12 factors you should pay attention when choosing an outsourcing company

Selecting a technology vendor to outsource to can be a challenge. A highly competitive environment and a growing number of outsourcing companies to choose from do not make your choice simpler. We are excited to share a list of factors you should look closely at since they can help you with each step of the verification process and improve your decision-making.

1. Experience in the relevant technology area and domain knowledge

Experience is a necessity in outsourcing. Imagine that your chosen technology vendor has experience in a different industry from yours and doesn’t understand your market sector. It might be a problem and cause unnecessary risk.

The outsourcer that you pick should have relevant experience. Why? Professionals should be able to help you and advise you. It isn’t enough to make decisions based on “gut feelings”; they need to have strong knowledge of a specific topic. Aside from a general business background, they must also understand your target system’s environment, which is crucial in software development.

More than anything else, this experience will give you peace of mind. You will know your project is in good hands and do not have to worry about its backbone.

2. References

Market reputation is equally important to experience. There is no sense in working with an experienced partner who constantly misses deadlines and doesn’t put the good of your project first.

Nowadays, it is easy to find out what people say about a company online. However, you should expand your research beyond forums or platforms with in-depth client reviews.

If you have any doubts or are considering several vendors, go one step further. Contact at least a few of their previous clients and learn about their outsourcing experiences. Contact them in person. The best way to choose a partner is to be confident that the company has many satisfied customers and is trustworthy.

3. Company culture

A collaboration between two companies works like a relationship. You both need to share the same values and understand each other easily. Partnerships in which these aspects are fulfilled are more likely to result in success.

Cross-cultural business can be tricky. Imagine a situation when a company from Western Europe works with a business from the South. Western societies think time is linear — deadlines are crucial to them; it’s the here and now count. Their decision-making tends to be quicker than Southern Europeans, who need a more personal approach to business decisions.

Their perception of time is different. Southerners’ way of work is more relaxed; they have time for responding, and good vibes are more important. These differences might create friction and misunderstandings.

Nevertheless, it’s possible to merge these two worlds. Whether you choose a company from your close surroundings or overseas, you should establish communication standards and the terms of collaboration. Consider the level of formality and data transparency. Develop a win-win situation.

4. Method of communication

We must highlight another aspect of an outsourcing relationship — clear communication between the company and its partner. It’s essential to set up a communication strategy to obtain transparent feedback.

It would help to establish how your communication will look before, during, and after the project. How much insight will you have into current activities? How much control will you have? You need to establish expectations and develop frameworks.

Face-to-face meetings are probably one of the most effective forms of communication. However, long-distance communication can be just as effective if you prepare correctly.

Select the communication channel, and make it part of your strategy to document everything pertinent to the project. To encourage active listening and feedback, create a handbook that outlines the organization’s culture. Remember that communicating effectively doesn’t always happen naturally but requires a plan.

5. Onboarding process for clients

What is the next thing to pay attention to? You should research the client onboarding process at a particular company. Before the kickoff, discuss with the vendor what their procedures are and what concrete steps they take.

It would be perfect if they have it carefully planned and tailored to your individual needs so that every step is clear and understandable for both parties.

How can you prepare for the onboarding process as a client? First, you can make a document containing all the information they need to get started, e.g., stating who the project’s stakeholders are.

Client onboarding is the best time to go through all of your questions. Introduce the business context and provide technical documentation. Building foundations early will allow you to create a solid framework and set mutual expectations.

6. Emergency plan and risk management

Managing risk effectively can be a determining factor in the project’s overall success. Your vendor needs to be prepared for the worst. Consider whether they have emergency plans, and identify, assess, and control threats.

They must be flexible to work under time pressure and hostile environments. It will maximize your safety if they put together a robust risk management plan that considers all possible hazards and unexpected events before they occur. This will protect the future of your company and save you money.

The outsourcing company should report on ensuring that the project keeps running smoothly and succeeds if an unexpected issue occurs during the project’s development.

7. Data management

Security and privacy of data are two of the biggest concerns nowadays, especially for businesses. When choosing the right technology vendor, remember that information about your customers and company will be in their hands. What does this mean?

When you outsource a project, you often have to share sensitive information with people outside the company. You must ensure that this data is entirely safe. Find out what data management at the company looks like, and ask for it to be explained.

You must ensure that they use the latest security technology and that all activities comply with GDPR. You must consider hiring a vendor who regularly checks their network and security systems. Make sure you take every necessary precaution to prevent any data leak.

8. Issue of rates

The issue of rates is an often forgotten aspect when determining the terms with an outsourcing company. Understand their pricing before making any decisions. How fees will be charged must be established from the outset.

You can recognize a professional company because their prices are entirely transparent. It will be apparent to you in advance how much you will pay, what for, and what to expect in the case of, e.g., an increased workload.

Don’t get trapped. Remember that a cheap, fast, yet great company doesn’t exist and that these three aspects don’t usually fit together. You might regret your decision if you only go for the lowest price.

It’s very likely that the company is inexperienced and will learn about your project, or the solution will have so many bugs that you will pay more money to fix them. Aim for a good balance between price and quality. Is it easier said than done?

Usually, yes. You must communicate your budget and how much money you will invest in the project. Otherwise, you and your vendor may not be able to meet halfway. Do you have a limited budget? Talk about it with the vendor. You might be able to split the project into stages or negotiate different conditions.

9. Project development

When selecting a vendor, you must also consider how the project will be developed. Does the company have a so-called project implementation manual? If so, you can see all the details of the project’s development and guidelines there.

With such an adequately prepared plan, you can avoid making hasty decisions. Moreover, you will understand the reporting process clearly and stay updated on all aspects of your project. Regular reporting is essential to keep your company informed about the development status.

The structure of the reporting should be defined before the project starts. If the company doesn’t want to compile it, that’s a red flag for your cooperation — they probably want to limit your insight into the project’s progress. If you cannot monitor obstacles (and milestones), you will not be able to react quickly once the project deviates from the terms of the contract.

10. Financial stability of the service provider

There’s nothing worse than hiring a service provider with financial issues that will cease operations before completing your project. It’s a significant risk you must avoid. An external problem such as a pandemic or third-party bankruptcy should not cause friction to your project.

That is why it’s essential to assess the financial stability of your potential vendor. Check the company’s insurance policy and ensure it can handle risks and unexpected issues.

Are there other steps to minimize the risk of hiring a company with financial difficulties? Make a background check — research the company’s credit history. It’ll give you insight into the company and enable you to ask relevant questions if you have any concerns.

In addition, you may ask the vendor for a financial statement. However, in most cases, private companies do not release such information. Take a close look at the provider’s growth plan. It’ll also tell you a lot about the situation in which the company finds itself.

11. High-quality product

That brings us to the final point of vendor evaluation and selection. Even though all of the aspects above contribute to high-quality service, there is one more crucial aspect of choosing a vendor. You need to ensure they will create high-quality code that meets specific standards.

How does the company take care of its code quality? Look for vendors who make mock-ups before writing the final code and improve it based on user feedback and opinions. Only then can you ensure they strive for the best product quality.

Before you turn to a particular company, check whether they perform code reviews and functional testing. Find a software vendor that tests for regression and manages backlogs. These precautions ensure that you will receive a robust product that has been thoroughly tested.

The implementation process is the starting point for them, not the end. The code needs to be well-tested and follow the best practices to achieve long-term success and allow your software to work without any bugs.

12. Subcontractor risk and quality management

Hiring an outsourcing company may bring with it some concerns. What if they don’t live up to their bargain or change the project price because of suddenly more work hours?

Many companies work on fixed models for project delivery, and they are fully responsible for the outcomes, budget, and time of product delivery and quality.

The model we’d apply in DAC.digital is chosen with the customer at the beginning of cooperation and often can be modified ‘on the go’ depending on the project, time, scope, or budget circumstances.

Such a model is often good for companies with extensive experience in complex and demanding projects, as you may need support from teams with vast project development experience and using a mixture of project management methods.

Although it will take some time and effort, this selection process will pay off. Choosing a vendor that becomes your partner can bring great results. So, are you ready to outsource?