Challenges of Outsourcing and Solutions

Outsourcing is a new trend in software development. Statista reports that global spendings on outsourcing grow constantly. According to the report, businesses are expected to spend $971.2 billion on outsourcing in 2023 globally.

According to the software development outsourcing guide, the main objectives of outsourcing software development are:

• reduced development cost
• better flexibility
• cooperation with experienced developers
• access to top tech talents
• absence of micromanagement
• risks reduction
• easy team scaling

Nevertheless, despite the many advantages of hiring third-party vendors, businesses experience many outsourcing issues.

We have prepared a thoroughgoing cheat sheet for entrepreneurs who want to hire a contractor to develop a digital product. It implies most of the outsourcing problems and solutions with detailed instructions on tackling them.

The most widespread challenges of outsourcing are grouped so that you can easily find instructions on how to cope with unexpected issues when outsourcing digital product development.

OUTSOURCING VENDOR SELECTION ISSUES

Inexperienced entrepreneurs and startuppers need to find trusted software outsourcing partners. Unfortunately, they may select an unprofessional or unreliable vendor. It causes additional problems with outsourcing software development.

Below, you will find the top-six vendor selection challenges and instructions on how to overcome them.

1. Inexperienced or Unreliable Partner

Finding a reliable partner to build digital products might be a tough challenge. It may take a lot of unsuccessful attempts to find a trusted and experienced vendor, as it is one of the most common challenges of outsourcing.

The irrelevant selection of a partner for outsourcing IT services may lead to problems with the schedule, budget, and product quality.

Solution

Feel free to follow the outsourcing partner selection guide from CodeIT not to waste your time and money. 

For starters, you need to find top outsourcing companies to shortlist the best ones for further assessment. The best ways to find top software development agencies are:

• Trusted listings and review platforms — Clutch, TopDevelopers, and GoodFirms are the most popular listing sites. Feel free to explore them to find companies with expertise in specific industries. 
• Google search — Don't hesitate to use the Internet to find the most popular agencies that offer assistance in building digital products.
• Freelance platforms — Many outsourcing companies are listed on popular freelance platforms like Upwork or Freelancer.
• Ask your connections — Feel free to ask your friends, colleagues, or business partners if they can recommend software development companies.

We advise skipping promoted search results from Google, freelance platforms, or listing websites when coping with one of the most widespread problems of outsourcing. 

To choose an outsourcing provider, we recommend assessing the following:

• Rating and reviews — Check the feedback submitted by previous clients on trusted listing websites and freelance platforms. 
• Projects completed — Explore case studies to learn more about the expertise of a selected company. They are usually listed on companies' websites and listing websites like Clutch.
• Company's workflow — Find out how reviewed companies communicate with clients and build digital solutions. 
• Previous clients — Find contacts of previous clients and message them to learn more about their personal experiences of working with certain outsourcing companies.

2. Demand for Developers with Industry-Specific Expertise

There is no one-size-fits-all solution for every business. Companies that operate in different industries need well-tailored digital solutions to solve specific problems. 

Outsourcing companies that need to gain expertise in building solutions for particular sectors may not be capable of delivering the required functionality. Hence, finding niche-specific expertise is one of the popular outsourcing issues.

Solution

In order to find software engineers with industry-specific experience, you should do the following when researching outsourcing companies:

• Explore vendors' websites — Thoroughly investigate the websites of selected companies to examine their expertise in building digital solutions for companies that operate in specific industries, like healthcare, logistics, or fintech. 
• Examine case studies — Explore case studies published by a company on their website and trusted listing.
• Contact company's managers — Send emails, start live chat sessions, or schedule one-on-one meetings with companies' representatives and ask them about their hands-on experience building industry-specific solutions or using certain technologies.
• Check reviews — Explore listing platforms and read reviews submitted by previous clients. Pay close attention to the feedback left by the owners of businesses that operate in your niche.

3. Unclear Cooperation Flow

Inexperienced entrepreneurs frequently experience some problems with outsourcing software development. They don't understand how the outsourcing process works and what steps include.

Solution

In case you're not confident about the product development flow of a vendor, you can do the following:

• Explore a company's website to learn more about all the milestones of cooperation
• Contact an agency's representative to learn more about all the steps to take to outsource software development

Note that different companies may use distinctive workflows. Hence, there is no right workflow to choose.

For instance, CodeIT's tried-and-tested software development workflow implies the following stages:

1. First call — Our company's representatives contact a client to learn more about an idea and technical requirements. Also, we sign the non-disclosure agreement (NDA) to keep all the information shared with our team members secured.
2. Planning and analysis — We analyze a product vision and technical requirements. Our experts offer the best tech stack, define user roles, provide a communication plan, etc. All the required documents are discussed and approved with the client to prepare a detailed cooperation agreement.
3. UI/UX design — We analyze business requirements and prepare the visual design of a digital product.
4. Iterative development and testing — Our team uses the Agile methodology that implies: sprint planning, sprint implementation, code review, and product testing.
5. Deployment — Our team configures a live server and releases increments. Also, we prepare detailed technical documentation.
6. Maintenance — We troubleshoot technical issues and implement change requests as an additional service.

4. Negative Previous Outsourcing Experience

Roughly 41% of surveyed entrepreneurs reported dissatisfaction with their outsourcing partners, making the previous negative experiences one of the foremost problems of outsourcing.

Solution

If you have previous negative experience outsourcing product development, it's advisable to analyze it thoroughly. Define the fundamental problems that led to the negative experience and focus on avoiding them when looking for a new vendor. 

For instance, in case you have received a product of unsatisfying quality, the following issues could affect the outcome:

• poor communication
• lack of testing
• insufficient involvement
• unclear requirements

In such a case, you should find a partner who can control all the processes meticulously and prepare a communication agenda. Also, creating a detailed list of functional and non-functional requirements is recommended.

5. Outsourcing Methods Selection Challenge

The three outsourcing methods businesses can choose from are:

• Fixed price — The complete scope of work and final charge are estimated by a vendor before the product development process begins. The client pays a defined sum only.
• Time and material — The client covers the number of hours developers spend and other fees. The final charge is flexible and depends on the number of tasks to complete.
• Dedicated development team — Software engineers and other IT experts are drawn by businesses to scale up their in-house teams. 

Inexperienced entrepreneurs may need help with choosing the best outsourcing method that matches their needs.

Solution

It is one of the challenges of outsourcing that can be solved by examining the detailed comparison of the three outsourcing methods to find the one that fits your needs.

Outsourcing model	Pros	Cons
Fixed price	Fixed budget Defined schedule Team management isn't required	Low involvement No change requests are accepted Unreasonable final charge Tedious project estimation
Time and material	Significant involvement Ability to request changes On-demand experts allocation	The budget isn't fixed The deadline depends on the amount of work
Dedicated team	Complete control over developers Option to enlarge a team of professionals fast Significant involvement of developers	Team management is required No option to involve different developers upon demand

6. Values Mismatch

When delegating product development tasks to an external vendor or hiring dedicated software developers, there is a chance of values mismatch.

Solution

Discover the values of an outsourcing company by exploring their websites. Also, you can ask an agency's representative about their values to choose the right partner.

TIME AND MONEY OUTSOURCING ISSUES

Lowered costs and reduced development time are primarily outsourcing objectives. However, some entrepreneurs experience many challenges of outsourcing related to missed deadlines or bloated budgets.

Feel free to explore the most popular time- and money-related problems of outsourcing and solutions below.

7. Lack of Time To Complete a Project

Outsourcing software development companies help speed up the product development process by allocating a lot of tech specialists. However, if you're short in time to complete a project, you may face a lack of time to complete a project, even after dedicating a large team of software engineers to your project. 

Solution

It's vital to understand that building an app implies a lot of crucial stages that cannot be skipped or performed simultaneously.

Also, the performance of software development teams cannot be increased linearly. If you double a team of software engineers, the overall performance won't grow two times because the number of connections increases. Many developers need to plan their work, create backlogs of tasks, communicate, and discuss all the ideas with other team members.

Therefore, it's recommended to involve experienced project managers. It will help thoroughly estimate the time required to complete all the tasks, especially in case of involving a large team of developers.

8. Unforeseen Team Composition Issues

The entire team you gather in the initial stage may not work till the final release of a product. Its composition may change accidentally due to unforeseen issues. If some IT specialists leave a project, a team's productivity may fall significantly.

Solution

Outsourcing issues and challenges caused by unforeseen team composition issues should be solved fast.

The best option to keep your business safe from unexpected team composition changes is to partner up with a large agency with many developers ready to work. Hence, an agency can replace a team member if a software engineer can't continue working because of unexpected circumstances.

For instance, the CodeIT team implies more than 200 tech-strong specialists that can be drawn to the projects of our clients fast.

9. Undefined or Unclear Requirements

Poorly defined requirements can lead to possible misunderstandings or unsatisfactory product quality.

Solution

It's vital to thoroughly outline all the business needs to build the right solution and avoid any change requests when developing a digital product.

We recommend preparing the following documents to tackle this issue:

• Product vision — A document outlining the primary purposes of developing a new digital solution and the business problems it should address
• Feature list — The list of functionality that should be developed
• Technical requirements — Information about expected load, number of users, security standards, and other details
• Design mockup — UI/UX design of an application with a defined visual appearance of items, their placement, and animations

Using these documents, an outsourcing company's representatives can clearly understand your business problems and the solutions they need to provide.

10. Delayed Project Start

Some outsourcing companies can hardly allocate the required number of IT specialists to a client's project right away. 

It may take several weeks to gather a team of software engineers, which can cause a delayed project start.

Solution

To avoid delays and begin the product development on time, you should clarify all the details with the company's representatives.

Define what roles should be involved and create a team set. Clarify when all the required specialists can start working on your project to keep yourself safe from missed deadlines.

11. Unforeseen Expenses or Hidden Fees

A bloated product development budget is one of the problems associated with outsourcing when businesses partner up with unreliable agencies to delegate product development.

Solution

When picking the “fixed price” outsourcing model, businesses pay the defined price only. However, this model has a lot of drawbacks. 

Sign a document that outlines all the expenses during the cooperation period. It will help you keep yourself safe from hidden fees when picking other outsourcing models.

For instance, at CodeIT, we prepare the master service agreement (MSA). It is a document that outlines all the cooperation details in advance.

12. Undefined Overtime Work Regulations

Some IT specialists may need to work overtime to deliver the required features on time, help other team members, or tackle unexpected issues. However, some companies may not offer the opportunity for clients to request IT specialists work overtime.

Solution

The overtime work regulation should be defined when composing the agreement.

It's recommended to define the following overtime work regulations:

• roles that can work overtime
• number of hours defined roles can work overtime
• overtime payment rate

13. Unforeseen Technical Issues

Many unexpected technical issues may appear when developing a digital product. The most common technical problems that may negatively affect product development are:

• server or hard drives failure
• unexpected outage 
• loss of the Internet connection

Solution

Keep your business safe from technical issues by analyzing possible risks and preparing disaster-recovery plans. For instance, to prevent data loss due to a hard disk failure or a spear attack, create data backups and store them in a cloud or on dedicated hard drives.

MANAGEMENT AND COMMUNICATION PROBLEMS OF OUTSOURCING

Many entrepreneurs need help managing remote teams of developers and keeping consistent communication, especially when cooperating with inexperienced vendors.

With the help of the top challenges of outsourcing and the solutions listed below, you can establish an outsourced team and manage it seamlessly.

14. Insufficient Developers' Tech Skills

Indeed, all businesses want to draw top tech specialists to their teams. Unfortunately, some of them are unsatisfied with the tech expertise developers outsourcing companies provide.

Solution

There are three options to ensure that you hire the best software engineers when cooperating with an outsourcing company.

1. Establish tech skills standards and share them with a selected outsourcing partner. It will help you to avoid any possible mismatch in expertise evaluation standards.
2. Hire a dedicated software engineer to conduct technical interviews and assess the skills of new team members.
3. Use third-party platforms that help assess the skills of software engineers. The most popular are Codility, CodeSignal, and TestDome.

15. Undefined Scope of Work

Insufficient planning is one of the problems of outsourcing that can lead to many change requests, increased budgets, missed deadlines, or irrelevant product quality.

Solution

Note that it is impossible to meticulously plan all the activities. However, we recommend preparing a backlog of tasks and estimating the approximate time for their completion. 

Developers will be able to create sprint plans when applying the Agile software development methodology, using the backlog of tasks. One sprint can last from one to four weeks. Usually, one sprint lasts for two weeks.

Also, it's vital to note that unforeseen issues or change requests may affect product development time. For example, if a new iOS version is released during a mobile app building process, developers are required to update the codebase and develop new OS-specific features.

16. Lack of Control

Some outsourcing companies can hardly provide the ability for their clients to monitor all the processes meticulously. Incomplete control over product development processes is one of the disadvantages of outsourcing. Hence, entrepreneurs have to tackle problems of outsourcing software development caused by insufficient control over all the processes.

Solution

If you want to avoid the inability to make important decisions and monitor all the processes, we recommend doing the following:

• define your involvement when selecting an outsourcing partner
• configure a project management tool to track the process of tasks completion
• create a communication agenda to get in touch with project managers regularly

17. Possible Communication Gap

When cooperating with nearshore or offshore outsourcing companies, you may be required to communicate with experts for whom English is not the first language. 

Outsourcing communication issues can lead to irrelevant tasks assigned to developers, which turns into wasted time and money.

Solution

For starters, it is recommended to conduct one-a-one video chat sessions with the representatives of selected outsourcing companies to ensure that they can keep conversations in English without any issues.

Also, you can prepare meeting notes during conversations and share them with project managers to ensure that all your key messages will be delivered.

18. Complicated Team Scaling

In some cases, businesses may need to involve a large team of software engineers and IT specialists. It may be a severe problem because only a few outsourcing companies can afford to hold dozens of top-tier specialists so that they can start working immediately on a client's project.

Solution

The best solution to this challenge is finding an outsourcing partner with scouting experience to find the top tech talents quickly. Also, it should be a reputable company, so they can attract a lot of skilled tech specialists, evaluate their skills, and hire the best experts.

19. Undefined Roles and Responsibilities

Undefined roles and their responsibilities may cause a lot of issues related to team composition. Also, it might be challenging to organize a team of outsourcing software engineers and manage them effectively.

Solution

The tried-and-tested way to define all roles in your team and what they should do is to prepare a RACI (Responsible, Accountable, Consulted, Informed) matrix. It is a document that brings clarity by defining roles that should be involved, activities, and deliverables.

20. Complicated Developers Onboarding

Integrating new software engineers into your in-house team may take time. It's needed to share a lot of information with new developers and create collaborative environments.

Solution

If you want to integrate new developers into your team fast, it's recommended to pick a vendor that has hands-on expertise in onboarding software engineers.

Otherwise, you can onboard new team members fast by sharing the following documents:

• Product vision
• Technical requirements
• UI/UX design mockup

These documents will help new developers understand business challenges and the primary purpose of a solution they need to build.

If you use custom-built tools, prepare user guides to help new developers grasp how to use them or conduct a workshop to onboard new team members fast.

21. Time Zone Differences

Since outsourcing agencies may be located around the globe, you may experience communication issues because of time zone differences.

Solution

Creating a well-planned agenda is the most reliable way to solve one of the most widespread challenges of outsourcing, which lies in inconsistent communication. Hence, all team members can adjust their schedules to communicate and share project updates without issues.

22. Irrelevant Tools Selection

It's vital to pick the right tools to establish consistent communication and manage outsourced developers effectively.

Solution

In case you don't have a set of battle-tested tools, don't hesitate to ask an outsourcing provider to set up all the required tools.

If you need to select all the tools by yourself, we recommend picking the most popular solutions. They can work on many different devices and offer many helpful features.

The most used tools by outsourcing teams are:

• Project management: Trello, Jira, Asana, ClickUp, Zoho Projects
• Communication: Google Workspace, Slack, Microsoft Teams, Skype, Zoom

Examine the pros and cons of various tools. Also, don't hesitate to request free trial periods or presentations to discover how different instruments work. 

OUTSOURCING ETHICAL ISSUES AND PRIVACY CONCERNS

Businesses have to share sensitive data and knowledge with third parties to create collaborative environments.

The solutions listed below will help you keep your data safe and establish a secure cooperation environment to overcome the foremost privacy problems of outsourcing.

23. Data Privacy Concerns

Most businesses have data privacy concerns when hiring an external vendor. They don't want any internal or sensitive information to be shared with third parties. On the other hand, it's impossible to integrate outsourced IT specialists into an in-house team without providing access to internal data.

Solution

The most widely used and reliable solution to keep your sensitive information safe is to sign a non-disclosure (NDA) agreement with a vendor. It should be signed in the initial stage before sharing any information about your project or idea.

Also, you can create a list of roles involved and the data they need to access to complete assigned tasks for solving one of the challenges of outsourcing. Limit data access for involved experts to enhance security in your company, according to the list.

For instance, you can create Google documents and provide access to them by email. Consequently, only selected developers will be able to access certain documents.

24. Unacceptable Code Quality

Developers apply different approaches when composing the code. It may not meet specific standards or be poorly commended. Also, it may be complicated to understand for other developers, which makes the code peer review or pair programming challenging for software engineers. 

Solution

Establish code standards and share them with new developers. Create a document that implies all the rules for composing the code of expected quality. Also, create code samples and share them with new developers so that they understand your code quality requirements.

25. Possible Data Security Threats

When involving third-party vendors and a large number of outsourced team members, there is always a risk of data loss or leakage. 

Solution

There is no 100% reliable way to keep all your data safe. However, some activities can help enhance data security.

• Corporate accounts — Create corporate Google accounts for new team members and use them only. Admin users can configure corporate accounts, set permissions, and monitor all the activity. Also, admin users can disable corporate accounts remotely.
• Secure shell (SSH) connection — Use the secure shell protocol to transfer sensitive information to remote teams.
• Single Sign-On (SSO) — Establish an access management tool that helps provide outsourced IT specialists with a convenient way to log in to different independent services using a single ID. With the help of the SSO tool, admin users can disable access to all the services for selected users at once.

CHALLENGES OF OUTSOURCING OUTCOMES

It might be unclear for businesses how to finalize their cooperation with third-party vendors and what they will receive.

The solutions to the most widespread outsourcing outcomes challenges will help you receive a product that will match your needs.

26. Insufficient Deliverables

Sometimes, businesses receive insufficient digital solutions from their outsourcing partners that cannot completely solve all the business problems.

Solution

To receive a product that can solve your business needs and match your quality standards, we recommend setting the definition of done (DoD) criteria for deliverables. 

Create a list of deliverables that software engineers and IT specialists should provide. Set the characteristics of every completed deliverable to understand when a task can be considered completed.

27. Unacceptable Product Quality

An outsourcing partner may not have the expertise to provide a solution its clients need, which is one of the popular challenges of outsourcing. In such a case, you may be unsatisfied with the quality of the product you received.

Solution

For starters, we recommend hiring QA experts to conduct acceptance testing. They need to check all the features created by software engineers thoroughly. If any bugs or other issues are detected, they should prepare detailed reports, so developers can polish the developed functionality until it works perfectly. 

Also, you should sign an agreement that defines the product you should receive from a hired partner in the initial stage of your cooperation. For example, at CodeIT, we prepare and sign the statement of work (SOW) with our clients. It is a document that implies detailed information about the resource or product we provide to a client.

28. Change Requests Issues

Product requirements may change when building a new digital solution. Therefore, businesses may request outsourcing companies to develop additional functionality or implement changes, which may become a challenge for some vendors.

Solution

Understanding that no change requests can be submitted when picking the "fixed price" model is crucial.

If other cooperation models are applied, clarify if a selected provider accepts change requests before signing an agreement. 

29. Undefined Product Ownership

Some entrepreneurs may face a lot of issues with receiving complete ownership of digital solutions developed by other outsourcing companies. Undefined product ownership details put both parties at risk of losing their time and money.

Solution

Clarify all the details in the beginning and sign an agreement that clearly defines the ownership of a product, how it is transferred, etc.

For instance, at CodeIT, we prepare the master service agreement (MSA). It is a document that outlines all the legal information regarding our collaboration with clients.

30. Post-Development Support

Some outsourcing agencies refuse to support the digital products they deliver to clients. Hence, businesses must search for other vendors to develop new features or fix any issues. 

Solution

The only option to tackle one of the common problems of outsourcing is to discover if a company offers post-development support when selecting a tech partner. 

Also, it's essential to create and sign an agreement that outlines your post-development cooperation. You should be confident that your outsourcing partner will be capable of providing the required tech specialists to implement new functionality and solve any technical issues fast after the release stage.

31. Outsourcing Vendor Dependence

Some entrepreneurs depend on their outsourcing partners because they can hardly find new developers who are capable of updating a complicated codebase.

Solution

To avoid dependence on a specific software development partner, ask an outsourcing company to do the following:

• prepare detailed technical documentation
• add comments to the code
• follow established code quality standards

These activities can help receive a well-documented digital solution with a codebase that all software engineers will easily understand. Hence, they will be able to know how your application works to implement new functionality or troubleshoot technical issues.

CONCLUSION

Delegating digital product development to an external vendor and drawing developers from an outsourcing partner might be challenging. They may cause extra expenses, missed deadlines, legal problems, etc. Inexperienced entrepreneurs may need help with hiring outsourcing companies.

We have prepared the cheat sheet detailing 31 outsourcing issues and detailed guides on tackling them. Don't forget to save the hints on tackling the foremost outsourcing problems.