This is the second post in a series of articles about the ins and outs of technical outsourcing. The last one looked at reasons why hiring a software development firm might be a good idea. This post examines some of the red flags to look for once you’ve decided to outsource and are vetting potential partners.

If you liked this article, listen to Dialexa’s VP of Software Engineering, Andrew Turner, on Custom Made talk technology reliability and security and how in today’s current landscape CIOs won’t get promoted if everything works. But they will get fired if anything doesn’t: Listen to all episodes of Custom Made for insights and perspectives from industry disruptors and technology leaders.

There is a bit of a stigma attached to the word “outsourcing.” For many, it seems to call to mind offshore labor cranking out bad code at bargain-basement rates. I learned this first-hand when, as a consultant at Accenture, I faced client resistance to offshoring a help desk operation.

Does technical outsourcing deserve the negative connotation it seems to come with? In some cases, it does. There are many software development firms that fit the stigma; but there is such a large variety of companies offering offshore, nearshore and onshore solutions, that they can’t all be painted with the same broad brush.

So it is not so much about avoiding outsourced, or even offshore, software development firms, as it is about knowing what to look for - especially when it comes to signs that a vendor might do more harm than good. With that in mind, we present five common red flags to look out for when evaluating a potential development partner:

  1. They give you an estimate without truly understanding the details of the project. A huge part of being good at serving multiple clients in disparate industries with different objectives and requirements is knowing that there is a minimum amount of information needed to properly estimate level of effort. If the firm you are considering does not ask a lot of questions, they either do not know what questions to ask or they are planning to win the business and bury you in change orders once you have committed.

  2. They provide a fixed bid on the whole project for free. This is related to the previous point, and it is one you will see a lot. The problem here is that the amount of time and effort required to accurately estimate a concept-to-release engagement is typically beyond what a firm should invest in trying to win the business. So if they do provide you with a fixed-bid proposal for the entire project up-front you should first be concerned about whether they truly understand the scope - and if they did put in the time and effort to provide an accurate estimate, you might want to look into the health of their business as a whole. At Dialexa we address this issue by either proposing a 'Phase 0' or Discovery Phase and estimating the design and build after it's completed, or taking a more 'Agile,' time-boxed approach.

  3. They are not transparent. If prospective development partners are reticent to let you speak to their technical or design leaders, don’t want to give you insight into how they arrive at their pricing or cannot offer references that you can actually speak with, you should dig a little deeper. There are legitimate reasons why they might not want to reveal everything, but if obfuscation seems to be a pattern that they cannot offer reasonable explanations for, it may be time to look elsewhere.

  4. When you ask for a big discount, they give it to you. This one is a bit counterintuitive, but if you ask a software engineering firm for a 25 percent discount, and you get it, you should wonder whether they’re prone to marking up their work unreasonably. I know that we are in this business to make money, but if a potential development partner comes down by 25 percent, they were probably just trying to see what they could get away with, and they will likely do it again.

  5. Their proposal isn’t sufficiently detailed. This one can be a sign of two potential issues: either they do not have enough information to provide an accurate estimate and approach to delivering the end product, or they want to minimize the number of things they are contractually obligated to do. One exception to this is if both parties agree to take on a time-boxed approach to the project, in which case you’re buying time, as opposed to defined deliverables. This more lean approach offers more flexibility than a fixed-bid engagement, but it's worth noting that what you gain in agility you lose in certainty. 

Of course, these five red flags are just a few things you should look out for. There are many intangibles that only you can sort through, which is why it is best to talk to several firms, and in addition to understanding their capabilities, get a feel for the culture, team and fit and select the firm that feels like an extension of your team.

If you have any comments or questions about this topic, feel free to get in touch, we would love to hear from you. 

To learn more about how Dialexa improves the software development process, including our approach to the new product development process, click the image below.

Get Farther Faster with a free copy of our Guide to New Product Development Process for Software

The photo used in this post, "Red Flags" by Rutger van Waverenis licensed under (CC BY-SA 2.0) 

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