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May 15, 2018

Why Most Software Outsourcing Companies Aren’t Good Enough

You have standards for developers you hire for your internal software team and also for how they should work together. Likewise, when you outsource software development your vendor should also meet your high standards. But, what exactly are the standards? Hiring an employee is very different from vetting an offshore or nearshore software company

Most business and tech leaders don’t have deep experience searching the world for the best software outsourcing company. Many simply ask a friend or work with a team they’ve previously worked with - but that doesn’t mean you’ve found the best vendor.

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Beware. Research indicates that 97% of the software outsourcing companies out there don’t have the experience you need.

Chances are high that the vendors you’re considering have warning flags that indicate high risk for the software you’re about to outsource. You just have to know  what those flags look like.

You might not investigate software outsourcing every day, but we do. Our research team studies the global landscape, who’s who, who’s where, what they do and what they charge to do it. And guess what? 97% of the companies we review do not pass our first round of reviews. We wouldn’t hire them - and neither should you.

Here’s a few tips from the Accelerance Research Team on what to look out for.

Too Many Junior Developers

It’s laudable that many software outsourcing companies provide career opportunities to new graduates from local universities. Although they cost less (more about pricing below), you don’t want a team of inexperienced newbies or “freshers”. It’s fine to recruit recent graduates, however, they should only make up a small percentage of new hires.

What to look for:

  • Pipeline of Candidates - Software outsourcing companies are always recruiting. A good company should have a full pipeline of pre-screened and desirable candidates in their local market to quickly build a team and scale to meet demand.
  • Meaningful Definition of Seniority - Listen for stories of the outsourcing company downgrading the title of a new hire (i.e., candidates who want to jump from junior to senior developer.) Only hire a company who objectively tests the skills of candidates and doesn’t tolerate title inflation.
  • Robust Technical Interviews - Find out how your software outsourcing vendor interviews for technical skills. The hiring process should include tests on basic programming concepts, coding, etc. See if they’re as comprehensive as what you do for your own hiring - or better!

No US or Western Footprint

Every software outsourcing company wants to break into the North American (and other Western) markets. Early stage software outsourcing companies often break into the business with small projects on freelance sites like UpWork and with projects for clients with whom they already have a personal connection. But you should only hire a team with an established track record before you hire them for your business-critical app development.

What to look for:

  • Senior leaders who have worked in US
  • Offices in US
  • References with US clients
  • An engineering and problem solving company culture
  • 80% of their clients are Western businesses

You don’t want to be any company’s first outsourcing client. Communication will be awkward and they will not understand Western business practices.

Too Small, Too Big

Your software outsourcing company should be the right size - which depends on how many developers you need over the life of your software development engagement. The idea of “the bigger, the better” doesn’t apply to selecting a software outsourcing partner. Here’s an example.

One of our clients (you’d definitely recognize their name) had several development teams totaling 80 developers - but they weren’t getting the attention and quality they needed because the large software vendor they selected had over 8,000 developers. Even though they’re a marquee client, they were only 1% of the large software outsourcing company’s business.

This led us to derive the Accelerance 5% Rule.

Screen Shot 2018-05-15 at 11.51.26 AM

What to look for:

Your development team size should be > 5% of the total number of developers employed by your software outsourcing partner:

If you need a 10 developer team, then the rule computes: 10 developers / 5% = 200, which means you should select a software outsourcing partner with < 200 developers.

A corollary to the 5% Rule is that your team shouldn’t be much more than 20% of the outsourcing company’s total developers. You’ll certainly get lots of attention, but you’ll benefit more from a larger, more diverse and innovative developer pool.

Accelerance uses size and growth to identify the best software outsourcing companies for our clients. Generally, Accelerance Partners have between 50 and 5,000 developers, a wide range to satisfy a variety of clients with different software development needs.  

Poor English (Translation Buttons Don’t Count)

Technical expertise is important, but so is emotional intelligence, teamwork and ability to communicate. Make sure the individual developer candidates hired by your software outsourcing company are evaluated for these skills too.

You’re looking for the ability to speak and converse, with a good understanding of written English. Websites that aren’t in English (translation buttons don’t count) are a warning flag that your potential outsourcing company doesn’t have the ability to work effectively with English-speaking clients.

The ability to speak English isn’t enough for software outsourcing. Communication styles and collaborate with your team is a completely different skill. For example, most Asian cultures are notoriously polite and individuals will defer to you as the client rather than challenge an incomplete or poorly defined feature. And many East Europeans speak so directly and emphatically they can come across as insensitive and lacking in empathy.

Most projects that fail, suffer from poor communication about system requirements and which features are the most important to implement.

What to look for:

  • Cross Cultural Communication - This goes both ways. Are employees trained to be aware of cultural communication differences? Are yours? When you hear “that will be difficult” from an Asian developer do you know it means, “no!”? Even idioms common in American English may confuse the best English speakers. A Ukrainian delivery manager at one of the Accelerance Partner companies laughed when he told me he didn’t know what it meant when a ticket agent at JFK told him he was “all set” when checking in for a flight. Imagine the confusion when we start throwing around baseball idioms and the listener can’t get to first base in understanding what we’re talking about.
  • Daily Standups - Or at least multiple standups per week. The lack of standup meetings can be the fault of the client, being unable to attend, but your software development company should be adamant about having both parties in attendance to avoid delays and poor development team performance.
  • Physical Meetings Periodic physical meetings with your outsourced development team and/or having key members visit you is a requirement to ensure good communication when building complex, business-critical apps. Be sure to visit your software outsourcing company at least quarterly. Accelerance Partners encourage visits and also handle travel arrangements, especially locally for lodging and transportation, to ensure an enjoyable trip. For example, Accelerance Partners often arrange a driver pick us up at the airport and take us to our hotel.

Unrealistic Software Outsourcing Pricing

Everyone wants a good deal and our annual global software outsourcing rates guide continues to be the most popular download from our website. Because of our continual research in the worldwide market, we know if an offshore or nearshore vendor quote is competitive for the region or if they’re a low-cost or high-cost outlier in their pricing.

What to look for:

  • Too Cheap - Beware of software outsourcing companies with the lowest rates. It’s usually a sign that they’re only hiring junior developers without the experience needed to code effectively and efficiently. In addition, juniors are too inexperienced to challenge you on your inevitably incomplete requirements. You’ll save per hour and pay more in time, rework and frustration.
  • Too Expensive - If you’re used to paying high salaries to your internal developers, then a slightly lower hourly rate from a software outsourcing company can seem like a deal. These outsourcing companies may be good at delivering software, but they also take advantage of their client’s ignorance of market rates for software outsourcing.

Cost savings is often the primary motivator for software outsourcing by executives and is a common cause of project failure. The perceived “savings” of a low rate are outweighed by the delays and additional costs caused by a failed project.

Talk to Accelerance

We encourage every business and tech leader, like yourself, to watch for the warning signs that create risk and low performance outsourcing. You might not have the budget, resources or even the time to vet and verify every single software vendor you come across, but we do.

Accelerance is a consulting firm that helps technology leaders create effective strategies for global software outsourcing through better planning, better partner selection, and better ongoing management. Talk to an Accelerance Advisor today to mitigate risk and outsource with confidence.


Mike McAuliffe

In his role as Managing Director, Mike advises technology and technology-enabled companies on effective strategies when building high-performing, global software engineering teams. He is a highly accomplished executive, with proven ability in innovating and implementing business-building strategies for recognized...

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