Mitigating Risks With Software Development Outsourcing

In the Oxford Dictionary, the term “outsourcing” is simply defined as obtaining goods or services by contract from an outside supplier (, n.d.).

When it comes to software development, the same is true, with many companies opting to use economically cheaper labour to extend or swap out their workforce in order to enhance their endeavours and reduce costs across the board.

Countries such as India, Russia, China and Mexico have a lower Cost of Living (, 2017) and are among the most common places to outsource to (Lisa DiCarlo, 2003).

With the immediate ability for companies to save money by outsourcing, it would appear to be the perfect thing to do, but unfortunately, there are always risks and tradeoffs with most decisions, of where outsourced software development is no lesser apparent.

There are many concerns with outsourcing, such as:

  • Data/Security Protection
  • Confidentiality
  • Loss of business knowledge
  • Failure to deliver / Timelines
  • Compliance and regulation oversights
  • Cultural
  • Communication
  • Hidden costs
  • Timezones

The top risks and tradeoffs are:

  • Communication
    • Identify and describe
      With a workforce being predominantly in another country where the primary language is plausibly not the same as the employer, with a different culture and idealisms, a truly high level of communication is extremely important.
    • How they could affect a project
      The inability to communicate fully from both sides means a project can easily be delivered incomplete or with different outcomes than expected.
    • Strategies for mitigating risks
      By having tight scheduled daily and weekly meetings, along with a decent online project management tool and a standard process to follow, communication issues can be averted and the gap can be narrowed considerably (Hugo Messer, 2010).
    • How these strategies will be effective
      By staying abreast of issues and creating an atmosphere of inclusion and support, both parties work better together towards the same expected outcome.
  • Hidden Costs
    • Identify and describe
      Many outsource providers underquote in order to get business, but then during a project?s lifespan, they will add in additional charges stating that circumstances have changed.
    • How they could affect a project
      One of the most beneficial reasons an employer may choose to use an outsourcing company is due to lower project costs than they themselves could do with an in-house team.
      When the supplier adds in additional costs, this benefit can easily slip away, leaving more disadvantages than advantages to using them in the first place.
    • Strategies for mitigating risks
      The only real way to mitigate against increasing project costs and hidden charges is by performing extensive project analysis and planning prior to commencement. Many companies have been known to place managers at suppliers premises, in order to stay on top of things from the inside (James Rubin, 2013).
    • How these strategies will be effective
      By removing any uncertain or unclear areas in a project plan, you guarantee less room for movement and misunderstandings.

References: (n.d.) Outsource [Online], Available from: (2017) Cost of Living Index for Country 2017 Mid-Year [Online], Available from:

Lisa DiCarlo (2003) Best Countries For Outsourcing [Online], Available from:

Hugo Messer (2010) How do we solve communication problems in (offshore) outsourcing? [Online] Blog, Available from:

James Rubin (2013) The Hidden Costs of Outsourcing [Online], Available from: