5 Potential Mine Fields When Outsourcing Software Development as a Startup

Last updated: September 15, 2022 ·

Rapid growth in companies is something all leaders want to achieve, yet it is rarely a linear process. Project milestones loom as deadlines create a race against time. When growth requires software development projects, many companies quickly see they need to scale up their developer talent pool. 

Scaling up the project isn't as simple as just hiring more developers. First, there is a talent shortage in the software development industry. The market for open-source developers is particularly challenging right now. 93% of employers report difficulties finding talent with sufficient open-source skills, even as almost half plan to increase their open-source hiring in the next six months. 

Companies also have to consider short-term needs vs. long-term payroll commitments. You may not want to staff full-time employees to get past a temporary busy phase. 

One solution is to consider outsourcing or hiring temporary talent from outside the organization. At Sharkbyte, we suggest taking an incremental approach. To get started with outsourced teams, look for contractors with industry expertise, start with a small project, and set measurable goals. You can read more about the five essential qualities of an outsourced software development team here

In this post, we'll focus on some factors to consider before you begin hiring.

To get started with outsourced teams, look for contractors with industry expertise, start with a small project, and set measurable goals. Click To Tweet

Independent Contractors for Outsourced Software Development

One common way to outsource is to hire independent contractors (IC) who operate kind of like freelancers. Companies pay them on a contract basis. They may work for several clients at once. 

One of the significant advantages of hiring an independent contractor is that it can be less costly than hiring a full-time employee. The hiring cycle is shorter than when adding a full-time employee. You also don't have to deal with regular employee onboarding. Independent contractors are not entitled to the same benefits as regular employees, such as holiday pay and sick leave. 

You can also hire contractors with specialized skills that you don't permanently need in-house, meaning companies can temporarily access expensive talent to get past a particular milestone. Expertise on demand can be a significant advantage in complex projects. 

On the downside, independent contractors are, well, independent. They rarely have any equity upside, so they may not be as invested in the company as our employees. Also, because they are not employees, management does not have the same control over them. This is why it is essential to clearly stipulate expectations in the IC contract. 

In fact, treating independent contractors as employees is illegal. Companies need to be careful that they do not create a situation that gives the appearance that they are using independent contractors as employees to avoid the overhead of benefits and payroll taxes.

What are some critical steps in a successful independent contractor match? First, review the contractor's portfolio of previous work. Secondly, the company must clearly communicate expectations for project responsibilities and payment terms in writing. Ultimately, it is essential to weigh all of the pros and cons before deciding whether or not to hire an independent contractor for software development.

Software Testing and Code Revision Requirements for Outsourced Developers

When outsourcing software development, an employer must include software testing and code revisions in the developers' contracts. Spelling out the expectations will ensure that the developers remain accountable for their work and are responsible for correcting any errors or bugs in the code.

Even though most developers have good intentions, they may run into a time crunch if they are juggling different projects. They will be less likely to cut corners on projects with firm parameters. Including testing and revision provisions in the contract will incentivize developers to produce high-quality code in the first place. 

When the expectations for testing and revision are clear, developers will take the time to test their code thoroughly and fix any errors before release. This helps companies avoid the costly and time-consuming process of having to patch or otherwise fix broken code after release. 

In today's global business world, ensuring that your software is legally compliant and meets standards for the target market country is essential. Protecting your company from legal risk starts in the development phase. Teams should include compliance considerations in their development roadmap

If your outsourced team is international as well, you need to be sure that all developers are aware of relevant laws and regulations, so they design and test compliant software. 

Depending on the product and level of complexity, some companies may choose to work with a compliance specialist to help ensure that the software meets all the requirements. Finally, regular updates for your teams on compliance issues are essential to help ensure that everyone is on the same page. 

Communication Challenges with Outsourced Software Teams

Cultural differences, time zones, and preferred workstyles are all factors that can cause confusion and delays in communication with outsourced developers. One of the biggest challenges can be getting everyone on the same page. It can be difficult to schedule video conferences or in-person meetings with employees in different locations or even different time zones. One solution to this is to augment your team with developers in the same hemisphere or even time zone. 

Project management software can create a go-to comms foundation, allowing everyone to see deadlines, assigned tasks, and progress reports in real-time. In addition, regular check-ins via email or chat can help ensure that all team members are on track and meeting expectations.

While project management tools can reduce channel friction, they don’t manage cultural differences. Be aware that compared to other cultures, US communication styles are very direct. We see this as efficient, but in some cultures, it comes off as abrupt, bordering on rude. 

Another difference in some cultures is that people avoid asking questions because they don’t want to disappoint anyone. Humor also varies across individuals and cultures. By planning for communication differences, companies can set themselves up for success when working with independent contractors.

The Importance of Confidentiality and IP ownership

One major challenge with outsourcing is protecting internal IP. As we mentioned, independent contractors may be working on different projects simultaneously. It's possible they have worked with a competitor or will do so in the future. 

Any company that relies on independent contractors to create software faces the risk of losing control over its confidential information and intellectual property. To protect their interests, companies must ensure that their confidential information and IP are adequately protected. One way to do this is to use independent contractor software development tools that allow companies to retain ownership of the code and data.

These tools typically include watermarking and digital rights management, making it difficult for unauthorized users to access or copy the code. Tools can also track who has accessed confidential information. Stakeholder transparency creates a disincentive to abuse that access and makes it easier to identify potential leaks. By using these tools, companies can help safeguard their confidential information and IP while equipping independent contractors with the information they need to work on the project.

Moving Ahead

Outsourcing software development can be a great way to get your project done on time and on budget, but it's essential to take precautions to avoid common problems. Building an outsourced team takes time and focus. If you're looking for a faster way to scale up your development team, contact us to schedule a call and discuss your project! We provide custom development roadmaps and nearshore team augmentation services to help maximize the success of your projects—large or small.

5 Action Plan Items for Hiring Outsourcing Software Development

  1. Be sure you understand the legalities of hiring Independent Contractors.
  2. Included software testing and code revisions in the contract.
  3. Confirm that your developers understand issues of legal compliance and regulations for the project.
  4. Plan ahead for communication challenges with offshore developers in other cultures and time zones.
  5. Plan ahead to protect your IP and confidential information.


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