While IT departments use outsourcing as a weapon to augment their business profits and meet their objectives. However, many organizations have failed to properly implement outsourcing, thereby leading to a negative impact on the business' main concern, and slamming down project ideas even before dispatching the product.

It is a fact outsourcing can bring forth fruitful benefits by not only improving the business effectiveness but also resulting in huge cost-reserve funds and decreasing the time to market the application if it is done accurately; however, while hiring a proper reliable outsourcing company, the organization should heavily investigate the outsourcing risks and learn its mitigation methods. In this article, we are going to tell the same.

Risks involved in hiring an outsourcing software development company & how to mitigate them.

Unrealistic Expectations:

Most outsourcing companies will agree to every requirement that their clients present, fixing the deal under any financial limit and within any time frame. These false promises and expectations often result in the delay of the project and hikes up the total budget. Thus, for outsourcing risk mitigation, draw up a legal document of work and share it with the possible custom programming firm.

The documents and the estimations might have objectives from the customer’s side, but it is the job of the software outsourcing company to point out the mistakes. Thus, it is essential to make the required changes as needed and get into a mutual agreement between both parties before beginning the development process.

Indistinct Leadership:

Task supervisors are assigned based on their technical skills; however, administration and communication are surprisingly not taken into consideration. A project supervisor resembles the foundation of a project as the let-down or accomplishment of the project is strongly dependent on how he/she achieves the business needs while maintaining the budget and the deadline.

Thus, his/her duties are mainly about directing and assigning the group with tasks and tracking business development. A poor initiative can crush outsourcing objectives. Hemce, if you are planning to outsource your project overseas, make sure that the chosen communication channels don’t lay unnecessary barriers or interruptions because of the varying time zones.

Confidentiality of Information:

While engaging with potential outsourcing firms, one has to disclose completely about the business’ plans and requirements. Here comes the non-disclosure agreement (NDA), which can be used to make the potential firms sign the form to maintain confidential secrets.
An NDA is an authoritative report that ties at least two parties in an agreement, where they can't share classified competitive advantages about one's business that has been uncovered to them.

Outsourcing a Key Product:

Outsourcing your key item appears to be very dangerous. While outsourcing makes a person hire an offshore team but losing their proficient experts. It is better to hire teams with engineers and analyzers who act as an extension of the primary teams rather than wholly utilizing the offshore team.

Quality of Software:

The reputation of the business firms totally depends upon the product it delivers, i.e., the software it provides. Once the software is rolled out in the market, it becomes a huge disadvantage for the company if they find bugs at the later stage. It would be financially efficient to find bugs at the early stages than in the following phases. Regular testing of the software will eliminate such problems.

Inadequate Technical Skills:

It is compulsory to select or hire software vendors having previous knowledge in the same industry, as mismatching of skills can create risks, especially when the technical scenario doesn’t match with the software development firm.

So, it is recommended to investigate the software outsourcing company's previous and existing clients, about their experiences and services, along with a thorough checking of the background details of the vendors before listing a task to the outsource.

Hidden Costs:

There have been outsourcing companies who presented cost-effective deals only to book customers, but later, found to be providing poorly trained specialists for the management of that particular software. To avoid such problems, enquire business partners about their testimonials or genuine reviews. Also, take a clear look at the expenses.

Milestone-Based Payments:

Outsourcing companies, in many cases, deceive their clients with extra cost. So here, a milestone-based payment scheme should be implemented to bring more transparency and free up conflicts concerning payments. The project must be broken down into milestones, and the payment scheduled should be totally based upon achieving these milestones.

Instilling Code Guarantees:

Companies often fool users by presenting the code of one user to another. Thus, acknowledging application with a code guarantee must be practiced. Signing an agreement also helps the consumer to ask for the necessary changes, if he/she finds bugs inside the software, as the contract entitles the outsourcing company to redesign and fix the bugs at their own expenses.

Here, the agreement or contract, other than ensuring that the software is free of malware, also specifies how web hosting and mobile application development would be supervised.

Maintenance Support Contracts:

Business clients of the outsourcing companies often get misguided as some of them don’t provide any support or maintenance contract. Maintenance contracts plainly express the length for which the group will offer help on the software that they have built and designed.

The developer thus has an enhanced feeling of ownership as that makes them liable to anything related to the software. Henceforth, business firms should always ask for maintenance contracts.

Intellectual Property Rights:

As discussed, the earlier contractor might often reuse the codes composed for your software to give it to other competitor brands. To avert this problem, the client should include licensed innovation rights in the contract that will keep away any rights infringement issues, thereby, preventing the outsourcing companies from reusing the codes.

Termination Clause and Jurisdiction:

Business firms must include a termination statement in the contract, stating that necessary actions will be taken if the outsourcing company fails to deliver the required result. The organization, as well as the outsourcing company, must mention the said jurisdiction in the contract to seek help in case of any dispute. Referring to the jurisdiction in the contract is significant to decide the laws under which the agreement is secured.

General Risks:

Potential issues like the economic downturns and language barriers negatively influence the quality and popularity of a product. Heavily study the language gap and ensure the outsourcing company has employed well-spoken English vendors.


We have to invest in technology to create business opportunities. Through this article, we address the business leaders to critically assess an outsourcing firm, keeping these points in mind. The various outsourcing risks and mitigation are clearly stated above, and we hope it will help you to earn the most profit in return for the invested time and capital.