, maintain shared document repositories, offer cultural sensitivity training, and develop comprehensive risk management plans.

Case Studies and Examples of Overcoming Software Outsourcing Challenges

Real-world examples of challenges in outsourcing software development and solutions provide valuable insights into the practical application of outsourcing strategies. Here’s a detailed case study showcasing the successful outsourcing partnership between VROM Automation and TATEEDA GLOBAL.

Client: VROM Automation

VROM Automation aimed to modernize its outdated in-office warehouse management system by transitioning to a flexible web-based platform. The goal was to streamline inventory data flow processes through seamless eBay integration. 

The company specializes in trading electronic components for custom IoT solutions, connected device networks, and industrial automation.

Challenges:

• Integrating the web platform with eBay accounts via API to synchronize sales and warehouse operations.
• Migrating a large volume of outdated MS Access code and architecture.
• Ensuring the correct functionality of transferred data through meticulous testing and verification.
• Maintaining uniformity in styles and appearance of the interface post-migration.
• Managing timezone differences as team members worked from remote locations, including Poland, Ukraine, and LATAM countries.

Solution and Outcomes: 

VROM Automation engaged TATEEDA GLOBAL to develop a custom web-based warehouse management platform with eBay integration and other essential business functionalities. 

To manage the timezone challenges, we employed several approaches: ✅ Consecutive Task Execution: Specialists in different timezones worked in a follow-the-sun model, allowing one team to continue tasks while another rested. ✅ Real-Time Client Contact: Our U.S.-based CTO and project managers maintained real-time communication with the client, ensuring seamless coordination and immediate issue resolution.

Our team, comprising designers, .NET, and Angular web developers, developed a comprehensive solution offering extensive e-commerce inventory and warehouse management capabilities. 

The project involved migrating functionality from a desktop application built on MS Access to facilitate inventory data management and operations within VROM’s eBay listings/lots.

We successfully integrated the platform with eBay accounts, synchronized sales and warehouse operations, adapted the database, rewrote SQL queries, and ensured a coherent data structure. 

Additionally, we introduced a new UI library and migrated from ng-zorro to devextreme, enhancing the user interface.

Outcome	Description
Enhanced Visibility	Improved transparency in inventory processes.
Streamlined Operations	Faster handling of new arrivals and sales, reducing delays.
Cost Efficiency	The remote team from nearshore and offshore locations helped reduce staff costs by approximately 20-25% compared to hiring solely in the U.S.

Conclusion: Avoiding Problems with TATEEDA

Recapping the key software outsourcing challenges discussed in this article, it’s clear that outsourcing can present several hurdles, including unclear objectives, hidden costs, project management issues, and security concerns. 

These challenges of software outsourcing can be effectively managed by adopting best practices such as investing in software management tools, starting with small-scale projects, implementing regular performance reviews, maintaining clear documentation, and developing comprehensive risk management plans. 

By understanding these challenges in outsourcing software development, you can navigate them successfully.

At TATEEDA, we know how to cope with outsourcing IT system development issues and challenges. We are ready to assemble nearshore/offshore teams on demand and will do everything necessary to ensure client comfort and efficient project execution. 

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