What are the advantages and

disadvantages of project outsourcing?

Project Outsourcing allows to easily accomplish business goal by taking everything related to the
development, quality assurance and management of the project off your shoulders and handling it in
an adept professional manner until the final ready-to-use solution delivery. It allows a company to
execute projects using the resources of another firm.

Advantages:
1.Risk Sharing

 When a company undertakes a business function in-house, it has responsibility for the costs of
correcting any systems failures and of dealing with their consequences. However, if the company
outsources the business function, the general expectation is that the supplier of the outsourced
services is responsible for the correcting failures in the underlying delivery systems at its own
expense and is liable to pay compensation to the company.

Therefore, you can mitigate risks for your business by choosing an outsourcing firm that has a high-
quality project management system and a tried-and-true process for developing applications.

2.Increase Productivity

A quality software outsourcing company must include a team of high-skilled workers such as
developers, testers, project managers, etc. Thanks to the valuable experience of these members
through many projects, they are able to analyze your ideas, requirements. Also, they provide brilliant
recommendations in terms of technical and business. And chances are that they will translate your
blueprint into a real product more efficient.

Furthermore, you can expect that the product will be an innovative one since these experts would
like to apply the newest and most suitable tech stacks into their development. By outsourcing your
product to an experienced team, your project will probably start earlier, and your product will be
launched sooner.

3.Focus on core businesses

Since the offshore company will be taking all the hard work, it’s time to concentrate on such higher
tasks as marketing, clients specs and demands, design, content and maintenance, and other
additional services. Outsourcing can help you get more free time, so you can pay attention to main
functions and be more active in many other areas of software implementation.

4.Saving Time

In a competitive digital environment with no room for error, speed to market is essential. With
outsourcing companies, you save a lot of time. Having a dedicated software development team with
experience in agile methodology and high quality project management will allow the product to be
ready for the customers ahead of your brand challenges.
5.Managing resources

It allows to effectively monitor the usage of the resources that are not accessible in your in-house
workshop but required to perform the development by working with offshore professionals.

For instance, perhaps the customer needs some feature coded in a specific technology but the
customer does not know this programming language or how to work the debugger he was given. The
outside software development companies could give these skills to the customers.

6.Cost savings

More enterprises than ever must do more with tight finances. Using an experienced, outsourcing
software development company will help manage development fees. Not only will eliminate IT
recruiting budget, but freelancers will cost less than offering someone a salary.

Disadvantages:
1.Communication

Companies that outsource some of their software operations often deal with employees from
another country that speak little or no English or whose company culture is different from theirs.
Time zone differences can also lead to communication breakdown. In-house team leaders who are
responsible for an outsourced team can help with this issue, but this still remains one of the top
difficulties of outsourcing.

2.Risk of exposing confidential data

When you outsource, you delegate part of your IT infrastructure to another company. In doing so,
you hand over sensitive information such as processes, employees’ details and other important data
to the outsourcer. So, it is natural to worry about the way the outsourcing provider handles your
resources security.

3.Hidden costs.

While companies seek to outsource to save money and receive a final product of exceptional quality,
there is always a risk of getting a huge bill compiled of hidden fees. Some companies hoax the client
with double-billing or give out false overestimation. Hidden costs may also include phone calls,
meetings, additional consultations and even the travel expenses. In the end it all piles up, but when
you are in the middle of work, there is no backing out.

4.Reduce quality control

Concerns about the level of quality produced when companies outsource their software
development are real. It’s much easier to do quality control and monitoring when you know the
software engineers directly and can physically speak with them one on one.

Outsourcing companies and some freelancers may often be motivated by profit rather than a job
well done. That means the work you send out may come back quickly, but will lack the standard and
quality that customers have come to expect from your products or services.
5.Internal resistance

Some within a company may feel threatened by a project outsourcing model. Although most project
outsourcing serves the purpose of overcoming a lack of internal capabilities, some internal
employees may be concerned that this model will lead to cutting back internal staff in favor of
project outsourcing.
Suppose that you were to outsource the testing of your
software. State your strategies for selecting the right
company for this task.

It's easy to outsource globally, but finding the right outsourcing company isn’t nearly as simple. So
strategies need to be considered out there that will make the task a little bit easier.

1.Consider geography

Because communication is key for successful outsourcing relationships, regions with similar time
zones are often a good starting point; however, other factors such as nearshore versus offshore,
cultural compatibility, political stability, low inflation rates and geographical proximity, are also
critical.

2.Expertise

While selecting a Software Testing company, there are various questions to consider to identify the
right service provider. Does the partner hold an appropriate experience? Does the partner have
required client-communication procedures? Matching up your requirements with the proficiency of
a partner is critical. The partner should also have readily-available resources to meet your needs.

3.Background Check

Another important thing to do is to make sure if the outsourcing company is secured financially. This
can be done by looking up their history, including their years in market, their clients/customers and
if they have a stable annual incomes and amount of projects. This is to make sure that they do not
run out of funds mid project, and also adds in extra security and trust for the quality of the
outsourced project.

4.Balance of cost and skills

The budget is a significant aspect to consider. However, it should not result in hiring amateur
resources. It is suggested to not take decisions solely based on cost factors. Because hiring amateurs
oftentimes lead to more issues and a significant increase in cost.

5.Thought-leadership

One of the most important aspects while choosing a QA company should be its proficiency and
subject matter expertise in QA and testing. It is important that the company has its own set of IPs, in-
house accelerators, proper research and is readily investing in new trends.

5.Ethical conduct
Picking a partner with great values and good ethical conduct is important. The partner should display
a responsible attitude and give you confidence that the partner would advise on the right strategies
and guide you through times of issues or failures.

6.Reputation in the market

The credibility and relevance of the testing partner are crucial. Proper research on the company’s
leadership and reputation in the market should be checked before offering the project to a
company.

Define the types of contract and explain in which conditions they can be
applied.

Project managers need to have a good understanding of a variety of contract types so that they can
handle contract negotiations effortlessly.

1.Fixed Price or Lump Sum Contracts

The seller and the buyer agree on a fixed price for the project. The seller often accepts a high level of
risk in this type of contract. The buyer is in the least risk category since the price the seller agreed to
is fixed. This type of contract has fully detailed specifications, checklists, and project scope
statements from the seller side, which the buyer will use.

With this type of contract, sellers may try to cut the scope to deliver the projects on time and within
budget. If the project is finished on time with the desired quality, the project is over for that
contract. However, if the project is delayed and there are cost overruns, then the seller will absorb
all the extra costs. 

2.Cost-reimbursable Contracts

A cost-reimbursable contract is used when the project scope is uncertain, or the project is high risk.
The buyer pays all costs, so the buyer bears all the risk. Under a cost-reimbursable contract, the
seller works for a fixed time period and raises the bill after finishing the work—a fee that represents
the profits for the contract. The fee may be dependent on selected project performance or other
metrics.

A major drawback of this type of contract is that the seller can raise an unlimited or unknown
amount which the buyer is compelled to pay. This is why cost reimbursable contracts are rarely
used.

3.Time and material contracts

Time and material contracts are usually preferred if the project scope is not clear, or has not been
defined. The owner and the contractor must establish an agreed hourly or daily rate, including
additional expenses that could arise in the construction process.

The costs must be classified as direct, indirect, markup, and overhead and should be included in the
contract. Sometimes the owner might want to establish a cap or specific project duration to the
contractor that must be met, in order to have the owner’s risk minimized. These contracts are useful
for small scopes or when you can make a realistic guess on how long it will take to complete the
scope.

4.Unit Price contracts

Unit price contracts are what we usually call hourly rate contracts. This type of contract is a hybrid of
a cost-reimbursable and fixed-price contract. For example, if the seller spends 1,200 hours on a
project at $100 an hour, the seller will be paid $120,000 by the buyer. This type of contract is
common for freelancers, and the main advantage of this contract type is that the seller makes
money for every hour spent working on the project.