July 5, 2023
Outsourcing software development can speed up your product pipeline, cut costs and tap tech talent - but you need to choose your partner carefully.
The global IT outsourcing industry is set to reach $430 billion in value this year and is on track to double in size between 2016 and 2027.
Application outsourcing alone will amount to $120 billion in 2023 with businesses large and small choosing external partners to architect, develop and maintain the software that is integral to being a digital-first organization in the 21st century.
Having helped forge thousands of successful outsourcing partnerships over the last 20 years, we’ve seen firsthand the benefits a productive and mutually respectful outsourcing relationship can yield. But the outsourcing industry at large is littered with examples of partnerships gone wrong, projects derailed and reputations ruined.
All of that can be avoided by laying the groundwork to ensure you work with a software development partner that will be a great fit with your organization.
At Accelerance, we consider six key criteria when helping a client undertake due diligence on a potential software outsourcing partner.
Source: Accelerance Guide - Due Diligence in a Disrupted World
Let’s look at those six criteria in a bit more detail:
- Look for relevant experience: Assess the outsourcing company's experience and expertise in your industry or technology domain. Check their portfolio, case studies, and client testimonials to ensure they have a proven track record of delivering projects similar to yours.
- Evaluate technical and management expertise: Evaluate the technical skills of the outsourcing company's developers or teams. Review their qualifications, certifications, and expertise in relevant programming languages, frameworks, or platforms. A well-structured project management approach is essential.
Assess the outsourcing company's project management methodologies, tools, and processes. Look for transparency, frequent progress updates, and their ability to adapt to changing requirements. - Analyze cost-effectiveness: While cost is a crucial factor, it should not be the sole determinant. Evaluate the outsourcing company's pricing structure, payment terms, and overall value proposition. Consider factors like quality, expertise, and long-term benefits rather than focusing solely on the lowest cost option.
Of course, developer hourly rates will be a major consideration. It may be helpful to undertake a benchmarking exercise to see how a potential partner stacks up against the rest of the market.
Determine if the outsourcing company has the capacity to scale their team or resources as your project evolves. This flexibility is vital to ensure timely project delivery and accommodate changing needs. - Consider cultural fit: Cultural alignment can greatly impact collaboration and project success. Assess the outsourcing company's work culture, values, and communication style to determine if they align with your organization's culture and expectations. Many of our clients actually travel, in some cases to Latin America, Asia, or Europe to spend time with a partner under consideration. There’s nothing like ‘breaking bread’ with a potential business partner to help establish whether you can productively work with them.
- Assess communication capabilities: Effective communication is crucial for successful outsourcing. Evaluate the outsourcing company's communication channels, language proficiency, and responsiveness. Regular and transparent communication will help ensure project alignment and minimize misunderstandings. Time zone differences are a practical consideration too when it comes to communication and collaboration. Determine if the outsourcing company's working hours align with your business needs to avoid significant delays or communication gaps.
- Check security and IP measures: Data security and confidentiality are critical considerations. Evaluate the outsourcing company's security practices, including data protection, access controls, and compliance with relevant regulations like GDPR (General Data Protection Regulation).
The Due Diligence Process
The Accelerance guide Due Diligence in a Disrupted World is a great starting place to learn how to apply those six criteria.
Part of your due diligence process should include performing thorough background checks, including reviewing client references and conducting interviews with key team members. This will help you gather insights into the outsourcing company's reliability, professionalism, and customer satisfaction.
Before approaching a potential software outsourcing partner, you also need to define your requirements. Clearly outline your project requirements, including goals, timelines, budget, and desired outcomes. This will help you evaluate potential outsourcing companies based on their ability to meet your needs.
The Accelerance Way
Accelerance can take the uncertainty out of choosing a software outsourcing partner. Our due diligence process is time- and volume-tested: We’ve used it to research 8,000-plus software development companies in more than 30 countries.
Only those that score in the top 1% of our rigorous validation process are included in our premium Accelerance Global Network as certified partners. We’ve done this groundwork to help you maximize your return on investment by choosing the right partner.
Check out our other useful guides:
Baseline: Evaluating Outsourcing Readiness - The Definitive Approach for Assessing and Mitigating Software Outsourcing Risks
Benchmarking: How To Make Sure You’re Right On The Money - A step-by-step approach on how to evaluate your current outsourcing partner contract
Get in touch to find out more about our partner matching and due diligence services.
