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How to Manage Software Outsourcing Vendors

  • 18-19 min read
  • July 19, 2021
  • 👍 Rating — 5 (4 votes)

A lot of companies make a decision to delegate their IT-related tasks to “outsourced partners” for the latter to do the work and meet the desired objectives. Software development accounts for the biggest share of this market, as the size of the application development segment is projected to reach a whopping nearly $109 billion in 2021

The popularity of outsourcing is a function of the convenience it brings to companies and also how lucrative and fruitful its results are. However, in spite of how wonderful the end benefits are, maintaining a successful partnership with a third-party vendor is art your company needs to master if it hasn’t done so already. Moreover, even then, there is always a chance that cooperation may lead to unsatisfactory results, your outsourced project may take more time and money than you’ve planned, or the communication with a vendor may overcomplicate the whole development process. 

Embracing vendor management principles and implementing relevant operations/best practices optimizes the collaboration with the outsourced team and helps bring the maximum value out of it.

GBKSOFT has wide experience working as a vendor for mid-sized companies and enterprises. In this article, we gathered and presented tips on IT outsourcing vendor management. We address the best practices our clients and us use in the partnership and highlight procedures that typically guarantee satisfaction with the project course of action and, more importantly, results.

Predominant reasons why companies choose to outsource 

The IT outsourcing market has seen rapid, unwavering growth year after year. However, this fact should not come as a surprise: hiring a third-party vendor for development brings about a great deal of benefits to the company. According to the Deloitte survey, the main reason for outsourcing is cost reduction, and this indicator is as relevant as ever today.

Reasons Why Enterprises Outsource

Source: Deloitte

Moreover, cooperating with a vendor is much quicker than hiring a developer or the whole IT department. Looking for a new employee is a complicated, and often protracted task, especially when it comes to onboarding long-term hires. But even when it comes to short-term contractors, there are some hurdles to overcome, for instance, they need to be tested to ensure that they have the necessary skills to perform the responsibilities that are expected of them. And creating a team from scratch is even more complex. You have to search for the right people by creating a suitable job description to disseminate via job posts or word of mouth, conduct several rounds of interviews, test skills, and pay for certain services as part of the aforementioned. The process may linger for months, causing delays in the deployment of your project. On the other hand, when looking for an outsourced vendor, you can get a decent result much sooner, cheaper, and likely with better quality outcomes. 

Companies also care about keeping their main priorities in focus and attended to, and that’s where outsourcing comes in handy as well. Software development, which is the most demanded IT function for outsourcing, takes a lot of resources and engagement from the team and management. Usually, you need to go through dozens of steps, such as specification writing, prototyping, designing, coding, testing and don’t underestimate the importance of always checking and introducing changes and corrections to the software during development, as well as maintaining it thereafter. So digging in for in-house development might distract and divert the focus of the company away from the main operations and goals. If you choose to outsource, your CTO, Procurement Manager, or Vendor Manager will take care of ironing everything out with the vendor the solution, while the rest of the team will remain focused on core business.

Have you ever worked with an IT vendor before?
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If you’re still unsure, let’s refer to other [big] companies, and even internet companies and assess their experiences with using IT outsourcing partners to meet their needs:

  • Alibaba, the Chinese e-commerce giant, turned to outsource at the beginning of its rise. The company needed to develop a website, and the lack of appropriate specialists in China prompted it to rely on a US vendor to fill in the gap. At the moment, Alibaba still uses outsourcing, although, for one reason or the other, they now resort to local partners.
  • One of the most famous consumer goods companies Unilever signed a lot of remarkable outsourcing deals with well-known tech companies, for example, IBM and HP. The company mostly outsourced the development and implementation of universal software, like ERP, to use for all international offices. It helped with cost savings and kept staff focused on the core business.
  • Slack, a messenger widely used in the workplace for business-related communication, has happily outsourced its redesign. Their vendor successfully reworked the company’s website, app interface, and even logo.

As you can see, a lot of enterprises, as well as mid-sized companies choose to outsource as in most cases it’s the most optimal decision for their growth and efficiency.

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Benefits of vendor outsourcing

At this point, you may be wondering what actually drives different businesses and even giant companies to resort to vendor outsourcing. The first and most obvious attractive reason is the lower price and the possibility to start and finish the development much faster. These days, it’s all about time to market so that’s certainly a very compelling argument in favor of choosing to outsource to software developers. And in the business world, time equals money. However, that being said, the financial side is not the only one that attracts companies and makes them choose outsourcing partners. Here are some other benefits that can be considered decision-making factors for businesses.

Experience 

Outsourcing companies create solutions for businesses all the time. They encounter a lot of bugs and issues on a daily basis and thus have already discovered and mastered the best problem-solving techniques. Moreover, when delivering a bunch of projects, the experienced vendor probably doesn’t see new problems that they haven’t seen before often. And hence sees the obvious issues and solutions instantly, while you might need some extra time for research and competitor analysis. 

Basically, when you are working with outsourced specialists, you receive quick and concentrated expertise and thought-through options for your desired solution.

Scalability

If your business is in need of scalability, and you need to develop an additional software solution or upgrade existing, hiring a vendor will be much wiser than looking for new employees. Usually, in-house IT teams are focused on maintaining current affairs, and there are typically few resources available for taking on additional workload. Initiating this process may take months. Hiring new developers is tedious and expensive, especially if additional help is needed only for a limited amount of time. 

In this case, the outsourced company is a perfect fit, as you will be provided with appropriate specialists who will immediately get down to business.

Access to wider expertise

Through outsourcing, you can get superb specialists involved in your project. Outsourcing companies have a wide range of developers possessing various levels of knowledge and experience. For example, GBKSOFT has specialists skilled in mobile and web development, as well as many programming languages and frameworks. Moreover, we add designers, QA engineers, and architects to every team to guarantee project quality. 

It is almost impossible to keep such a multi-skilled, multi-purpose team in-house, especially if your core business isn’t connected to software development. But you may still need to create complex, functional solutions for different platforms (for example, desktop, Android, and IOS apps), and then outsourcing is undoubtedly the right choice.

Challenges in outsourcing vendor management

Vendors give mid-sized and large businesses a lot of opportunities to grow, though, as we mentioned earlier, the final result isn’t guaranteed and could still be disappointing. 

Simply hiring an outsourced crew isn’t a silver bullet by itself. As with any complex and major project, it requires monitoring and focus. It is also complicated to work with totally new people who are unaware of your managing style, company values, and workflows. 

There are a lot of obstacles that you can encounter while cooperating with a vendor. However, it doesn’t mean that you need to decline outsourcing services at all. As they say, forewarned is forearmed, so evaluating possible risk is the right step for a positive experience with outsourcing. Let’s look through these challenges. 


Inflated budget & deadlines
The biggest risk is not surpassing the budget estimation mark. Of course, if you want to replace something you’ve planned, or, say, add new features, the budget and schedule may change as well. Some technical difficulties may also appear, for example, when your application requires integrations with third-party services. But it’s important to check your spending and evaluate if they are objective and realistic, or if the vendor is actually inflating the price.
Compliance
Nowadays, following compliance policies is crucial for any business. Breaking the conditions of GDPR, HIPAA, or PCI DSS brings a lot of legal, financial, and reputational issues. Your IT vendor should be aware of the main regulations of the industry your company works in and proceed accordingly. Another point is your internal compliances. Even with the most experienced or skilled vendor, you won’t be pleased if the partner refuses to follow your standards. As a result, conflict may arise.
Efficiency
It’s important to check the progress and performance of the outsourced team to make sure that the development is productive, and really is leading to the desired result. It’s quite possible that the outsources team will develop a great unique solution for your company without having any previous relevant experience, but that is less likely. It may take longer with the final result only being available in a few months time, and plans and estimations are usually floating and flexible and don’t end up matching with reality 100 percent of the time. So there is a question that arises: how do you keep track of real project progress and make sure that the vendor meets expectations? The answer is to have dedicated managers from both sides committed to the project, have regular reporting, and monitor intermediate, milestone results.
Security
There is always a risk of a breach when you give access to your data to a third party. It’s an inevitable threat in this case, as otherwise, you can deprive your vendor of the information required for successful development. On the other hand, you also have no control over the security measures of your vendor, so you should be ready to put a lot of trust in your partner. NDAs may be a solution. Every reliable company will agree to sign it which will protect your data from leaking or being disclosed, especially to competition.
Communication
Let’s admit: communication is key in any business relationship and at the same time it can be quite challenging to keep up good, transparent communication. When we encounter outsourcing, we get two companies with very different flows and approaches. Cooperation may have its ups and downs, there may be misunderstandings along the way as every party needs time to synchronize with each other. And also, don’t forget about timezone and cultural differences when you choose offshore vendors, they can also play a role in the efficiency of your project. Software development requires constant and accurate communication, but moreover, it requires adjustment and engagement. Thus, it is a big mistake to underestimate the importance of regular meet-ups or calls.

Tips on IT outsourcing vendor management

Through 10 years of our work, we have cooperated with a large number of partners all over the world. Therefore, we are used to managing and developing projects within the budget and timeframe that was initially agreed upon. 

Tips on IT Vendor Management

Our portfolio consists of projects that were of varying levels of difficulty and size. So we have a huge amount of good experience under our belts that we would love to share with you. Here you can find the most efficient advice on how to make your cooperation fruitful and good-spirited instead of nerve-wracking and wasteful.

Prepare accurate documentation from the beginning

While negotiating the contract with your vendor, make sure to aim for a contract that you will be comfortable following. Even if it’s a chore of your financial or legal team to review a contract, it’s better for a manager to be involved as well, as you will be the one to actually be working with the vendor. 

Your contract should identify and highlight the responsibilities of each side and have clauses for all kinds of possible applicable controversial situations. Thus, check if the project fits your standards, the scope of work and payment terms, limitations, and terminations. In the beginning, you should also consider if you need to sign other papers as well, for example, NDAs or GDPRs.

Provide relevant info and set realistic expectations

The outsourcing team usually knows how to develop the most appropriate solution for your needs. But it’s your responsibility to provide the context of why you are looking for a software solution. When describing your desired project, try to be as accurate as possible and not to spare any details. The more the vendor will know from the beginning, the more accurate planning and estimation will prove to be. Namely, share what problem or problems you encountered, why you decided to engage in and go with a development team, how the outsourced project should align with the goals of your company. 

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Estimation is the first step of our cooperation on a new project. Learn more about how we estimate software costs in this article.

Manage your expectations as well. Discuss the project length and budget with the vendor and refer to the comparable experience your development partner can provide you with so that you can get a ballpark idea of how your project development might go down. For example, if your project is a custom CRM development, you can learn how much time it took the vendor to develop a similar solution previously, what bottlenecks there were, and correct your internal plan accordingly.

Establish a reporting system

Every company may need reporting of different depth: for some, receiving weekly reports with details on what part of the budget has been expended will be enough, while others may ask for a wide and expansive report with details about touches and features that have been added over the past week to keep tighter control. 

Determine what amount of info you need for optimal management, but establish that right from the start, and be sure to discuss your plans with your development partner. Agree on the schedule of report submission as well as on its make-up of its contents. Consider how you want to receive the report: maybe you need to discuss it on a video call instead of just checking a spreadsheet or prepared a written-up summary that is shared with you. All of these things depend on personal style, personality, individuality, the details of which definitely should be ironed out before delving into a mutual business relationship. 

Use project management software

You’ve probably used dozens of different applications to manage different projects and teams. It turns out that it’s also useful for cooperation with vendors too. While the outsourced team tracks all the tasks, you can easily check the progress of the project and then point out, highlight, or specify anything that you consider important. 

Ask your partner to grant you access to their wikis or other software, so you can be empowered to track the progress yourself. Some of the most popular examples of such software are Jira and Confluence, widely used in companies with Agile practices.

Synchronize regularly

Regular synchronization is no less important than accurate contracts or realistic evaluations. Your engagement in the development is important, so don’t neglect calls or other forms of communication. If you have reservations, it’s better to voice them in the middle of development than at the end of it when everything is already said and done. Your feedback guides the developing team in the right direction, and thorough comments will be a helpful contribution towards creating a great application. 

Encourage video calls, as face-to-face communication makes synchronization easier and more genuine, and personable. With the help of Skype, Microsoft Teams, Google Meets, or Zoom it’s possible to connect with offshore teams from any place in the world, so why not use this fantastic opportunity?

Manage risks

We talked quite a lot about the risks associated with hiring a third party. They demand a lot of attention from your side, as you should be prepared to react and act in the worst-case scenarios. 

The main risks are connected with data security, payments, and compliance. Your goal here is to clearly identify the risks, evaluate their possible impact on the project and your company, as well as plan mitigation measures. 

Your information security is one of our main priorities. We always take measures to protect your data. Learn exactly how we do it in this article.

As your cooperation progresses, the risk profile will also change. We suggest reevaluating them every step of the way during your cooperation and adjust your plan accordingly. Keep track of possible threats and monitor the actual evolving situation, and you will be able to handle and control issues before they snowball to become insurmountable.

Trust your vendor

At the end of the day, having trust between you and your vendor is essential to your continued cooperation. It doesn’t mean that you should have a blind trust, performance monitoring is still necessary. Although, keep in mind that you’ve contacted a software development company for a reason, and you need to concede part of the control reins to the vendor. Being anxious, suspicious, or snoopy will only harm your relationship, and thus the quality of the project. But as soon as you find a partner who matches your standards and openly communicates with you, you will be able to rely on their expertise freely. 

Verify the competence and validity of your vendor even before you start your cooperation. Research their website, check testimonials and their profiles on special directories like Clutch or GoodFirms, look for other reviews. Ask your partner about their portfolio and learn how they establish and set up cooperation with their clients. Learn about their security measures. When you start your project, agree on the preferred communication channels. Ask if your vendor plans to give you access to the intermediate results, for example, prototypes. 

Transparent communication is a great basis for a trustworthy relationship, so stay open and motivate your partner to engage you more. 

Why choose GBKSOFT as your vendor for software development

GBKSOFT is a trusted vendor for more than 200 clients. We develop mobile and web solutions for business purposes, including the fields of business intelligence, healthcare, HR & recruitment, logistics, and others. Our clients highlight the following benefits from cooperation with us:


Transparent processes and progress tracking
We keep our clients updated and informed every step of the way during development. We start with estimation and specification writing to give you an approximate idea of the project’s projected budget and timeline. After the project is underway, we provide regular reports which can be customized for your business needs. As we work in Scrum, every two weeks we update on the results of the last sprint and notify about the next stage that is planned and demonstrate the features that were developed.
Efficient communication
We always keep our video calls productive and informative. Depending on your wishes and needs, we are ready to adjust to your time zones and preferred communication methods. Our clients also get access to our environments like Slack and Confluence, so they can examine the progress themselves and leave feedback whenever they want.
Guidance throughout the development process
Development may be tricky, especially when it comes to large projects. Some crucial technical aspects may not be obvious in the beginning, thus our Business Analysts concentrate on writing the quality specs and creating user flow. We also offer Discovery Stage before going into development, which allows us to prepare a strong base and set us up for successful project completion.
Deep immersion into your business
To create a truly meaningful application, we learn everything we can about your company. A deeper view of your goal and context, competitors, and audience analysis allows us to create a better strategy for application development.
Wide expertise
Our team consists of specialists with various knowledge of technologies. Therefore, we can provide you with different types of development and coverage of different kinds of applications, both web, and mobile.

In conclusion

Most of the time, business owners should resort to delegating their projects to develop software to experts. We promise that it will prove to be more than worth it over the long haul. Further, you should probably make a decision in favor of “outsourcing vendor management” as it is the most effective solution for any mid-sized or large business that hires a third party for software development. It gives you a complex vision of your partnership, insulates your business from unpleasant surprises, and provides a structure and platform for cooperation and collaboration, which is very important considering that many business owners value having control.

We suggest that you stay open and positive, but thorough while working with outsourced partners. Your goal is to accept your vendor as your ally, and that is guaranteed to bring you the best results. 

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Looking for an experienced vendor for your development?

GBKSOFT offers a full cycle of software development for business goals.

Your goal is to find a reliable vendor with transparent communication, good reviews, testimonials, and a quality portfolio. Find an outsourcing company that shows the expertise and experience you require, but also that you’re comfortable to cooperate with.
You need to embrace vendor management principles for successful cooperation. To break it down into a few basic and clearly defined steps, you need to perform the following actions: keep your partnership organized, stay engaged in the development, request regular synchronizations, plan risk assessment, and monitor vendor performance.
Olha Didenko

Creator

I believe that the tech sphere is one of the most important markets nowadays, therefore I like to dig into new trends and explain their main point in simple words. My interests include how new technologies improve our everyday life, including education, traveling, communication, and workflow.
Valeriia Dukhan

Expert

The project manager who is not afraid of challenges and is absolutely sure that the only way to success is actions. Experience of work with complex and high-loaded projects proved that impossible is nothing. So let's make your dream come true together!
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