Top 6 Outsourcing Issues In Software Development and How To Avoid Them

Aug 04, 2022

Top 6 Outsourcing Issues In Software Development and How To Avoid Them

Outsourced software development, when done correctly, may give companies with a major competitive advantage, enabling innovation, sustainable growth, cost savings, budget/staffing flexibility, and a multitude of other benefits. It simplifies the life of the whole management team, making them seem good while adding value to the business. That is, of course, when it is done correctly. So, how can you avoid getting it wrong? 

In this article, we go through the typical issues which can appear when you make a decision to outsource the software development. What are these issues and how to avoid them, let’s find out below. 

What is software development outsourcing? 

Outsourcing software development means delegating some or all project tasks to a temporarily hired third party. In this case, the client typically delegated responsibility of a certain sector of business to a qualified external enterprise with the resources and competencies to tackle specific business difficulties.

Outsourcing software development is particularly appealing to companies which wish to incorporate brilliant developers from all around the world in their projects.

According to a Deloitte poll, over 70% of respondents utilize outsourcing to cut costs, 40% to provide workflow flexibility, and 57% believe that outsourcing helps businesses to focus on the core business components.

Why should you outsource software development? 

Techbenemoth gives us some stats which represent the valuable benefits of outsourcing. According to the survey results, the most important outsourcing benefits that businesses evaluate are cost-efficiency and flexibility.

  • 76.9% of respondents (or 300 companies) voted for both of these options.
  • As secondary benefits, outsourcing companies mention higher profits margins (38.5% or 150 companies)
  • A risk-free business model (35.4% or 138 companies) 
  • Access to new markets (36.9% or 144 companies).
  • On the other hand, 12 companies consider that outsourcing has no benefits.
  • Another 54 companies think that outsourcing has other benefits than those mentioned above.

Let’s check the main reasons for outsourcing: 

  • Saving costs.
  • Saving time. 
  • Experts on board.
  • Technological advancements. 
  • Flexibility.

We’ll come back to expand these reasons later, in our blog. But now, let’s stay focus on some significant issues when it comes to outsourcing and how to keep away from them: 

Issue #1 Uncertain and insufficient software requirements

It is crucial to be clear about your goals while outsourcing your software engineering project in order to ensure the project's success. One of the most typical mistakes companies make when outsourcing software development is failing to produce a properly specified, well-understood requirements document. It is critical that both sides have a clear knowledge of what is being requested rather than a foggy understanding.

How to avoid this issue? Maintain detailed documentation.

Create a complete information sharing plan, including features, technology, and code logic. Your chosen vendor should be able to understand the project simply by reviewing your published regulations. If this is insufficient, arrange calls or meetings with the outsourcing companies, your DevOps specialists, QA automation engineers, and developers to discuss potential risks and address any questions your vendor may have.

Issue #2 Finding the right outsourcing approach

Among other issues with outsourcing, you may have difficulty finding a vendor of the appropriate requirements. A large outsourcing agency may take a less personalized approach and charge you too much for your project. A small outsourcing agency may not have enough developers for your project size. 

On the other hand, this issue appears not only when it comes to the outsourcing agency size but when it’s needed to choose the appropriate approach. 

There are three common outsourcing models:

  • Time and material model;
  • Fixed-price contracts;
  • Dedicated development teams.

You may pick one of the models based on your goals, requirements, scope, duration, budget, and other criteria. How do you make your decision?

How to choose the vendor based on your goals? Let’s read about the mentioned models. 

The fixed price model requires you, as the client, to provide the complete list of project requirements, also known as scope, as well as the exact deadline and budget. Unfortunately, due to inflexibility, outsourcing teams are sometimes forced to sacrifice a few features in order to meet deadlines. Or it could go the other way, and you'll have to pay extra fees for developers' work as a result of unexpected changes. 

The time and material model is better suited for long-term partnerships and allows for on-the-fly changes. With this model, you only pay for the features that have been added, avoiding unnecessary costs and poor results.

Dedicated development teams are extra team members who fill a knowledge gap on your team. Instead of completely delegating your project, you will retain control and will have more skilled experts on your team.

Issue #3 Choosing a vendor based on the lower price

When it comes to choosing an outsourcing partner, many people make the mistake of focusing solely on price. The cost factor is important in decision making, but it should never be the only factor considered. Other factors to consider include their track record, experience, technical expertise, and how well the outsourced team can meet your needs.

How to meet cost-ratio value while choosing a vendor? Higher prices represent a better experience in expertise fields. 

It's vital that you keep in mind that you get what you pay for. If you choose the cheapest company, you may end up with a poor quality work product and poor service. Furthermore, if the project exceeds budget or takes longer than anticipated, you may end up paying more in the long run.

Issue #4 Finding a Reliable Vendor

Companies frequently choose an outsourcing partner based primarily on price, deciding on the lowest cost on the market while demanding a high quality product. Sure, cost is an important consideration when looking for offshore software development services, but it is far from the only one. So, in order to find your offshore developers, you must conduct extensive research and analysis that takes into account both cost and non-cost factors.

How to find a trustworthy outsourcing company? Deep research. 

Aside from establishing your business and technical requirements, you should investigate their operating model and market performance, type their name into a search engine and see what results you get, read reviews about the company and feedback from previous customers, review its portfolio, website, and so on.

Check out credible resources like Clutch, TopDevelopers, and DesignRush, as well as vendor websites, to learn about their cases and experience.

Issue #5 Unclear contracts

Unlike the in-house hiring process, the legal outsourcing process is not as standardized and is heavily influenced by the vendor's location. Depending on your location, you may be required to sign additional papers that are not part of the legal process. Outsourcing issues arise after contracts have been signed and work has begun; minor misunderstandings in the agreement may result in serious consequences that infect the entire dynamic between you and your vendor. 

How to avoid this? When it comes to signing papers, be diligent. 

Prepare an NDA for the outsourcing company to sign, as well as any other regulatory documents that may be required. Discuss every aspect of the process, including situations where your vendor fails to perform or makes a mistake, and don't forget to address security concerns. Your contract should include provisions for compensation, working conditions, freelancer responsibilities, ownership information, and other pertinent information.

Issue #6 Communication - is the key to successful collaboration

Whenether, you are just clarifying some details with the chosen vendor, or already have plans to add some significant features, you should specify the right time for both of you and the vendor to have the opportunity to make a decision together based on all pros and cons from both sides. 

To ensure project success, clear lines of communication must be established with the outsourcing partner. It can be difficult to reach out with questions or concerns if communication is not seamless, resulting in miscommunication and unnecessary frustration for both parties involved. 

How to avoid misunderstandings? Put in place continuous communication.

Make communication a priority in your workflow by incorporating calls, feedback loops, and other communication techniques into your project schedule. If possible, you can also meet in person at each other's offices to facilitate better understanding and increase empathy. Finally, use project management tools such as JIRA and Trello to stay in sync, and set up a shared GitHub board to share technical processes.


So, in addition to the numerous benefits of outsourcing software development, there are some drawbacks. Hopefully, the common mistakes highlighted in the article that startups make on their outsourcing journey will prevent you and your company from repeating them and making your experience smooth and successful.


Innovation Feel team can provide a skilled dedicated team to develop your product and, for sure, make your outsourcing experience successful and smooth. Text us and we will be in touch with you shortly! 

Related Articles

A Step-by-Step Guide to Mobile-First Design

A Step-by-Step Guide to Mobile-First Design

Breathtaking Upsides of IT Staff Augmentation Services for Your Business

Breathtaking Upsides of IT Staff Augmentation Services for Your Business

Top 15 Git Commands You Should Know To Become A Coding Ninja

Top 15 Git Commands You Should Know To Become A Coding Ninja