How to Choose a Software Outsourcing Company (The Right One)
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More chaptersOn the verge of digital transformation, software development outsourcing has proved to be an optimal solution for digital product engineering as it brings a package of benefits, namely cost-efficiency, access to a larger talent pool, faster time-to-market, and shorter go-to-market cycles. Thus, outsourcing is seen as a timely luck to accelerate business growth. That answers the increasing number of all-sized businesses, ranging from startups, SMBs, and enterprises, turning to delegate their software projects to intermediary companies. Unsurprisingly, 40% of global organizations plan to outsource more. In addition, the shortage of software developers is another good reason driving IT businesses to go with an outsourcing team or company.
In reality, 49% of IT projects fail. Do you know what may cause such results? The reasons leading to a software project failure are numerous. But in the context of outsourcing, picking the wrong software development partner is one huge mistake that any company tends to make, which may ruin the entire development process of a product or put your project in much trouble. As a result, you’d better learn how to choose right in order to avoid it. However, it is easier said than done.
As the global outsourcing market emerges at a fast pace, software outsourcing companies are sharply increasing in number, offering you a vast ocean of choices but also causing difficulty in filtering the best one. Most guides, tips, or tricks may give you the same “recipe” to succeed in outsourcing – get the right company, but very few of them are actually helpful enough to tell you exactly how to do it. If you were through a bad experience with a false outsourcing vendor before, then you are out of the wood now because we – Orient Software – are here to help. For those who have no clue, we introduce comprehensive instruction that guides you from stem to stern on how to find and select the right software outsourcing company to partner with.
Before You Look for a Software Development Outsourcing Partner
Before starting the search process, there are fundamental tasks on the list you need to cover, which will greatly help to visualize “your dream outsourcing partner”. Consider this the first stage of your vendor selection process.
Define Your Goals & Expectations
The very first step you all should take is to sit down and clarify your project requirements and whatever expectations you want to reap from an outsourcing partnership. Let’s begin to question your project team about all the aspects coming up in mind, ranging from the purposes of your outsourcing decision, desired outcomes, timeline, and budget limitations, what technologies and skills, as well as who should be working on the project. All of these will conceptualize a clear vision of the vendor’s selection criteria and help you shortlist a catalog of the best software outsourcing companies that can do the exact type of work you require (E.g., mobile app development, UI/UX design, quality assurance, and software testing, etc.) and deliver just what you expect.
Analyze Your In-House Resources & Competencies
Outsourcing is not always the only answer to a company’s need since you have an in-house development team. A thorough analysis of your in-house resources and capabilities is an essential step before selecting an outsourcing partner. It is essential for you to evaluate what competencies are missing, underperforming, or overutilized and make decisions on whether it needs to be backfilled, replaced, or simply augmented with external resources. As a result, you need to critically figure out which tasks should be delegated, areas that require external expertise or technologies to complement, and those you can afford to take care of yourself and the ones you cannot. Simply put, you outsource what you lack.
For instance, if you own a development team already and entail additional manpower, you can resort to IT staff augmentation services. But if you plan to build a team from scratch, you can consider contracting out a dedicated team or confiding the whole project to a third party. Also, consider different levels of involvement – part/full time - based on how much control over the software development process you seek. These answers are crucial for drawing up an effective decision-makers’ map. Once these criteria are determined, move forward to the next step.
Consider What Models of Outsourcing Best Suit Your Needs
There are many different models of outsourcing software development that a company can opt for. These outsourcing types are distinctive in setup, level of involvement, cost advantage, and much more, so it is recommended to figure out which one suits your needs the most.
Location-based Outsourcing Models
These setups are determined only by the geolocation and distance between the clients and the service providers, namely offshore, onshore, nearshore outsourcing, or hybrid (multisource outsourcing). The location-based types are primarily utilized to reduce development costs by leveraging the advantage of developer rates around the globe. Also, such models enable companies to tap into the global pool of talent and expertise which are not available in their locations.
Relationship-based Outsourcing Models
Such outsourcing setups as staff/team augmentation, dedicated teams, and project-based models are already common across almost all sectors; the information technology industry is where they truly shine. In this arrangement, the ownership and responsibility between a client and the software development outsourcing company toward a product are the main points of emphasis. In specific, the service provider will be in charge of the entire project’s development process, team formation, and project management based on the specifications provided by clients.
Your project managers will be in contact with the outsourcing company and receive frequent reports on the work progress and which areas require you to be involved in the project. This way, you can minimize the level of involvement of your internal team, which is one of the best things about these models. With your products developed by an outsourcing team, you can prioritize other tasks while keeping their budgets in hand.
Contract-based Outsourcing Models
Sometimes known as pricing-based models, these arrangements are created to concentrate on controlling product quality, payments, timelines, intellectual property protection needs, and others, with the ultimate goal of keeping development costs from breaking the bank. Clients and software development companies consent to a well-defined contractual agreement to work on a specified project, in which the contractors will provide the needed manpower, expertise, and services to wrap it up within negotiated budgets. This model shifts some of the risks onto suppliers by formalizing deliverables. Additionally, it enables a mutually beneficial relationship by incentivizing vendors to achieve higher-than-expected results in order to make ongoing collaborations more feasible. Considering that, projects with limited budgets are likely to prefer these models.
Time-and-material Model: In this contract-based setup, clients are charged for the actual hours spent on their software development projects in the form of monthly fees or hourly rates. This is a win-win situation in which software engineers and outsourcers are compensated rightfully for what they deliver while the clients receive outcomes proportional to the money they pay. As a result, service users have more freedom to change tasks and shift priorities whenever necessary with no worry about any predefined deliverables, hidden costs, or budget constraints. By reason of that, the time-and-material model is considered the best approach for mobile application development projects. More often than not, this model is paired with Agile methodologies.
Fixed-price Model: Clients and outsourcers define an upfront estimate of how much they need to spend, agree on a set cost of a software development project, and make certain that it does not exceed the specified limitations. Due to its essence, the Waterfall method is often employed for this model. As such, this model proves the best way to control development costs and take the financial burden off your shoulders. However, it does bring some limits in terms of scope changes or budget revisions. Therefore, fixed-price outsourcing arrangements are incredibly useful for those projects with known complexity levels and well-defined objectives.
Knowing which model works best for your project is also a fundamental step you must press on before looking for a software outsourcing partner. It’s better for you to ponder upon several questions to decide if a certain business model is suitable for your project or not: Is this business model compatible with my domain? Can I trust my chosen partner with full responsibility for the project? How much control will be given away in order to get desired outcomes? Do they specialize in working with startups, or do they have experience only in large-scale projects? Etc. Answer all these queries, and the results will lead you to a choice.
Determine What Software Development Services to Utilize
There are various types of software development services, and choosing the right form and level of engagement is central to your outsourcing success in specific and your long-term business success in general. Although any software development outsourcing company can promise you a full set of services, certainly, outsourcing vendors are not created equally regarding quality and core competencies. They promise you a complete suite of business consulting and IT outsourcing services, but each will specialize in some specific types of services. Thus, you should make sure to select a service provider that understands your business domain and can meet you at an intersection in which you and your partner can supplement each other in a win-win situation. Some of the most prevalent software outsourcing services available should be mentioned:
Custom Software Development
This refers to a general software engineering practice that involves the process of conceptualizing, developing, deploying, and maintaining custom-made software. In contrast to bespoke products, custom software solutions are built to meet the exact requirements and business goals you defined. Despite outsourcing development to third-party, businesses can get full visibility into the whole SDLC and have control over the finalized products. To this end, custom software development services covering different types of product development are the best way for those companies that seek to build and customize their own solutions at their disposal.
Web App Development
This service type involves outsourcing some courses or the entire development processes of web-based applications. Web app development services virtually include backend coding, front-end design, server setup, web hosting, database management, as well as dedicated support for the maintenance and scalability of your application. Moreover, specialized services such as custom CMS development, web application testing, and quality assurance are often included.
Mobile App Development
Much like web app development, mobile app development services are utilized to hire companies or full-fledged teams to conduct the complete cycle of mobile products, from laying the foundation, UI/UX research and design, backend coding, and app testing to deployment and post-launch support and maintenance. The sheer complexity of mobile applications is a major reason why it’s better to contract development to software companies rather than in-house teams or freelancers. To outsource mobile app development successfully, you must ensure that the chosen development partner has experience in such a type of product engineering and can provide you with the best quality services.
Quality Assurance & Software Testing
Software testing and quality assurance are the critical stages of any SDLC, ensuring that all software application components are tested thoroughly and validated to function as expected before the finalized product makes its way to the end users. Business leaders often consider several reasons to entrust the QA testing activities to outsourcing software development companies, typically mentioning the lack of in-house expertise, cost savings, and shorter launch cycles.
Cloud Solutions
Cloud computing services imply outsourcing the process of migrating data, applications, and other workloads to cloud platforms. Besides initial migration assistance, companies offering such services can assist in designing, deploying, and managing your cloud-based infrastructure. Broadly, most of the cloud-based services fall into one of the following categories: Software as a service (SaaS), Platform as a service (PaaS), Infrastructure as a service (IaaS), Anything/Everything as a service (XaaS), and Function as a Service (FaaS).
DevOps
DevOps is the acronym for “Development Operations,” and it is the practice of merging software development (Dev) and IT operations (Ops), facilitating seamless collaboration between them. DevOps services are related to the automation of various processes, such as CI/CD management, containerization, infrastructure orchestration, monitoring, etc. By engaging professional consulting services, businesses gain big aid in implementing DevOps practices and reap the promised benefits. Notably, they can wrap up projects and deliver innovative solutions in a shorter amount of time.
Artificial Intelligence
The AI market has seen tremendous growth over the last few years, with major tech giants and startups alike playing a big role in its development. For organizations willing to take advantage of the latest AI-driven services and solutions, outsourcing is often the preferred option due to cost savings and access to specialized knowledge. Outsourcing artificial intelligence services (natural language processing, computer vision, robotics process automation, etc.) also gives businesses the ability to try out various projects without having to invest heavily in them upfront.
In addition to the services mentioned, there are a lot more, such as big data analytics, Internet of Things (IoT), cyber security, etc., that you can consider utilizing. Always keep in mind that your choice of software development outsourcing services will powerfully link to your selection of vendors.
Get to Know Different Types of Outsourcing Contract
Prior to sourcing for a partner, you should educate yourself on outsourcing contracts if you strive to outsource software development projects or your IT needs successfully. These contracts are essentially formal records that outline the nitty-gritty details of expectations and agreements that have been discussed between the service user – you – and the service provider.
The documents often contain clauses related to quality standards, the scope of services, contract duration, price, delivery timeline, method and frequency of payments, and dispute resolution. Generally, you’ll come across some commonly used contract formats.
Fixed Price Contracts
The appropriately named fixed-price contract is one where you know the project scope beforehand, along with the exact cost to pay for it. This type of contracting works best when both parties involved are sure about what is expected from them in the end. The defining feature here is that whatever changes occur during the course of the project requires a written agreement between both sides before any modification can be implemented.
Time & Material Contracts
In contrast with fixed-price contracts, the time and material contract that is used in outsourcing software projects allow for more flexibility as it usually transcends a single project. As its name suggests, this type of agreement works on an hourly basis where you’re billed based on the amount of labor and resources used during the project’s duration. This approach provides higher scalability options but often comes with complex pricing structures.
Target-centric Contracts
Sometimes, you might see yourself in a situation where neither fixed-price nor time and material contracts are the right fit. In these cases, target-centric contracts can be used. They are based on predefined project objectives and measurable outcomes but allow for some flexibility in terms of how exactly it is achieved. This type of agreement is ideal when working with long-term projects or complicated software development processes that involve several phases.
Your final decision may have nothing to do with the initial choice once you vetted the outsourcing vendors as the contract clauses may fluctuate much or less post-negotiation, but familiarizing yourself with these contract types sets the firm foundation for your informed decision-making.
The Strategic Considerations in Vendor Selection
Don’t judge a book just by its cover; evaluate it thoroughly instead. There is a multitude of norms and ways to assess an outsourcing vendor. Oftentimes, the line between a good and bad software house is thin, and you can hardly perceive it. Therefore, being lost in your own expectations or misjudging a service provider is sometimes unavoidable, especially if you are a “rookie” in outsourcing. Therefore, getting to know these key attributes will help you see things more clearly when assessing a custom software development company:
Reputation
First and foremost, scout the market for top software outsourcing companies by reputation. Usually, a good service provider should receive positive reviews from their previous or current clients. After this first filter, you can sort out the most potential vendor from a general list of top-tier ones.
Costs
Statistics show that 59% of businesses claim that they outsource some departments to cut expenditures. Therefore, software development costs are the next big factor that you should keep an eye on. When it comes to considering one service provider over another, you should not go for the lowest or highest prices. Sometimes, high-priced companies do not necessarily mean the ones with the best quality. And the lowest prices are often implicit with risks. Instead of choosing either option, it is advisable to collect quotations from different service houses and compare them to rule out the unqualified ones in terms of prices, and then you can proceed to further assessment in other aspects before finalizing your selection.
Expertise & Skillset
In the IT sector, industry-specific expertise and skillset are the cruces that set a service vendor apart, but it is no exaggeration to say most software outsourcing companies sound impressive at first sight. Therefore, you – the service users – must stay focused and assess them with much respect to the technology stack. Let’s clarify that you are not into this to rank which is the leading software outsourcing company but to identify the right one who possesses enough know-how about your project needs, expected outcomes, and capabilities to fulfill them.
Security & Compliance
These are two fundamental aspects that businesses should never look over in the software outsourcing world. Ask your vendor to provide evidence of whether they can guarantee secure data transmission and follow industry standards for keeping confidential information safe. If a custom software development company does not prioritize these elements in its work process, it is advised to stop considering them and move ahead to other service vendors. Ensure that the software house is compliant with GDPR regulations and other data security standards. Also, make sure they are aware of technology-specific regulations like PCI DSS or HIPAA if needed.
Cultural Fit
The crux factor that makes up a long-term business partnership lies within the cultural fit. As software development is a kind of collaboration between the service provider and the user, it is essential to get on the same page in terms of culture and work ethics. You should make sure that you will be compatible when it comes to working style, language, communication channels, methodology, etc. If a vendor cannot meet conditions similar to or close enough to yours, it is better to move ahead with other software outsourcing service vendors. It may take some practice before you can identify the right cultural fit for your business, yet it is worth the effort because of the long-term returns it can bring.
Now that you have gained enough insights into what you should perceive well before scrutinizing any outsourcing company. Once you make up your mind with all the aforementioned preparations above, you are now ready to approach the services providers.
Best Practices to Find, Interview, & Hire the Best Software Outsourcing Company
The missing jigsaw for your business picture is nothing less than a software company providing professional software engineering and consulting services that can cater to your business needs. As such, to prevent you from falling for a reputable yet inappropriate partner, you should follow these best practices, of course, only after the first stage of preparation.
Decide Where to Outsource
The correct destination to outsource heavily varies on your purpose and requirements. And the good news; you have various options for outsourcing countries. For example, if you seek to reduce development and labor costs, outsourcing to offshore countries compared to your geolocation, such as Vietnam, will be nothing less than a good choice. On the other hand, if you are after high-end services and absolute convenience with a fast turnaround time, nearshore outsourcing may make a better choice.
Search for Potential Service Vendors
After targeting one specific location, it is now time to source potential service companies available in your chosen destination. For example, you decide to outsource to Vietnam and then start searching for a list of top software outsourcing houses within the country. There are multiple sources to find them and many ways to reach them. You can start Googling, ask for references from your business partners or clients, or spend time surfing the IT communities for info. A few of the most recommended sources to look for software outsourcing companies are Clutch, GoodFirms, IT Firms, and so on.
Conduct Due Diligence
Trust us; finding potential service providers is not the only daunting task you are about to accomplish. It is no exaggeration to say all vendors sound impressive from the outside, so you’d better verify information about them so as to have a thorough view of each.
Before meeting up with them, it is advised to do the background check beforehand, and you should never skip this part if you do not want to end up wasting your time later on. Even the top software development company has to go through this assessment prior to an interview. Particularly in this step, you need to assess their work experience, team scale, portfolio, technical stack, and last but not least, customer testimonials with no bias or gut feelings. This way, you gain true insights into the vendors’ capabilities and what they have delivered to the clients before you. Additionally, dig into the other details, such as work culture, project management methodologies, ownership, payment terms, and many nitty-gritty, ensuring theirs match your expectations.
At the end of the day, you undertake the practice to make sure the chosen companies have what it takes to meet your project’s scale, complexity, and requirements and, more importantly, to inspect their integrity and credibility.
Interview Shortlisted Vendors
You are not done yet. Be consistent because you are almost there. With the shortlisted candidates, you now continue to question them for further information. Of course, you can go straight to interviews without meeting them in person. But is it really wise? The answer is no because nothing compares with face-to-face meetings. You should schedule a meeting or two with each of the service providers and meet with them in their office. Virtual meetings should be fine too. This enables you to have a better understanding of their culture, working environment, and how they communicate and manage projects, as well as measure the chemistry and compatibility between your teams.
During the interview, do not forget to ask them about their knowledge proficiency in terms of technical understanding, team resources, and skillset, past project experiences. Also, don’t forget to inquire about their working process, the methodologies they use, and what tools they employ to manage their tasks, and make sure you pay attention to their communication protocols.
Even more importantly, clear up any confusion about the legal agreement, such as payment terms and Intellectual Property (IP) rights. This is crucial to ensure your business’s safety later on in case of disputes or risks. Briefly, question the vendors about nearly everything you are concerned about at this stage until you have nothing left to ask.
Note These Tips Down If You Want to Avoid Committing with the Wrong Partner
Outsourcing software development is nothing less than an adventurous journey; therefore, challenges are inevitable. When shortlisting your potential candidates, there are a number of things you should do and should avoid also. Keeping these tips in mind will be useful for your choice.
Do Not Go for the Cheapest or Even the Most Expensive
Needless to say, cost reduction is the biggest desire most businesses aim at when they partner with an outsourcing software development company. Unfortunately, choosing services or a software outsourcing company over another merely based on price is a huge mistake. Good services do not always mean costly, and vice versa.
Do not get tempted by low-priced services, as it is often a red flag for quality issues occurring later on. If you select a partner because their offer is the cheapest, you might pay two or three times more in the end.
You think you may save a considerable amount of money, but you then end up with a novice vendor who fails to deliver what you need. Due to the sub-par outcomes, you are left with no choice but to switch to another vendor and re-do the entire project from scratch, costing you more time, effort, and also money than you are supposed to spend.
The same goes for the most expensive ones, as it does not necessarily guarantee higher quality services either. So, make sure that you get what you paid for. The advice presented at this point is to prioritize compatibility over price and balance cost and quality.
The Technical Stack – the Fewer, the Better
The number of technologies listed in a company’s technical stack might speak louder than words, but not always. In software development outsourcing, you surely crave a partner who is an expert in the technology required for your project rather than a “jack of all trades, master of none.” Therefore, it is best to go for a service provider who has mastery over the fewer frameworks, programming languages, and tools that are essentially relevant to your project requirements than those who are well versed in many because you do not need or use that much after all.
For example, you want to start a web development project. Then, it will be wiser to select a software development company that lists HTML5, CSS3, and JavaScript as their main technologies, as these are the fundamental building blocks for creating any website. This way, when you limit your selection to those who have substantial experience in the specific technology stack you are looking for, you go one step closer to finding the right partner.
Do Not Settle with the First Vendor
Having said that, you should never fall into this trap, either. It pays off to compare multiple service providers as it allows you to make a better decision in terms of quality, budget, and overall value for your project. Therefore, do not rush when choosing or assessing an IT partner if you do not want to misjudge or make the wrong decision. Alternatively, you should take your time to find the chosen one.
Do Not Put All Your Eggs in One Basket
There will be nothing wrong with being loyal to your favorite service provider, but putting all your eggs in one basket can be a major cause of concern. That’s why it is vital to diversify your software development vendors. Even if you are absolutely confident about the services of your current partner, it is still advisable to select a few more service providers. This way, you will be able to assess the different approaches and solutions other vendors may bring forth and compare their ideas with yours. But there may be exceptions sometimes, so be flexible.
Orient Software Is Your Best Software Outsourcing Partner, No Less
We are Orient Software – the leading software outsourcing company from Vietnam, and we are here to be your best IT partner for all types of product development projects or IT manpower needs. Why partner with us? Simply because:
We Understand Your Business Domain
With almost two decades of experience, Orient Software is trusted by over 100 companies and brands that run businesses across industries from different regions of the world, and still counting. As a trustworthy IT partner, we have delivered over 250 successful projects. No doubt, we have plenty of cross-industry experience and insights that enable us to comprehend your project requirements, vision, and even the challenges you are likely to face so that we can tailor solutions that cater to your niche.
We Are Expanding All Around the World
We are present in most of the prominent high-tech locations. In specific, Orient Software is now available in four countries (including Vietnam, Japan, Singapore, and North America) with eight branches, including the headquarter in Ho Chi Minh City, offices in Da Nang city, Hanoi Capital city, Hue, and more on the way. By expanding our footprints across Vietnam in specific and worldwide in general, we aim to bring our best-in-class services to your door wherever you are soon.
We Offer You Premium Services
Orient Software helps organizations of all sizes and shapes to accelerate digital transformation as well as their business growth by bringing forth top-notch software development services. Our services are tailor-made to fit the specific needs of our clients, ensuring that they get precisely what they are looking for. On top of that, we also have a wide network of software engineers and developers who can work on any type of project or technology stack – from .NET to PHP, Java to Python, you name it.
We Stay on Top of the Latest Technologies
At Orient, we understand the importance of staying up-to-date with cutting-edge technologies and trends, such as artificial intelligence, blockchain, the Internet of Things (IoT), etc., and we are always looking for new opportunities to innovate while adding value to our client’s businesses. Therefore, you can rest assured that our choices of software development technologies and techniques are state-of-the-art and rooted in years of practical experience.
We Guarantee the Transparent Development Processes
Innovation, transparency, and agility are core principles at Orient Software. We keep our clients updated on the latest developments during each and every development phase, ensuring that you are fully aware of what’s happening around your project.
Let Orient Software accompany you in your outsourcing endeavor. What you need, we provide, indeed. Your right software outsourcing partner is only a few steps away.
Technical/Content Writer
Technical/Content Writer
