May 14, 2022

10 Outsourcing Software Development Risks and Ways to Avoid Them

In this article, we are going to overview outsourcing risks and benefits along with the most common software development outsourcing pitfalls and suggest simple yet effective practices to overcome them. 

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Creating a tech startup is risky. And moving along the path of digital transformation can be even riskier. That’s why both newly created and mature companies decide to outsource their software creation to the dedicated vendors, making use of their experience and expertise; however, this tactic is not also completely safe. Fortunately, most of the software development outsourcing challenges can be mitigated by following the right strategy and making fully-informed decisions from the very beginning.

1. Wrong Destination

There are a lot of countries to outsource your project to. Each of them can be both winning and unpromising for your future business success, and that’s why making the wrong choice with the destination is the biggest problem of outsourcing software development. 

Depending on the country you choose you either face or avoid the main pitfalls of outsourcing software development. While not all the destinations are equally cost-effective, you can save significantly but face a huge mentality gap, language barrier, and project management challenges because of the time zone difference. Or vice versa  - increase the final cost of the outsourced project several times, but run it more smoothly.

So, to mitigate this risk, make sure to choose the middle ground. While creating a project in the US or Western Europe is pretty costly, and offshore software development in the Far East is more affordable, there is still a better balance of price and quality. Consider Eastern Europe for software development outsourcing, paying closer attention to Ukraine. This is a top outsourcing development destination, recognized globally - Ukraine hosts more than 200,000 skilled developers with fluent English and European business mindset. 

2. No Niche-Specific Experience Company

Partnering with an unsuitable development company is one of the common risks in software development. The matter is that the software development outsourcing business has a relatively low entry threshold, and not all the companies are equally honest, transparent, and business-oriented.What’s more, not all of them are suitable to be chosen for your project development since having experience in your niche is one of the most important choice factors. A company skilled with creating software solutions for your industry can offer you better opportunities for meeting your business goals, choosing the right technologies, forecasting and mitigating the development risks, plus following the best practices for your niche. So, choose a company wisely, after carefully reviewing their portfolio and gathering social proof. This will help you avoid major software development risks.

3. Poor Communication

The issue of business communication is always relevant. What’s more, remote communication doesn’t always come as highly effective. Poor communication is one of the top reasons why outsourcing software fails. To eliminate this risk, firstly get back to the previous point - you have to hire not only a company with niche-specific experience, but also to make sure you are both comfortable in communicating with each other, and the company itself is actually engaged in your project. 

As a rule, the company that communicated effectively from the very beginning will keep in touch during the development process as well. So, partner with a company that has a quick response time, and can be reached easily. Also, don’t hesitate to discuss the communication practices in advance. Most software development companies engage customers to control the team and communicate with team members either personally or via Project Manager, schedule daily and weekly calls, and discuss the results after the development iteration ends. 

4. Loss of Control

Controlling an outsourced development project is another challenge and another risk. This issue goes hand in hand with the previous one, as there is no possibility to control the remote project if there is no effective and transparent communication. 

So, this is one more point you should discuss with your vendor in advance. Reliable software development companies usually encourage the customers to control the process by scheduling communication sessions with PM and the developers and reporting to the customer, according to the pre-agreed schedule. The projects created according to the Time and Materials contract also often imply using the time tracking software so that the customer can be fully aware that they pay for the actual work done. Consider these opportunities and discuss them with your development partner in advance.

5. Non-Transparent Pricing

The opportunity to optimize the development budget and save it because of the programmers' salary gap is one of the main reasons why companies choose to outsource their development tasks. Still, non-transparent pricing, and as a result, overpaying and overspending is one of the software development outsourcing risks. 

Here is a step-by-step algorithm on how to avoid them.

  • Choose the type of contract wisely.

 As you know, there are three types of contracts in software development outsourcing, and each of them is suitable for fundamentally different projects. While Fixed price is a good fit for small and predictable solutions, Time and Materials contract, in turn, allows you to pay for the actual time and resources you have used. A dedicated team, in turn, is a choice for the long run, which allows you to hire a tech team that will be fully committed to your project development. 

  • Agree on pricing in advance

Usually, it is calculated based on the team members’ salaries per month. Make sure to agree on a clear amount before the development project starts. 

6. Lack of Aligned Vision

Running the process remotely is another risk for software development projects being outsourced. While this tactic allows you to save operational costs, remote communication and project management are always riskier in terms of a common vision. That’s why you have to do your best to align it with your development vendor in advance. Gathering Software Requirements Specifications (SRS) is the best practice to do it. 

Long story short, SRS is a document that highlights the business objectives, project requirements, the necessary resources, and technical and design features that have to be created for a Minimum Viable Product (MVP). As a rule, the Business Analyst, Project Manager, and Team Lead are working together with the future product owner to create an MVP and make sure stakeholders and team members understand each other correctly. SRS serves as the main guideline of the development process, so creating it insures you from other risks of outsourcing software development, for instance, overpaying for unnecessary features. 

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7. Data Privacy Issues

The issue of data privacy is also always relevant, especially when it comes to data-sensitive projects. The first and main thing to protect you from data misuse is a Non-disclosure agreement (NDA), which you should never hesitate to sign and insist on signing it. Never partner with a company that refuses to sign an NDA due to it being one of the best customer data protection practices in software development outsourcing. This document also protects your code, your ideas, and your intellectual property rights.

Secondly, make sure the company follows data protection practices when it comes to the development itself. Most of the apps developed now should be compliant with GDPR (General Data Protection Regulation), plus there can be additional legislation for specific projects. For example, eHealth solutions should be HIPAA-compliant as well.

And lastly, make sure the company you intend to partner with has no data leaks and related issues. Researching previous customers' feedback is the easier way to do it. We at A-Team Global, for example, are proud to have no single data leak issue for more than ten years of us helping our customers’ businesses grow. 

8. Lack of Resources

The opportunity to quickly scale the team (or reduce it and avoid overpaying) is among the main reasons to outsource your software development, especially if you would like to create a large project according to Agile methodology. However, the issues of team scaling are always urgent and driven by the business environment, so the software development vendors have to respond to them quickly and source the necessary talents for their customers.

So, if you are on the way to creating an Agile project that is projected to be scaled, make sure your vendor has enough resources and well-established hiring practices to support your need for additional talents. The best practice to do it is to specify this condition in a contract, setting the terms and requirements the vendor should meet in the case of a team scaling.

9. Code Quality Issues

Evaluating the code quality is impossible until the code is written and tested. And this is what makes this risk pretty serious - the time and resources are usually already spent when the code quality issue becomes relevant. So you have to make sure the code that will power your app will be clear, readable, understandable, reusable, and testable in advance. Below are some of the best practices to do it.

  • Get back to the company’s portfolio and evaluate their expertise one more time. For example, here are our case studies so that you can get an instant idea of our core competencies.
  • Choose some solutions from the portfolio and compare them with your project expectations. Browse the websites, download the apps and evaluate the experience you get. 
  • Discuss the process of quality assurance in advance. Find out what tools and approaches the company uses to make sure of code quality. Usually, the software solutions are tested using a mix of manual and automated tactics. Agile projects created with the DevOps approach in mind should be tested and integrated step by step, to find the errors as early as possible and save development time. 
  • Consider Code Review as a Service. In this case, you have to hire an independent contractor to evaluate the quality of the code created by your development vendor. Discuss this opportunity with the vendor beforehand and add this condition to the contract. 

10. Constant Delays

This is the most unpleasant risk that is almost impossible to deal with. While your software is still created by people, you can’t be 100% immune from mistakes and delays. But fortunately, you can prevent this issue. And you might have guessed it right - choosing a reliable software development vendor with a proven reputation decreases the risks of failed deadlines significantly. 

In one of our recent articles, we have already shared how to choose a software development company, so below are some of the tips to help you prevent delivery delays and deadlines failures as well as to overcome software outsourcing challenges

  • Get an idea of how the company keeps its promises from the very beginning. For example, ask them to send a proposal in two-three days and check whether it will be sent on time. 
  • Know your rights. Usually, the terms of result delivery are clearly defined in a contract, protecting the customer from undelivered results and failed deadlines. Carefully study this section of a document to be fully aware of what you can require from your vendor. 
  • Stay involved. And as the best practice to deal with constant delays, stay involved and engaged in your project development. Control, communicate, and ask your questions. 


We’ve run through the major risks and benefits of outsourcing. There are several essential risks when it comes to outsourcing your project development. But fortunately, most risks of IT outsourcing can be instantly mitigated by partnering with a trusted development vendor. With a reliable company, you can stay calm about having a mutual vision, communicating the issues and resolving them fast, staying in control, paying a fair price, and getting the service of the highest-end level.

A-Team Global is proud of our top-notch reputation and the advanced level of tech support we provide our customers. Being an outsourcing and outstaffing development company for ten years already, we have been partnering with most of our customers for years, helping them transform their businesses and scale. 

We are also proud to have vetted developers, well-versed in modern technologies, and experienced with foreign project development. You are welcome to meet them right now by contacting us! 

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