Software Development Outsourcing: Main Risks to Avoid

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.

Risks of Software Development Outsourcing Team

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.  

Risks of Software Development Outsourcing Hardware

#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. 

Risks of Software Development Outsourcing Developer

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. 

Risks of Software Development Outsourcing Work

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.


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!

Subscribe to updates
Share this article


Contact Us

By sending this form I confirm that I have read and accept Intellectsoft Privacy Policy

Something went wrong. Send form again, please.

Thank you for your response!

We have sent an email to acknowledge receipt of your request. In the event that you have not received our email, we kindly suggest checking your spam folder or alternatively, contacting us directly at

Send again

What’s Next?

  • We will send a short email notifying you that we successfully received your request and started working on it.
  • Our solution advisor analyzes your requirements and will reach back to you within 3 business days.
  • We may sign an optional mutual NDA within 1-2 business days to make sure you get the highest confidentiality level.
  • Our business development manager presents you an initial project estimation, ballpark figures, or our project recommendations within approximately 3-5 days.

Request a Free Quote

Our rating on Clutch
Our rating on Business of Apps

We have offices in:

San Francisco Oslo New York London

Contact us Request a Free Quote

Something went wrong. Send form again, please.