How to deal with IT project outsourcing

IT project outsourcing is everywhere, yet only a few know the ins and outs of this significant phenomenon.

According to Statista, the revenue in the IT outsourcing market is expected to grow from $430 billion to $587 billion by 2027. With the phenomenon in the open, many new opportunities arise. IT project outsourcing is a direct path toward access to global talent, faster time-to-market, less strain on HR, and cost-saving. However, to access these benefits, knowing the ins and outs of how software development outsourcing works is vital.

Keeping the aspects above in mind, to understand IT project outsourcing, one should cover several key areas. The research starts by determining when companies need to outsource, how a business can choose a correct outsourcing partner, what can be coined as clear project requirements, how one can effectively manage the outsourcing process, and the role of quality and security in all of these. Covering the areas above provides an in-depth perspective on what outsourcing software development is all about.

The whys and whens of outsourcing software development projects

The first aspect of dealing with IT project outsourcing is about understanding whether you need companies to outsource it in the first place. In such a context, here are six factors pointing out you need to outsource your IT project.

1. If there is a project requiring an array of skills to be dealt with, outsourcing is worth considering. In short, training your in-house teams is much costlier and takes longer than hiring a dedicated team with the skillset needed. Once you identify the skill gap, it is a good idea to start IT project outsourcing right away. Considering there are about 3.85 million IT jobs in the U.S. alone, it is not hard to find a professional with required competence.

2. If a project you are dealing with is too complex to be handled by the in-house team, you should consider outsourcing software development. The practice is particularly important when companies try to expand their operations without thinking about investing too much into in-house capacities.

3. If you have a limited budget or cost-efficiency is the top priority, then IT project outsourcing is the way to go. In a nutshell, outsourcing helps access global talent, offering services at different rates. For instance, while a software developer in the United States charges $40-$70 per hour, a software developer from Ukraine can complete the same task for $15-$30 per hour. Such a major difference in the cost allows companies to save money. Besides, software development outsourcing saves money on maintenance and HR-related activities like onboarding, hiring, and termination. Putting all these aspects together makes IT outsourcing a massive cost-saving tool.

4. If you have your in-house team focused on core competencies or business operations, and there are some second-priority tasks to be handled. To illustrate, imagine you have a team of developers working on the product’s backend. However, there is no one on the team who can deal with the front end. Respectively, while your in-house professionals handle more complex server-related tasks, you can have frontend outsourced to allow your experts to focus on core competencies.

The four aspects above are the key whens and whys in IT project outsourcing. If you have one or some of them applied to your case, it is time to consider software project outsourcing. At this point, if there is a need to outsource an IT project, the next critical step is to find the right partner to do that.

Choosing the right IT outsourcing partner

Perhaps, one of the most significant aspects of IT project outsourcing success is the ability to choose the correct outsourcing service provider or vendor. Respectively, here are the key steps for choosing the right outsourcing service provider or partner:

1. Have a clearly defined scope of work

Before looking for an IT project outsourcing partner, you need to know what you want the partner to achieve. In other words, prepare and write down a clear scope of work document containing all the functional and technical project requirements. Besides, make sure the document is not overly technical. Start by asking simple questions like – what is the exact need, and what is the best solution to that? In such a case, the outsourcing project’s success directly depends on how well the scope of work was defined.

2. Focus on vendor expertise

3. Double-check the partner’s reputation

Before signing a contract with a prospective IT outsourcing company, you must double-check its reputation. Go through third-party reviews websites like Clutch, GoodFirms, and G2. Specifically, look for client reviews to have an objective angle on how the outsourcing software development partner dealt with previous projects.

4. Communicate budget requirements

As it was mentioned earlier, cost-saving is one of the top priorities when choosing project outsourcing. If you want the service to match your expectations, it is vital to figure out and finalize the budget. Then, you need to communicate the budget to the outsourcing partner to know exactly what degree of project quality you can get for the money invested.

5. Have data and intellectual property protected

When outsourcing IT projects, it is vital to take care of data privacy and security. There is a high chance during the process that you will share sensitive business information with the outsourcing vendor. To protect sensitive data and intellectual property, prepare a nondisclosure agreement (NDA) and have it signed. Besides, it is good practice to hire an outsourcing vendor to conduct regular security audits and network check-ups.

6. Use the agile methodology

To increase the chance of project success, one must know how to accommodate the constantly changing customer needs. In other words, while outsourcing IT projects, consider agile methodologies. These offer rapid results in highly-collaborative environments.

7. Emphasize flexibility

Finally, during IT project outsourcing, one can face situations when project requirements change in the process. To meet the changes, it is vital to have a flexible outsourcing partner. Account for flexibility as of urgency and support before finalizing the outsourcing agreement.

After following the steps above, there are two choices to make. First, you can sign the outsourcing agreement and try to get the best out of it. Second, you can consider several more key aspects and increase the chances of success. If you are up to the second option, it is time to speak about the effective way to manage IT outsourcing relationships.

Managing IT outsourcing relationships

They have an effective workflow with your outsourcing partner and take care of these three aspects: communication, performance, and feedback. Each one has a major impact on the IT project outsourcing outcomes and makes a difference between time and money wasted and product development to bring competitive advantage.

Setting communication protocols and expectations

In addition, try to promote open and transparent communication. This will create an environment of trust and will help prevent miscommunication. To illustrate, when outsourcing software projects, for instance, a mobile app development, one might have weekly progress calls to stay up-to-date. Besides, one can have a dedicated project manager as a point of contact to create a bridge between the parties involved in IT project outsourcing.

Building up performance metrics and monitoring process

The next factor in managing IT outsourcing relationships is all about knowing how well an outsourcing partner does their job. To get such information, you need to have performance metrics and monitoring processes up and running. In most cases, the following Key Performance Indicators (KPIs) illustrate the software project outsourcing success: productivity, quality, and cost-saving. When you have the KPIs, you can monitor the progress against them as well as other project milestones. Overall, with metrics and progress reports, it is important to offer regular updates to stakeholders.

In addition, you need to work closely with an outsourcing vendor to address any performance issues as soon as they arise. The KPIs show gaps in performance. Communicate with the partner and find the solutions right away. In any case, failing to address performance issues in time results in software project outsourcing deadlines stretching and your budget thinning.

Working through regular status meetings and feedback loops

Proper management of IT project outsourcing is virtually impossible without regular feedback and status meetings. In short, status meetings are a great way to discuss project progress, address any challenges, and identify areas for improvement. Keeping a close eye on the project means avoiding costly errors in the later stages of development.

Besides, try to create an environment of open and constructive feedback from a development team on each side. This ensures a culture of continuous improvement and learning. Feedback can be translated into a more refined project process, and optimized workflows. Listen to the people who work with the project directly.

The above mentioned aspects ensure proper management of the software projects outsourcing process. Again, it all revolves around three key factors – communication, performance, and feedback. Yet, even if you know how to manage to outsource correctly, some critical aspects remain to consider, namely the quality of the outcomes and data security.

Taking care of IT project outsourcing quality and security

Quality and security are two bedrocks of any given IT outsourcing project. The primary thing you want is for experienced software outsourcing companies to provide top-notch quality services. The primary thing everyone involved in the outsourcing process wants is to preserve data security. If you don’t receive the expected quality of the outsourced project, there is no point in using outsourcing services in the first place. If data security during the outsourcing is not preserved, it can lead to costly litigation and overall project failure.

Here are the two key elements you need to consider to get a hold of both quality and security:

1. Comprehensive quality assurance plan

To make sure you get the needed quality for the costs paid, start by collaborating with the outsourcing partner to work out a comprehensive quality assurance plan. This document must necessarily include performance criteria, testing procedures, and expected outcomes. In such a case, you need to follow the SMART methodology, which means the established criteria should be specific, measurable, achievable, relevant, and time-bound. Set quality standards that are realistic to achieve.

When the quality assurance plan for custom software is ready, make sure to have regular testing and review procedures conducted throughout the entire project lifecycle. Besides, using industry-standard tools and methodologies to outsource software development is there. These can be JUnit, Selenium, and JIRA, to name a few.

2. Data security and compliance

Pondering the aspect of data security, there are particular things to do. First, work directly with the outsourcing partner to have robust data security protocols, which include access controls, encryption, and data transfer methods. Second, make sure the outsourcing partner adheres to data protection regulations like HIPAA and GDPR. Third, conduct regular security audits to address potential vulnerabilities. Keep in mind that, in some cases, noncompliance to standards like HIPAA can cost up to $1.5 million.

Adding to the above, you might want to check if the outsourcing vendor you work with has the necessary certification, such as ISO 9001 and CMMI. Besides taking the case to the highest level possible, it is a good practice to account for ethical standards used during the outsourcing project as well. The rule of thumb dictates – it is always better to deal with security concerns early on, namely because later on, they will cost way more. So, always double-check whether the needed data security and compliance standards are there.

Lessons learned with software development project outsourcing

Now, with all the insights above, it is time to sum up the lessons learned. From a broad perspective, we can talk about three key cornerstones of the best development practices, IT project management, and outsourcing:

1. Analyzed project outcomes with pre-established KPIs, gathered feedback from stakeholders, and data-driven insights. Learn from different sources and try to improve the project at any given stage of its lifecycle.

2. Learn from the IT outsourcing project to improve the potential projects coming later. This means having post-project reviews and having aspects like collaboration and communication refined.

3. Strengthen the existing partnerships to establish long-term collaboration. If you manage to find the perfect outsourcing partner, it is vital to get a hold of this vendor. Keep the communication lines open, help outsourcing partners to achieve project success, and focus on mutually beneficial partnerships.

The three lessons above virtually show that handling IT project outsourcing is such a team dynamic process. Everything can change really fast. Your management team and managed teams of your outsourcing partner need to be ready to address the changes and keep the proper project flow. Besides, with every successful outsourcing project and with every new challenge addressed, there is a higher chance the next project you outsource will be delivered without any significant hiccups.

The bottom line

To deal with IT project outsourcing, you need to consider various factors. From clear project requirements to open communication lines, much of the project’s success depends on how well you collaborate on what you want the outsourcing vendor to achieve and what the outsourcing partner has to offer. At any point in the process, emphasize performance, communication, and feedback.

Putting all the puzzle pieces with software development projects outsourcing is laborious and time-consuming. Perhaps, the best decision one can make is to ask for support. Our experts have decades of experience in IT project outsourcing and can help your business launch a successful software development outsourcing project. Contact us!