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5 Risks to Avoid When Offshoring Software Development

By Eugene Safronov, writer
Aug 21, 2018
Image Credit: Photon photo/Shutterstock
> Business Basics

Outsourcing your dev projects can be a great idea if you choose partners carefully.

Building a remote dedicated development team provides multiple advantages to a company. It is a cost-savvy way to hire top technology experts and create custom software solutions. A study by KPMG concluded that cost economy is the main reason to outsource for 26 percent of decision-makers, closely followed by quality improvement (21 percent) and access to rare skills (19 percent).

However, before launching the cooperation, business owners should consider major risk factors and potential dangers. How can one avoid these hidden risks? 

Cost risk

Companies often risk going over budget when offshoring software development. It is strongly recommended to take additional management, travel and related expenses into account.

Moreover, it is vital to choose the right pricing model that fits your project type and requirements. Basically, there are three options: the fixed-price model, time and material model, and cost-plus model.

  • The fixed-price model is the least flexible but the most transparent, as everything is fixed in advance. Budget, timelines and scope of a project are defined before the project starts, with no further changes allowed.
  • The time and materials model fits best for businesses without a clear vision of the final product. It allows you to add new features during the work process and make the necessary adjustments. The final budget depends on the tasks, materials and resources used in the development process. To avoid considerable price growth, it is best to define the upper budget limit before launching the project.
  • The cost-plus model, also known as a dedicated development team, is the most suitable for long-term and large-scale projects. It provides a high level of control, as you can make any adjustments you need during the process. The price includes developers' salaries plus the service provider's fee, so you know exactly what you're paying for.

Decide which pricing model will be the best for your project by weighing the pros and cons of each beforehand. A transparent pricing system is a crucial element of a risk-free working process.

Performance risk

You have to be convinced that your future software solution will perform as well as if you'd built it in-house. The dedicated development team must provide high-quality services without constant supervision. The code needs to be well structured, tested and optimized for a specific environment. Thus, you need to choose a trusted software development company that satisfies your technological requirements. Explore case studies of a potential business partner, finding out if the company has already worked on similar projects or in your industry. This ensures that the code will perform well, be easy to manage and be followed by accurate technical documentation.

Misunderstanding risk

Your software development partner should clearly understand your market requirements and target audience. To avoid the delay of future product release, unmet end-user requirements or wrong decisions during the project, take these preventive measures.   

Explain your specific goals and end-user preferences to a software development company. Share your company vision and processes. Focus on business outcomes that you want to achieve. Presenting the product requirements document (PRD) with your indicated objectives and timeline will result in software that is focused and executed to your expectations.

For example, if your target audience prefers a specific browser, specify this before starting product development. This allows you to deliver a user-friendly interface and solution. Create a well-thought-out and structured plan together with your IT vendor to ensure your project will meet its final goals.

Risk of poor management

Managing a remote team can be challenging, but you can achieve an organized workflow by combining several effective tactics. Well-established management is the core strategy to avoid risks in the software development process. 

Your external and internal teams need to stay in constant touch. You can use messengers, emails, Skype calls and project management tools to achieve this. Agile and Scrum are two common tools in the IT industry. With their help, you can effectively manage multifunctional teams, providing them with necessary feedback. Get reports on bugs, monitor tasks, and answer questions that might be crucial for your project. Stay informed on the state of a project and communicate with your remote team members.

Taking into account different time zones, make sure to conduct regular meetings with your team and make real-life visits. This reduces misunderstandings and allows better coordination of the whole project.  

Data security risk

It is estimated that the number of security breaches in IT-related niches will reach 25 percent by 2020. The privacy concern is even more important to companies with important data (such as bank accounts, intellectual property and patents, or Social Security numbers). That's why it is highly recommended to sign security protocols and NDAs before starting the cooperation. Find a company with a clear security policy and security certifications. This helps to protect your business, ensuring complete privacy of your info during the collaboration. Make sure that your business partner protects your valuable information.  


To take full advantage of software development offshoring, you should be aware of all the possible dangers. This way, you can build a reliable partnership and achieve fruitful cooperation with tech experts. Efficient management strategy, clearly defined project goals and regular communication are the components of a successful collaboration. Make sure to take all the preventive actions before you even start. This allows to mitigate the risks and avoid the hidden dangers.

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Eugene Safronov
Eugene Safronov
See Eugene Safronov's Profile
I'm CEO & Founder at CyberCraft - offshore software development company in Ukraine. We're building dedicated development teams tailored to clients needs.
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