How to Mitigate IT Outsourcing Risks?

Indeed, outsourcing is one of the best business strategies that can help you accelerate your business growth. But one cannot overlook the potential outsourcing risks associated with the strategy.

The loss of control on the process and management can significantly impact the cost & quality. With a rise in the outsourcing industry, numerous companies are joining this race. Companies are willing to either work on IT staff augmentation model, i.e; hire developers only or outsource the complete project.

In fact, a lot of companies are also setting up their offshore development center. However, the lack of required knowledge and awareness is increasing the aptitude of risk. Fret not, every problem has a solution.

Outsourcing Risks and How to Mitigate Them!

How to Mitigate Risks Associated with IT Outsourcing?

1. Losing Control of Process & Management

While outsourcing, there's a chance that you may end up losing control over the development process. Your outsourcing partner gets the upper hand of the process & manages the whole project. In short, your offshore development center will become in charge of internal staffing & other significant decisions.

If both parties are not on the same page, potential issues might knock your doors. Slowly and steadily, the risk factor will escalate & the lack of communication will lead to raising more issues.

How to Mitigate this Outsourcing Risk?

• Clearly outline your objectives, requirements, and expectations.
• Pen down each and every detail.
• Decide the meeting times and keep all the communication & project details in one place.
• Before the collaboration, create a project charter and define milestones.

Planning is the first step. And if you will follow the plan with effective communication, it will solve 90% of the outsourcing risks.

2. Quality Matters

It may be hard for others to understand how your business works. However, to make any collaboration successful, it's necessary to have a profound insight into the client's business model. Therefore, it's very crucial for your technology partner to comprehend your industry thoroughly. A thought that your outsourcing partner doesn't understand your business may put you in dilemma.

A perfect way to mitigate this outsourcing risk is to perform a detailed background check of their working experience. While hiring, every outsourcing partner will portray an incredible image.

But how can you trust that what they are saying stands true? To ensure it, connect with at least 3-4 organizations that are/were associated with your shortlisted outsourcing partner earlier.

Their opinion will help you get a deep insight into your future association. In case, they hesitate to provide you the details, make sure to get cautious at that very point. It’s a red flag!

3. Hidden Costs

Cost plays an important role while making the outsourcing decision. Approximately 59% of the companies outsource to reduce the development cost. This cost is in terms of;

• Overhead Salary (hourly cost of a developer)
• Other Employee Benefits (increments, training, etc.)
• Infrastructure (hardware & software

Cost reduction, elimination of hiring hassle, and infrastructure cost make the outsourcing options viable.

Risk assessment is homework that has no shortcut. Service Level Agreements (SLA) are the only way to prevent yourself from this outsourcing risk. Address the following questions beforehand:

• How long will they provide post-development support?
• What will be the upgradation costs?
• How much end product will cost in total?
• What deliverables should you expect?

A satisfactory answer to the above questions can help you establish trust in the collaboration, making your outsourcing journey blissful.

4. Legal Aspects

Intellectual Property Rights is another concern when evaluating outsourcing risks. It is imperative to protect your company from potential software theft by the outsourcing partner.

A confidentiality agreement or NDA should be signed by both parties, to ensure that important & highly delicate information of the project is safeguarded from hackers or any such persons with mala fide intentions. Make sure to include the following clauses in the agreement:

• Payment Clause

• Exit Clause

• Time Clause

• Confidentiality Clause

• Performance Clause

Parting Note!

Risk assessment is an important part of outsourcing. In fact, it's important than the process itself. Why? It's because the process must be developed and implemented safely with high-quality standards.

You must take care of risk assessment at the initial stages to avoid such issues. Your concern at the initial stage will shape the future of your development process!