Effective Risk Management in Outsourced Software Development

There are two sides to every coin — and that’s no different in software development outsourcing. On one hand, outsourcing is a great way to work with specialized professionals, stay flexible, and stick to your budget. Yet, on the other hand, there are certain risks you need to pay attention to when using this practice.

If you aren’t careful, hiring people halfway across the globe can easily result in low-quality output and late deliveries. All this is often garnished with a copious amount of flimsy excuses. Stolen ideas and misuse of personal information are also very realistic scenarios, both of which are great ways to wipe out your entire user base and ruin your app.

Should you then abandon the idea of outsourcing altogether? Not quite. The benefits are far too big to ignore. What you need is to focus on risk management in outsourcing. It’s all about mitigating issues before they even arise.

What exactly is risk management?

No one should ever go into a project head-on. A certain level of planning is necessary, regardless of whether you’re building an apartment complex or developing a piece of software. Assessing the risk is crucial. It’s the process of the identification, evaluation, and prioritization of risks. Your primary consideration should be — what could go wrong?

You need to proactively understand and manage each potential issue. In its very nature, risk management is preventive. It prioritizes the minimization of threats and aims to optimize operations for success. What follows is the application of resources with the aim of controlling the probability or impact of unfortunate events.

Risk management in outsourcing software development is no exception to these rules. Here are some best practices that could help you seize opportunities and create desirable outcomes.

Know where you stand

Most advice on risk management in outsourcing will first focus on communication. However, before you explain your vision to your team, you must know it yourself. Do you have all the finer points figured out? If not, you better get that sorted.

What is your business objective? What is the goal of this particular project? Who is the app supposed to serve? Do you have any technical debt that needs addressing before the work can start? Self-reflection can make a big difference when moving forward with any project.

Detect the weak spots

Having a clear idea of what you want is a strong foundation indeed. Now let’s talk about potential bumps on the road. Conducting a thorough risk assessment will enable you to mitigate these. Let’s address a few common issues you will want to look into.

1. Lack of control over the development process.
2. Communication issues.
3. Budgeting and unexpected costs.
4. Lack of technological expertise.
5. Security and data breaches.

This is by no means an exhaustive list but is only meant to serve as a starting point for your research. Once you know what can go wrong, it’s time to move on to the next step. Create a risk management plan. Here are some ideas related to the above issues.

Stick to a structured approach

In today’s business, many operations tend to be on the freeform and spontaneous side. This isn’t always the best way to go. For example, relying on emails and instant messages for project management and all communications can spell disaster. At first, a more structured approach is best.

Slack and Asana are popular solutions but it may be good to go deeper and find the perfect fit for your team. Such project management tools can improve work delegation, reduce overhead fees, boost efficiency, and help keep all correspondence in one place.

Communicate, communicate, communicate

Speaking of communication, it’s definitely a recurring theme when it comes to the advice on how to run a business. Risk management in outsourcing relies on it a lot. Consistent communication is key to working with people, both face-to-face and remotely. Daily summaries, weekly Zoom calls, and regular code reviews are all a part of it. Moreover, documenting all communication is one of the better practices to adopt with your remote software development team.

Don’t be cheap

So how much is all this going to cost? Anyone developing an app or online service is bound to ask this question. After all, cutting costs is one of the main reasons for outsourcing. While budgeting is essential, it’s important to avoid the risk of being too cheap. This applies to both the platforms you use and the people you hire.

As a rule of thumb, low cost will mean low quality. Fixing problems created by a poor team can blow a massive hole in your budget. Instead of trying to cut corners, focus on being cost-efficient. Investing in quality can bring you more bang for your buck.

Focus on relevant technological expertise

When it comes to picking the right team for the job, a lengthy vetting process could be beneficial. It’ll give you an opportunity to gauge how much genuine technological expertise your potential employees have. Let’s face it, out-of-the-box thinking is great but it won’t make up for lack of experience.

If you ignore this risk, you may find out too late that your developers simply don’t know quite as much as you assumed. This can have major consequences. It’s up to you to play it safe and find professionals able to handle your project and successfully bring it to completion.

Stay safe, folks

Obviously, we can’t speak of being on the safe side without touching upon the topic of online security. It’s one of the pillars of risk management in outsourcing. Once you decide to hire a remote team, you’ll basically be uploading all sorts of confidential information onto a cloud. Giving someone on the other side of the globe access to all this can bring about a host of problems. Someone could steal your intellectual property. A data leak could damage your reputation beyond repair.

What should you do? Find a company that provides a clear security policy. Research your potential outsourcing partner and see if they adhere to standard security regulations. Ask to see certifications and info on legal compliance. Only then start crafting a binding contract.

Truly effective risk management in outsourcing

The truth is, even with rock-solid management, things can still go off the rails. It’s important to accept that your project is dynamic. Still, the above-outlined preventive measures can help you build an effective outsourcing strategy.

Before you begin your project, define your position and detect any weak spots. When hiring, focus on relevant technical expertise and don’t shy away from spending a bit extra. If needed, don’t be afraid to raise safety concerns. Once you start, stick to a structured approach and make sure you maintain good communication with your team.

All this may seem like a lot of work but it’s well worth it. Don’t be dissuaded from assessing the risks and managing them. It makes up for successful delivery.

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