5 Risks to Avoid in Software Development Outsourcing - Intellectsoft Blog

Updated: May 17, 2021

At present, outsourcing is considered to be one of the most popular employee sources in any area. According to the PwC, among the variety of the strategic reasons for its employment, leading positions still remain behind the cost savings.

However, that’s not the only one, since more than 70% of respondents say that outsourcing provides an excellent opportunity for different companies to access the talents.

The reasons why more and more organizations look for software development outsourcing are even more specific. Companies now accelerate the digital transformation, cloud technologies, and innovative solutions to automate the workflow and increase the return on investment (ROI).

However, to have a deep understanding of software development outsourcing, it’s critical to be also aware of the IT outsourcing risks companies can face during their employment.

Here we have covered the main insights about the problems of outsourcing and the ways they can be avoided. Let’s get started!

Types of Outsourcing Software Development and Its Advantages

To start with, outsourcing software development includes different models with specific characteristics. And, though all these have different outsourcing methods, each is targeted at providing the most profitable solution for the various organizations.

#1 Onsite Outsourcing

The model is used for employing talented professionals for a certain period of time to work in your company.

Benefits: This type helps to fill the lack of talents and improve the workflow efficiency inside your office. Besides, there is a great opportunity for the quick integration of a new worker to the existing team of developers.

#2 Onshore Outsourcing

The type which defines outsourcing of services to a provider within one country. The difference between it and onsite outsourcing is that the employees perform the tasks outside of your company.

Benefits: This type allows to minimize the expenses for the office space but always keeps the workers engaged with the company project.

#3 Nearshore Outsourcing

Indicates the outsourcing services that are performed from the country nearby, which offer lower labor costs due to the economical development of a country.

Benefits: Just like onshore outsourcing, there might be a slight time difference between the countries, which allows establishing a more productive workflow with paying less for the labor.

#4 Offshore Outsourcing

This type defines the outsourcing services provided from long-distant countries with a considerable time difference.

Benefits: Offshore outsourcing can be one of the most profitable ways for hiring talented employees on a temporary or permanent basis.

#5 Multisource Outsourcing

This type refers to a mixed way of outsourcing and is commonly used for hiring professional developers around the world. This model is used by different organizations to make the most of the multiple outsourcing providers.

Benefits: Get the best of the best around the world at a considerable expense for their work is the most common benefit for this type.

And, according to Deloitte, the main reason companies employ outsourcing models is cost-efficiency. After a project or a specific task is completed and the company doesn’t need the additional employee resources, the outsourcing is finished, thus saving the expenses for the permanent workers.

Along with the types of outsourcing, it’s significantly important to find out the risks of outsourcing to be aware of. As a rule, they include:

Weak management. One of the most common problems of outsourcing is the low management quality. It can lead to poor performance results and poor profit for the company.
Untrained staff. The risk of having troubles with a fresh-hired staff from a third-party provider can lead to the huge time and cost loss for teaching a new worker adjusting to the unknown tools and specific software.
Outdated skills and technologies. Outsourcing in IT also requires constantly following the trends in this industry to provide the best services to the clients. Without that, the companies will spend investments for getting nothing done at best, or showing poor progress at worst.
Hidden costs. The companies usually underestimate the management costs, including various expenses for the relocation, setup, and many other issues, thus getting the poor quality of the work done as a result. Also, they expect to get the ROI in the first year or even less, which is nearly impossible to be completed even by a high-professional vendor.
Lack of learning. Software development outsourcing should also include the organization’s learning to ensure the best performance and better prospects for development. A company and the outsourcing supplier should create a sustainable relationship that covers the unified strategy for both in-company and outsourcing talents. This way IT outsourcing risks will be mitigated, and the companies will work on the same wavelength.

All these and lots of other risks related to the technology, skill, or innovative solutions can significantly reduce the outsourcing efficiency for the company from any industry.

Without having all these outsourcing benefits and risks considered, there is a high possibility of losing huge investments, time, and resources.

5 Ways To Avoid These Risks

However, all these risks don’t mean outsourcing does nothing for the companies.

According to Deloitte, it still remains one of the most popular ways of getting the same quality of the services done, engaging more talents on demand and significantly reducing the expenses at the same time.

In general, there are lots of tips to resolve the common problems of outsourcing. Here are the most effective and usable ones:

Improve the Management Control

As soon as your company decides to employ the onboarding processes, it’s important to establish a reliable connection between your team and the hired IT developers.

Define the communication channels and provide the project details your team has worked with. Remember, the outsourcing process is aimed at helping organizations accomplishing various tasks and projects, not to compete.

Additionally, divide the tasks and responsibilities of each member of the development team, set up accurate deadlines, and offer the report system for the performance tracking.

Learn the Employees’ Experience

Before you start working on a permanent basis with your onboarding team, make sure their skills level perfectly fits the tasks and the criteria you expect they will perform in further.

For this purpose, outsourcing experts suggest the trial outsourcing periods for checking the performance of the team. This way it becomes easier to check whether the vendor’s outsourcing services can be used for your company projects.

Furthermore, to minimize the software development risks you can also send the trial task to be done for a set period of time.

After it’s completed, you can estimate the potential of your workers according to the work done and whether this team is worth onboarding.

Provide the Requirements for the Technologies Employed

Any company has a concrete set of tools used for completing various projects, communicating with the departments and team members, etc.

If you’re planning to employ any type of onboarding for your company, it’s critical to make sure that both teams of developers use the same software for the performance of the various tasks.

To ensure that, provide an opened access to the list of tools and software needed for the work. By using the united set of tools, the team members can easily share and access different materials without converting them.

Analyze the Front to Back Costs

The outsourcing costs could also have some hidden points companies don’t really pay attention to.

However, according to PwC, this can greatly influence the quality of the services performed, as not only the developers’ work should be covered but also the management and coordination, hardware and software updating, inventory coverage, and logistics should be included in these costs.

Outsourcing is a dynamic process that requires constant changes, updates, and improvements. With having all the costs covered, it becomes much easier to cover software development risks and provide an effective outsourcing process to your company.

Enhance the Organizational Learning

Last but not least, outsourcing software development risks are also connected to the lack of communication and learning between different departments.

The reason for this is that lots of companies don’t know how to provide effective learning or simply give up on this process, passing the responsibility to the outsourcing vendors.

As a result, the first months of cooperation are full of misunderstandings and low quality of the work done.

However, by incorporating organizational learning, companies can easily keep the in-company and onboarding workers aware of the latest updates in the company.

Besides, large corporations like Apple, Google, and Amazon have been using these training sessions during different workshops to improve the skills of each developer, enhance the team spirit and build the managing skills of every participant.

This simple type of training has led to performance improvement and better workflow organization as well.

Conclusion

To sum up, software development outsourcing has pretty many risks to consider, which might be challenging at first. However, after a deep understanding of the onboarding processes, companies can simply overcome these problems and get the most of this process implementation.

Needless to say, that the key component of any software development is having a dedicated development team. We, at Intellectsoft, know this as no one else does. Our team is here to empower companies and their workforces with innovative solutions and approaches.

So, if you’re looking for an experienced team that can help you with your project or idea development, talk to our experts right now, and discover how your business can start benefiting from it today!

The hospitality industry depends a lot on keeping customers happy, but it’s getting harder to attract and keep them. The pandemic hit this industry hard, and now market competition is tougher than ever, with competitive offerings swaying customers. Hospitality businesses are willing to spend big to win customers back. The main questions for many are: how can we stay ahead of the competition, keep our customers, and increase revenue? Keep reading—we’ve got some answers.

Customers today have so many options that getting their attention is a real challenge. It’s not easy to make them choose your business over others. What worked 10 years ago doesn’t work the same way now. Back then, people often chose businesses based on reputation. But with new types of businesses (boutique hotels, craft cafes) popping up or big enterprises getting a new strategy, expectations have changed. The good news is these businesses have shown what works: great customer service. They focus on personalizing the experience, making things easy for customers, offering loyalty programs, and using smart technology.

In this article, we’ll explore these tech strategies and show you how they can help your business grow, and double the revenue. Keep reading to learn more!

The Importance of Customer Satisfaction in the Hospitality Industry

Customer satisfaction, which equals exceptional customer experience, is the backbone of the hospitality industry. It plays a central role in driving revenue and loyalty, as satisfied customers are more likely to return and recommend a hotel, restaurant, or other hospitality business to others. In fact, a study by the Harvard Business Review found that a 1% increase in customer satisfaction can lead to a 0.5% increase in revenue. Moreover, loyal customers are more likely to forgive mistakes and continue doing business with a company, even if they experience a negative encounter.

Let's quickly review the challenges the hospitality industry is facing right now so we can move on to the solutions and our case studies.

Challenges in Hospitality

As businesses navigate the changes in the hospitality industry, there are some key areas where a little improvement can go a long way. From improving customer service to embracing digital transformation and tackling labor shortages, we’ll take a closer look at today’s biggest challenges—and, more importantly, how technology can step in to help. Let’s get started!

Poor Customer Service

Even with strong and high-quality business offerings, poor customer service can drive potential customers and existing customers away. Common issues include:

Long wait times in customer service queues (it is worth remembering that our attention spans 8 seconds, and we live in a very busy world, so quick and efficient responses are more important than ever.)
Poorly trained customer service representatives
Lack of follow-up
Services not being done properly or quickly
Recall issues that require multiple service calls

These problems can frustrate customers. But, at Intellectsoft, we believe that the right approach, combined with technology, can address them effectively.

Digital Transformation Gaps

Approximately 50% of hotels are adopting new technologies, with 43% automating repetitive tasks and 39% upgrading existing systems.
Source: workstaff.app

Source: workstaff.app

While many businesses are adopting digital solutions, some still struggle with outdated systems and fragmented data. Legacy companies often face chaos when trying to manage their data and create new systems or add features.

Some of the recent examples include clients coming to us to create AI solutions for their services while their data simply was not ready for the advanced tasks. We advise stepping back, communicating with a company objective, and working on keeping the data clean (centralized, structured, and segmented).

When we’re asked to create advanced systems using AI, we always emphasize the importance of organized data. To train AI and build such complicated systems that truly work, you need to start from the very beginning—collecting, storing, centralizing, and organizing it. We encourage our clients to align all departments to work internally on the data so we can create a unified digital system that delivers personalized experiences.

If you’re unsure where to start with your data, we can help. Collecting feedback at various touchpoints along the customer journey is crucial for gaining insights into customer satisfaction and loyalty. Book an IT consultation with us, and our experts will guide you in mapping out a path to get more from your data and build a system that works for your business and team.

Reskilling Staff

The pandemic hit hard in early 2020, especially for the hospitality and travel industries. Even five years later, many businesses are still feeling the impact. Recruiting and retaining skilled staff has become a major challenge post-pandemic.

Reskilling to address technology’s impact is of utmost importance, as about 40% of hotel General Managers place it among their top three workforce challenges.

Source: Deloitte

We strongly believe that adopting the right technology can help. For example, creating an app to train your staff not only saves time but also ensures consistency in learning. AI assistants can also work alongside your team, helping with tasks like recruitment (providing industry insights, crafting emails) and staff training. Imagine having an app dedicated to making your team’s work easier and more efficient!

How Technology Tackles These Challenges and Supports a Customer-Centric Hospitality Culture

Automation, AI, and similar technologies may threaten many. However, the debate about replacing humans isn’t about that—it’s about cooperation and working hand in hand with technology to achieve the highest standards and establish brand-new “golden standards.” Technology is here to assist staff in listening to and collecting customer insights from data.

Let’s review some of our cases to see examples of how technology helps improve customer experience and supports customer service.

Examples of Intellectsoft projects

Property management systems (PMS)

We created a web platform and mobile app that makes managing daily tasks easier and offers extra services to improve residents’ experience. It gives a clear overview of daily activities and helps with managing units and users. Residents can easily book amenities, submit service requests, and report incidents. The platform also includes features for equipment management, key instructions, workflows, and custom permissions. This makes it easier for staff to stay on top of equipment and ensure residents have all the information they need. Plus, tools like announcements, quick votes, a forum, and a community calendar help build a connected and engaged community.

Guest Experience Management App

Our next app helped our client improve their guest experience by replacing printed marketing materials and the need for phone calls with a smart solution. Now, guests can easily order in-room dining, make reservations, and interact with staff— through a simple tablet in their room. The solution includes three parts: a custom in-room tablet with a variety of services, an admin panel for hotel staff and service providers, and a backend system that connects everything together. This approach makes things easier for guests and staff, improving both convenience and efficiency.

Existing Customers First: Building Loyalty with Personalized Touchpoints

Keeping existing customers is not just a strategy; it’s well-known that retaining existing customers is more cost-effective than acquiring new ones. In fact, research shows that it costs five times more to acquire a new customer than to retain an existing one. KPMG named customer retention as the number one revenue driver for the company.

Moreover, a 5% increase in customer retention can lead to a 25% to 95% increase in profits, showing the significant impact loyal customers can have on a business’s bottom line. Retention strategies, like personalized experiences and loyalty programs, can foster long-term relationships and generate recurring revenue, ultimately making them an invaluable part of any business model.

Personalization: How Technology Can Help?

Everyone loves to feel special—it’s part of being human. In hospitality, personalization has evolved from being a luxury to an essential standard. With the right technology to manage your data effectively, you can deliver those “wow” moments that guests won’t forget.

More than half of hotel chains are already using personalization features on their websites, booking platforms, and apps, and another 39% are planning to follow suit soon. They’re tailoring experiences to fit guest preferences perfectly.

Source: Deloitte

How does technology make it happen?

CRM Systems: They help you keep track of guest preferences, booking history, and special requests so you can offer services tailored just for them.
Loyalty Programs: Personalized rewards and offers show your guests that you value them, keeping them coming back for more.
AI Personalization: AI analyzes guest data to predict what they’ll love (from room upgrades to local recommendations) before they even ask.
IoT Gadgets: Smart room features like voice-activated assistants, or temperature controls adjust to your guests’ preferences, making their stay more comfortable.

With tech-powered personalization, you’re building loyalty and maximizing the lifetime value of every customer.

Our Case Study: Smart Hotel Management & Loyalty Program

For one of our clients, we created a smart room solution, complete with a custom IoT system. Guests can use a mobile app to control services, explore amenities, and find resort information-- with a special touch to their suite type. For the client’s entertainment business, we improved their legacy software by running a full IT and code check, fixing issues, and making the system better for customers.

Along with that, we developed a mobile app for the loyalty program, allowing businesses to effortlessly reward their customers and keep them engaged with exclusive benefits.

Our solutions not only helped the client with special experiences for guests; it also improved operations, cutting costs by eliminating inefficiencies. Here's what our experts shared:

"We transitioned away from ESB (Enterprise Service Bus) systems, which previously cost millions, and replaced them with more efficient, self-managed solutions. Similarly, we’ve implemented Device Farms that improved operations and saved resources."

Leveraging Software to Increase Upsell Opportunities

Here are some examples of tech tactics that will help your team sell more and introduce new offerings to existing customers, improve overall efficiency leaving your team grateful:

Dynamic Pricing Algorithms

For finance and marketing teams, manually calculating pricing by segment to introduce your clients can be incredibly challenging. AI-powered tools can strongly optimize these strategies by analyzing your database in detail.

Upselling via Apps

Boosting revenue in the hospitality business often comes down to personalized experiences. Imagine this: a guest books a room, and then your app suggests a spa package or a room upgrade at just the right moment. Later, it nudges them to book a dinner reservation or a guided tour designed to their preferences. With apps offering these personalized recommendations during and after bookings, you’re not just increasing your revenue per guest but also skyrocketing their experience. And you do it in a sustainable way, not by speculating, but by offering what your customers desire based on their previous experiences. It’s a win-win: seamless, helpful, and far from pushy.

Inventory and Resource Management Software

Making every resource count in your hospitality business is key. Inventory and resource management software allows you to effortlessly track everything from linens to room availability, ensuring nothing goes to waste. Having real-time insights to reduce overstock, avoid shortages, and optimize operations assists sustainably keep everything under control and know what you need to focus more. It helps maximize room occupancy by aligning bookings with available resources, ensuring every room and item is used effectively. This approach leads to smarter management, better guest experiences, and a noticeable boost to your bottom line.

Adopting these strategies not only optimizes your operations but also drives business growth. Ready to discover how technology can elevate your goals? We’re here to create a tailored solution for you.

Steps For Implementing a Customer Service Technology Solution

Improving customer service in hospitality doesn’t have to be a daunting task. With the right technology, you can smooth the path of your operations, speed up response times, and elevate the overall guest experience. Here’s where you can make it happen:

1. Understand Your Needs

Start by identifying the challenges your business is facing. Are you struggling to manage high volumes of inquiries, track customer feedback, or personalize the guest experience? Pinpointing your needs will guide you to the best solutions.

2. Pick the Right Tools

Choose technology that aligns with your goals. Look for solutions that are scalable, easy to use, and integrate effortlessly with your current systems. Options like CRM software, live chat tools, or a guest experience app can make a difference.

3. Equip Your Team

Technology is only as effective as the people using it. Train your staff to make the most of the new tools, so they can deliver exceptional service and resolve issues quickly. Confident, well-equipped staff creates happy, loyal customers.

4. Keep Improving

Once implemented, monitor how well the solution works. Are response times improving? Are customers more satisfied? Regular evaluations will help you fine-tune your approach and keep things running harmoniously.

Some Tech Ideas for Hospitality Businesses

CRM Software: Manage customer interactions and preferences.
Guest Experience Apps: Delight guests with personalized experiences right at their fingertips.
Amenity Management Systems: Simplify operations for everything from room service to facility bookings.
Helpdesk Software: Resolve customer issues optimally.
Live Chat Tools: Offer instant support and answers.
Social Media Management Tools: Keep customer interactions engaging and organized.

Integrating these strategies will not only improve your customer service but also deliver unforgettable customer satisfaction, loyalty, and, ultimately, your bottom line. Ready to take the next step? Book a consultation with our experts.

Conclusion

To wrap up everything we've discussed, customer satisfaction and experience are at the heart of hospitality. Retaining customers is more than just keeping them around—building strong, long-lasting relationships and consistently meeting their evolving needs. By understanding their pain points and offering personalized solutions, you can inspire loyalty and drive progress. With the right technology and continuous improvement, your business can stay ahead, let go of what no longer serves you, and keep growing.

At Intellectsoft, with over 17 years of experience in software development, our expert team is ready to help. We create everything from mobile apps to full-fledged portals and systems, leveraging the latest technologies like AI, Cloud, and Machine Learning. With deep experience in the hospitality industry, we’re here to craft personalized solutions that bring your business unforgettable customer experience and retain your valuable clients.

Ready to double your revenue and level up your customer retention strategy with personalized technology? Contact our experts, and we look forward to working hand in hand with you to build or revitalize the perfect app or system for you.

Tetiana Borysova

Content Writer

Software Development Outsourcing: Main Risks to Avoid