The software outsourcing market is projected to cross US$512.50 billion in 2024. As much as 50% of companies outsource IT to save costs, while the other 35% do it to ensure greater focus on the core business activities. 

While outsourcing offers vital benefits like reduced cost, access to skilled experts, and mitigating risks, one might find it overwhelming when leveraging the services for the first time. Moreover, software outsourcing challenges can also lead to poor results, project failure, or excess wastage of resources. 

This article helps you understand the critical problems with outsourcing and how to tackle them.

What is Outsourcing?

Outsourcing is handing over software development tasks to third-party service providers. The services can be contract-based or on an ongoing basis, and the outsourcing vendor can be in the same country, neighboring countries, or located in a far-off zone.

Most business organizations choose an outsourcing company located in some third-world countries that helps them save costs and access reliable talent. This is called offshore outsourcing. 

An offshore software development company can help you build immersive websites and apps on a cost-effective budget.

Why Do Businesses Outsource Software Development?

Software outsourcing benefits businesses in the following ways:

  • Companies can save costs with software outsourcing as developers in third-world countries are willing to deliver quality work at cheaper rates.
  • Outsourcing allows companies to quickly find the proper skill set for software development projects.
  • It helps with the quick onboarding of the developers.
  • Access to professional developers reduces the risks associated with the software project.

While outsourcing offers various benefits, the potential challenges of outsourcing can cause several issues with the project.

What are Software Outsourcing Challenges?

The various problems a company faces when handing any project to a third-party service provider can be understood as challenges of outsourcing. However, outsourcing issues are not limited to the companies seeking services. Software developers also face several issues when working for a company.

For example, as per research by Statista, 42% of developers cite unplanned work as one of the significant problems with outsourcing, and another 34% of developers consider unclear direction as a troubling issue.

The infographic below provides insights.

Hence, outsourcing problems affect both software developers and companies looking for services.


Here are 10 Key Problems with Outsourcing IT Development & Tips to Tackle them

Vendor evaluation, communication barriers, and various other issues might erupt when outsourcing any software project. It’s essential to study them in detail to resolve them efficiently.

1. Poor Vendor Evaluation

Failing to choose the right software development outsourcing agency can alone lead to several unexpected issues and unsatisfactory results. For example, an agency that does not deliver promises on time will impact the planned marketing strategies of the IT project.

It’s essential to find the best software partners by evaluating them on various aspects before signing the outsourcing contract. 

Tips for Proper Software Vendor Evaluation

  • Look into the background and history of the chosen technology partners. Determine whether they have handled an extensive global clientele and their latest team strength.
  • Check whether they hold a good portfolio over Google Ratings, Clutch, TrustPilot, etc. These are independent platforms, and having good ratings over them advocates for professional behavior and outstanding results being continuously delivered by the company. 
  • Consider opting for the company services for a trial period. This will help you gain real-time insights into their response to issues and whether they fit the job best.

2. Unclear Objectives

When listing the most potential problems with outsourcing, you cannot forget the project’s lack of clarity and undecided end goals. Often, businesses hurry up to make a product without research and analysis and try to get results without setting objectives. 

Such custom software development outsourcing projects are simply bound to be doomed. A vague understanding of the project means you are not sure about the purpose of the software. 

Tips to Set Up Objectives

  • Identify what you’re trying to build and how the software will resolve the user’s problem.
  • Create a list of features the end software product must offer different stakeholders.
  • Categories the software project into a web app, mobile app, or SaaS solution. Once you know the type of software solution, it becomes easier to drive the project to success. 

3. Neglecting Communication and Cultural Barriers

One of the most prominent outsourcing IT development problems is communication & cultural barriers. This becomes more prevalent when choosing a service provider not located in the same country or neighboring nations. 

One might think that communication & language barriers are not valuable in software development projects. In contrast, Communication is the backbone of ensuring everything is designed and developed according to the business requirements.

In fact, various software development projects end in disputes not due to a lack of coding skills but due to poor communication issues. As much as 57% of projects fail due to poor communication.

Tips to Ensure Smooth Communication & Collaboration

  • Choose a company or a developer who is well-versed in the English language. This will help you seamlessly communicate ideas and ensure zero gaps and issues with cultural differences.
  • Discuss and establish various collaboration tools, like whether you can talk to the developer over calls, live chats, or emails directly at your earliest convenience. 
  • If you are handling a large-scale project with multiple team members, it is advisable to have a CTO or project manager who will lead the project communication.

4. Failing to Deliver Per Timelines 

One of the most commonly faced software outsourcing challenges is project delays. Not all companies will delay the project, and any trustworthy partner will try to deliver the project on the proposed timeline. 

However, delays happen with most outsourcing partners due to unexpected glitches in the ongoing projects. Keeping the deliverables flexible and following an estimate based on practical dates is advisable. 

Tips for Ensuring Proper Delivery Expectations

  • It is advisable to set concrete timeframes for the project with the outsourcing partner.
  • Divide the project into smaller tasks and set milestones and checkpoints for verifying the achieved results.
  • Try staying proactive and having some wiggle room in the deliverables that can help you manage and rectify the problems in case deliverables are not met.

5. Poor Budgeting

As much as 44% of startups suffer from failure due to running out of cash. Most companies fail to establish proper project estimates and set aside a dedicated budget for running the project. 

In the long run, as the project moves ahead, a significant spike in demand for resources delays the project and leads to failure. As per research by Harvard, the average cost overrun of all projects is 27%

Tips to Resolve Budget Issues

  • Choose an outsourcing software development services company that provides accurate estimates and follows 100% transparency.
  • Create a dedicated budget for the software project.

6. Risk Management

Although when you outsource the project to professionals, you can expect viable results, there’s always a risk factor involved. Failing to prepare for the worst-case scenario means zero backup for handling the project.

Tips to Resolve Risk Management Issues

  • Create a risk management plan with expert IT consultants.
  • When planning to mitigate risks, consider all aspects of the problem and solution with a 360-degree approach.

7. Lacking Quality Control

One of the significant problems associated with outsourcing development is the lack of control. Hiring an in-house QA expert who can ensure the software plan meets industry standards is advisable. Otherwise, you may end up with poor-quality software with bugs and issues.

Tips to Ensure Quality Control 

  • Ask the outsourcing software development partner to check the end product with various industry-standard tests like unit testing, integration testing, acceptance testing, etc. 
  • Ensure the software runs fine over the staging server before launching it to the target audience. 
  • Use standard project management tools like Basecamp, Jira, etc., to assign and track tasks with the outsourcing provider. 

8. Overlooking Intellectual Safety

Various businessmen have voted that overlooking intellectual property safety is one of the worst problems with outsourcing IT projects. You might think that the software ownership belongs to you; however, unless it is stated in the contract, you may need to undergo several visits to the court for justice. 

Intellectual safety also accounts for the outsourcing company’s steps to keep your business ideas and data safe from plagiarism. 

Tips to Maximize Intellectual Safety

  • Ask whether the company follows best practices for data transmissions across the various software team members.
  • Check for a non-disclosure agreement (NDA) in the contract, as it protects your ideas and data from plagiarism.
  •  Ask for complete ownership of the software, which could be transferred at the end of the project. This involves the transfer of rights to everything associated with the software.

9. Developers Dropping Out of the Project

When starting the project, you may be assigned a developer who later resigns from the outsourcing agency. While this may seem out of your scope, it can lead to undefined delays and issues with the software outsourcing project.

Tips to Resolve this Issue

  • Check whether the company has a large team of experts. So, you can always have a backup that eliminates the project from delay.
  • Stay tuned for the latest project and critical insights. A proactive approach can help you tackle several issues with ease.

10. Working in Different Time Zones

Hiring developers who work in different time zones is one of the critical challenges of outsourcing, but it can be easily tackled with the right approach. Different time zones can lead to communication, technical, and code issues. 

Tips to Eliminate Time Zone Issues

  • Try to choose outsourcing partners who are willing to work in your time zone. 
  • Maintain healthy communication with the outsourcing partners. 

How Nethues Technologies Can Help You?

We have been offering software outsourcing services for more than two decades. As a customer-focused software development outsourcing company, we ensure best practices in building future-proof solutions.  

Some of our USPs are:

  • 60 Days of project warranty, where you can seek any grievances for zero additional charges.
  • Dedicated experts, you can choose from 250+ portfolios. 
  • Quickly Scale up or scale down the developer’s team.
  • Hire developers to work in your time zone.
  • Get assistance from industry veterans with end-to-end consultation.
  • Trial our developers for 25/50/75/100 hours.
Take your software development to the next level – Partner with Nethues for unmatched expertise!

Author’s Bio

Sanjeev Kumar - Software Team Lead

A team leader by profession and movie lover by heart, Sanjeev is one of the intelligent brains at Nethues.

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