Evaluating Outsourcing Software Vendors: Key Criteria

When outsourcing any project, there is a lot to consider, from specializations to costs. This is especially true when it comes to software, which requires deep knowledge, strong skill sets, and a number of important requirements.

There are many software development outsourcing options, but not all of them are high quality. And while there are many benefits associated with the model – lower costs, a global talent pool and specialized skill sets, to name just a few – there are also many risks to consider . After all, you are entrusting projects and confidential information to teams that may be located in different countries or even continents, people you will probably never meet in person.

With so much to consider and so many software outsourcing providers to choose from, how do you know which one is right for your team and project? How can you evaluate each potential partner? Let's look at the main criteria for evaluating potential partners to help you decide.

#1 Technical Experience

Your first priority in supplier selection criteria should be technical knowledge and experience. You need an outsourcing provider who has the skills, knowledge and qualifications necessary to meet your needs and complete your software project successfully. While this is far from the only factor you should think about, it is obviously critical when considering any software outsourcing service.

Skills and Technologies

Part of demonstrating knowledge in the technical domain involves having experience using a variety of programming languages, tools, and technologies. Different languages ​​are better suited to different projects, so you'll want to educate yourself on the tools that are most appropriate for the product(s) you want the vendor to build.

For example, an Android developer must be well-versed in Java and Kotlin, while an iOS developer must know Swift and Objective-C. Meanwhile, for heavy data science projects, Python is a critical language to have experience in. Most dedicated development teams and individual developers know a wide variety of programming languages, in part because many projects require a combination of languages. Furthermore, having a large arsenal of tools allows you to serve different niches and types of projects.

Experience in Similar Projects

An outsourcing provider should not only have general technical skills, but they should also have experience working in similar niches to yours. If they have participated in similar projects, they will understand the complexities of the work and be aware of potential pitfalls and challenges, as well as essential product requirements.

You can get an idea of ​​a potential partner's experience with projects like yours by evaluating their portfolio, reading case studies, and asking for testimonials from past clients. Additionally, you should interview them about the types of projects they have worked on and ask about the challenges they have encountered and how they overcame them.

Development Methodologies

Software development vendors often specialize in specific methodologies, such as Agile. It is important that your preferences and the provider's methodologies are aligned. Ask about their best practices and flexibility. For example, if your preferred software practices are different, will the vendor be able and willing to adopt your methodology? What experience do they have working within your preferred methodology?

#2 Cultural Compatibility

Another important factor to consider is cultural compatibility. Shared languages ​​and working styles are helpful in achieving your goals. Specifically, here's what to think about.

Communication skills

Communication is the foundation of any successful working relationship. The development process can be complicated, and strong communication will allow you to overcome obstacles and stay informed throughout the project.

When working on an outsourcing project, you may partner with a team in another part of the world. Language barriers can be a problem, so it's important to know in advance whether the supplier is completely fluent in your native language. This will reduce the chances of miscommunication, which could negatively affect your project. To assess this, you should have the opportunity to speak to a responsible person or people on the supplier's team.

You should also ask about communication channels and ensure that your preferred methods align with your expectations and modes of connection.

Time zone differences

Time zone discrepancies can also create project management obstacles. If you have very different operating hours, resolving issues and communicating directly can be challenging.

If you are in completely different time zones, you should establish in advance what you will do in case of an emergency and how you will be able to contact each other. You must also define what constitutes special circumstances.

Cultural Alignment

In a work context, cultural alignment is important to satisfy business needs and combine work styles. When you partner with a third-party vendor in a completely different part of the world, this can be challenging.

To mitigate misalignments, you must evaluate this quality from the beginning. It's best to speak to a potential software vendor via video or at least over the phone to better understand how they operate in a business context. Discuss possible discrepancies and how you will work together to overcome them.

It's worth noting that when you work with a nearshore partner – that is, a company in a nearby country rather than one across the world – you're more likely to achieve cultural compatibility because these countries tend to share similar working standards. An offshore team – in a more distant country – could mean more language discrepancies, as they are in a very different area.

#3 Security and Compliance

Security is a critical component of the selection process when you evaluate potential suppliers. Data breaches and other cybersecurity issues can wreak havoc on your business, so you should choose a partner with a strong reputation that will protect you and remain compliant.

Data security practices

What cybersecurity practices and protocols does the software outsourcing vendor have in place to protect you? To understand them better, ask for evidence of their methods. This includes certifications they may have, as well as best practices and standards in place.

Legal and Regulatory Compliance

Digital technology and practices are governed by laws and regulations. Rules vary depending on the location or locations where the company operates, so it is critical that you consider your potential partner's geography and compliance knowledge during the vendor selection process.

For example, if your company operates in the EU, you must adhere to the General Data Protection Regulation ( GDPR ). As part of the process of evaluating software outsourcing providers for the processes they have in place to ensure they comply with all laws governing the specific area, location and technology itself. It is also important to consult your own legal/compliance team to understand the rules you must follow.

#4 Pricing and Contract Terms

Software providers operate under different pricing and cost models. During the supplier selection process, you will of course need to think about costs. Overall, software outsourcing is an ideal way to reduce the cost of your project, especially compared to the price of hiring full-time employees.

At the same time, cost is not the only factor you should consider. A lower price may ultimately mean a less successful project. You should always set a budget for the project, but you should think about what you will be paying for.

Pricing Models

There are several different pricing models that are commonly used in software outsourcing. Here we will describe some of the best known.

• Fixed price model: This model involves setting a pre-determined price for the entire project in advance. This means that no matter how much time the outsourced team spends on the project and what materials they use, the price will not change. This model is the most appropriate choice when the project scope is well defined from the beginning and circumstances are unlikely to change.

• Time and Material Model: This model is the opposite of the fixed price model. Here, you will only pay for the actual time and specific materials or resources that the supplier invests in the project, including the actual hours they spend on it and the equipment and materials they use, as well as the professionals they bring on board.

• Results-Based Model: This is a less common pricing model in software outsourcing, although there are some circumstances where it may better suit your needs. In this model, both parties agree on the specific results they want to achieve. The company only pays if the supplier successfully completes the project and achieves the milestones and results stipulated in advance.

• Profit Sharing Model: This model is best for early-stage companies and startups. In this case, the outsourcing partner agrees to receive a percentage of the revenue generated by the project or product they contributed to. This is the most collaborative type.

Companies should carefully consider which model is best suited for their project, weighing the pros and cons of each.

Contract Terms and Conditions

The agreement you establish must be solidified in writing – that is, through a contract. You should always set clear terms and conditions. This may involve negotiations on the part of the company and the supplier.

A contract includes terms and conditions far beyond the price itself. Some factors you should consider and include are:

• intellectual property right
• Confidentiality
• Dispute resolution procedures
• NDAs in effect
• SLAs or outsourcing service level agreements

Obviously, you will need to include terms that are specific and important to your business, and these will vary from organization to organization and vendor to vendor.

Software vendor selection process: step by step

Now let's look at the step-by-step process for evaluating and selecting software development companies to help you complete your project.

1. Establish your goals and requirements

Outsourcing software development projects always starts with knowing your own goals and objectives. Determine the necessary components of your product, including the requirements for a successful project. Additionally, define your objectives and deliverables for the project.

2. Determine the skills needed for the project

Once you've set your goals, determine the skills and qualifications you're looking for to help you achieve them. What knowledge is needed to carry out the project? Make a list of key qualifications and skills.

3. Establish a budget

Keeping your project goals and requirements in mind, establish a budget for your project. It's important to understand market demands and restrictions before setting a budget, so that you understand the norms and expectations regarding how much you will pay for your project.

When estimating your budget, remember that the cheapest software outsourcing provider is not always necessarily the best option. This is an important consideration when creating your overall plan – budgeting too little is risky and could mean a lower quality product. It is essential to balance your expectations of quality with price.

4. Choose the appropriate template for your project

• Increase in IT team
• Dedicated Teams
• End-to-end outsourced software development

Each model offers different advantages. For example, staff augmentation involves bringing in talent from the software vendor to work side by side with internal team members, while full outsourcing teams complete the project externally with their own key professionals on site. It's up to you to determine which model will work best for your organization and project.

5. Research your potential software development partner

As with any potential business partnership, it is important to conduct thorough research to determine whether your potential partner is a good fit for your project and organization. This research should go far beyond simply looking at the vendor's website – it should also involve investigating their reputation by reading reviews and analyzing resources like Clutch.

You should also examine the processes and procedures used by software vendors. You need to make sure your methodologies and criteria are aligned for the partnership to be successful, because compatibility is key, as are technical knowledge and skill sets.

6. Veterinarian and interview the supplier

According to your supplier selection criteria, do a thorough assessment of your supplier. This includes reading testimonials, reviewing portfolio and completing a full interview and skills assessment.

You can perform this process with multiple vendors before determining which software vendor is best suited for your organization and project.

7. Plan and start your project

This is far from the final step, but it gets you to the finish line of the software vendor evaluation process. With your supplier, create a detailed outline of the project and define any key points, such as how to maintain oversight and ask about measures implemented to ensure safety and compliance. This also includes defining key roles and responsibilities, from project managers to software developers to QA analysts.

When you are both satisfied with the plan, it is time to start the project.

Finding the Perfect Software Outsourcing Partner

Outsourcing software development brings countless benefits to your organization and internal team, from specialized skills to greater productivity and efficiency. But to reap the rewards of this type of partnership, you need to do your due diligence.

During your search for an outsourcing partner, you will need to evaluate a number of key factors, including technical skills, cultural compatibility, security measures and adherence to legal requirements, costs and more. If you conduct thorough research and take the time to conduct a thorough vendor selection process, you will increase your chances of finding the right outsourcing provider for your organization.

If you liked this article, be sure to check out some more articles about outsourcing.

• Pitfalls of Software Developer Outsourcing (and How to Avoid Them)
• Understanding and Selecting the Best Software Outsourcing Payment Model
• Common Outsourcing Services in the Fintech Industry
• Leveraging the Hybrid Outsourcing Model for Maximum Software Development Benefits

Common questions

How can I ensure that a software development company has the technical expertise needed for my project?

You can ensure that a software development company has the technical expertise needed for your project by performing technical skills assessments, reviewing portfolios, conducting interviews, and requesting references or client testimonials.

What are the key aspects of cultural compatibility that I should consider?

Cultural compatibility is critical to a successful outsourcing partnership. You can evaluate it according to factors such as English fluency, communication skills, time zone differences, and general cultural alignment – ​​something that is typically a quality of nearshore outsourcing partnerships.

How can I assess a vendor's commitment to data security and compliance?

You can assess a vendor's commitment to data security and compliance by performing a detailed and comprehensive review of the security protocols in place. Additionally, you should review their track record of success in managing data and taking secure measures with previous customers, as well as asking about the vendor's risk mitigation policies and certifications.