Outsourcing IT services has long been a winning strategy for various companies.
Hiring experienced developers or tech specialists for a project having a short deadline or planning for a cost-effective way to build a solution, holds a lot of value.
As per a survey, 90% of US companies consider outsourcing which is crucial for their growth.
78% of startup and small companies feel that outsourcing is something giving them a competitive edge in the IT industry.
Despite all this, there are many companies and entrepreneurs who are still afraid to work with offshore companies.
This may be because they have heard a few stories about someone's bad experience of collaborating with an unreliable company.
The key to this is to mitigate outsourcing risk by careful selection of an offshore partner and a prior detailed discussion of every milestone of the project.
Risks and Mitigation Strategies
Risk assessment and mitigation is successful with the help of solid preparation and planning.
If you know how to navigate the challenges, your outsourcing partner becomes an asset.
Here are must-follow risk evaluation and mitigation strategies.
1) Deciding What to Outsource
Deciding what to outsource is an initial challenge. Whether you are planning to outsource the whole project or specific tasks like design, development, testing, it requires serious attention.
Solution
In order to mitigate this challenge, you have to decide what the expertise of your in-house team is and what you need to outsource for a particular project.
If you are doing it for the very first time, you are advised to outsource a part of the complete project.
Keep the critical part in-house and outsource the rest to the remote developers.
If you feel the outsourcing partner has exceptional skills that can make the project more fruitful, then you should consider delivering the complete project.
2) Trust Issues
Trust is another major issue faced by most of the companies. Trusting a company or virtual development team that is located hundreds and thousands of miles away from your company is a little difficult.
The degree of trust is analyzed based on the points of every company's scores.
Solution
Here are a few important points that you should ask the IT outsourcing companies.
Here are a few suggestions for a risk mitigation framework that will give you a few fundamental ideas. You can also include a few of the customized questions.
Let's have a look:
- Is the company new or established?
- How long has the offshore company been serving the industry?
- How experienced is the development team of the company?
- How attractive is the official company website?
- How active is the company on social media platforms?
3) Realistic Expectations
Whenever you find a new outsourcing partner, the first issue you face is none of you are on the same page as both have different expectations.
Lack of awareness regarding the requirements and how the offshore firm implements the task are different things altogether.
Solution
Most of the outsourcing companies talk about the vast experience and best talent but how to evaluate the credibility of what they promise?
There is always a fear that the unrealistic expectations and promises made may not be fulfilled. Even worse if they stop business in the middle of your project.
Risk mitigation in software development is very important in this case.
It is great if communication is improved by initiating frequent meetings, adopting shared documents and more.
Setting up a project milestone is the best way to mitigate the differences.
However, if the offshore partner isn't within physical proximity, it is critical to utilize online communication tools like video conferencing, emails, etc.
However, make sure that language and cultural differences shouldn't be a reason for a dispute.
4) Domain Expertise
This one is a huge challenge especially when you want to collaborate with a remote development team.
When the outsourcing partner has no experience in your business niche, they will be spending more time analyzing your requirements.
Although various solutions are usually generic for a different niche when there is a lack of domain knowledge, the final result differs
The professional skills of the outsourcing firm have to be properly analyzed.
You have to check the background of the vendor like the expertise, certifications of the company or team and other relevant things.
You have to be very careful, otherwise, you will fall into a trap of a wrong vendor and mess up everything.
Solution
It is always better to take precautions at an early stage and look for an outsourcing company having good years of experience and expertise.
Take interviews with the developers and designers and ask about the process that they follow.
Also, look at the projects they have successfully completed. Carefully go through the quality and quantity of the projects. All this will help in common project risk and mitigation.
5) Security Breach
Think that you are discussing your business idea with two different IT outsourcing firms and both have complete knowledge about your business needs and workflow.
What will happen? Well, giving information to unfamiliar people is a risky affair.
Whenever confidential information has to be shared with the outsourcing remote partner, there is always a risk. However, you should make sure the security is not breached.
Solution
Ask the company about the security measure they employ. Review the recovery plan of the company in case there is a system failure.
Make sure the offshore remote company signs an NDA that includes penalty clauses in case a mishappening takes place.
In this particular legal document, there are two and more parties involved where trade secrets are shared.
The main idea behind this is to give the required information to a third person about business without the fear of data leakage.
6) Knowledge Transfer
Dealing with knowledge transfer is one of the most crucial tasks. There are two methods of knowledge transfer: first is sharing information, and knowledge from the outsourcer.
This is important only then the company will be able to fulfill your requirements. The second in the risk reduction plan is the 'know-how' and product fluency.
Solution
When technology is involved, look for outsourcers that moved beyond manual data transfer and have tools capturing business processes.
Make sure the knowledge transfer takes place accurately, quickly and efficiently.
Find the top outsourcing company that has the latest knowledge transfer technologies.
This will help in bringing great dividends to the company while helping to reach targets.
For risk mitigation and avoidance, make sure a creative roadmap is created for the development and knowledge transfer process.
This gives a clear picture of the provider’s ability and knowledge depth in a specific domain to optimize and run operations providing long-term benefits.
7) Misunderstanding
As per Grant Thornton's International Business Report, 88% of companies consider communication as the key to successful outsourcing.
When you are outsourcing your project to another geographical location there is a difference of time zone, language barrier, cultural difference and absence of face to face meeting that impacts the project outcome.
When you look for short-term project outsourcing, the offshore company takes some time to know about your requirements and adjust to the communication style.
Solution
The first solution in the risk reduction strategy is to cross-check the English of the team members and the understanding of their requirements at the negotiation stage.
Make sure you insist on personal communication and online meetings on a regular basis.
Ask the offshore company if they have previously worked with the company that had a similar time zone difference as it is presently.
Secondly, you know that every country has a different tradition and culture. So, it is important for you to understand the same and respect the ethics of the country.
Choose a company that has several years of experience in working remotely. A good outsourcing company will certainly build a business process based on the offshore location of the client.
This will give you a valid proof that they know how to manage their team, have worked in different time zones and have all the necessary skills required for cooperation.
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8) High-Quality Standard
If you ask a few entrepreneurs about abandoned outsourcing, all of them will give you a similar answer.
All wanted to save money and they went for the cheapest offer that was available in the IT market. They rel