Selecting a Software Development Outsourcing Provider

At its core, vendor selection in outsourcing is about finding the partner best equipped to meet your requirements.

That said, the process is a lot more complicated than it appears on the surface. For one, requirements extend well beyond the provider’s ability to follow along with your documentation or the skills and experience they bring to the table—the best outsourcing partners have similar values, culture, and a genuine interest in helping you achieve your goals.

Second, you’ll need to coordinate closely with internal stakeholders to ensure that everyone is on the same page in terms of evaluation criteria, requirements, and what they expect from an external partner.

In this article, we’ll answer the question “how should a company select an outsourcing partner.”
Experts from Tiempo’s development team weigh in, sharing their top tips for evaluating and selecting perfect-fit outsourcing partners.

Define Your Requirements

Define Your Requirements

Choosing the right software development company starts by figuring out what you hope to achieve by engaging an outsourcing firm.

As a starting point, see if you can nail down a clear answer for each of the following questions, as this will help inform your list of selection criteria.

  • What are you trying to build? Consider the use case, goals, and how this project fits into the big-picture plan. From there, you can figure out what tools/technologies are required and start searching for outsourcing partners with the right experience.
  • Where will the app run? Web? Mobile? Both? Are you expanding the feature suite of an existing application? Building something from scratch? In any case, determining the “where” defines the tech stack and skills required for the job.
  • What technologies will be used? Do you have any preference/need to use a particular technology? While it’s better to focus on outcomes than tools, ensure that both in-house and external teams have access to the same technologies—particularly if they’re collaborating closely on the same project.
  • Estimated deadlines. While the development team will provide a realistic timeline later when they present the project plan, you should have a general idea of when you plan on launching a new app or when you’ll need an MVP to present to stakeholders. Ensure that the team has the capacity/time to deliver the desired outcome before you commit.
  • Other requirements. Will you need any customizations? Or post-release support and maintenance? Whatever it is, make sure you’re upfront about your needs during your initial conversations with potential vendors to allow you to cover all of your bases.

Assessing Cultural Fit

Assessing Cultural Fit

Broadly speaking, you and your potential partner should have a similar set of values and standards.

Start evaluating outsourcing partners for cultural fit by looking at the following three areas to help you weed out bad-fit vendors and narrow down your list:

  • Relationship competency—Capabilities that determine the vendor’s abilities and willingness to align around client business needs and goals. Are they a suitable partner who will be invested in your success?
  • Transformation competencies—Can the vendor help your organization achieve meaningful progress toward business goals?
  • Ask about communication style—What channels do they typically use? How do they communicate with other clients? What tools do they use? Can they adapt to your organization’s existing processes/tools?

Beyond these basic competencies, you’ll need to dive deeper to determine which providers are likely to be the best fit based on your goals, work style, and company culture.

Sergio Deras recommends looking for companies with a “lean-promoting culture focused on making sure their people are happy campers.”

“The key is finding a partner vs. a service provider. With a partner, you want to make sure that you can blend your practices (for the better), that you can easily communicate up or down the organization, that they have a proven track record, and that the company’s values are aligned with your own.”– Aaron Rivera, VP of Tiempo Flex, Tiempo Development

Tiempo engineer Paul Estrada recommends looking at the team’s motivation for working on specific types of projects or product lines. He says that engineers tend to deliver the best results when they’re personally invested in the process.

For example, if you’re a financial services firm and your goal is improving the credit card payment experience, you might not want to work with an engineer who is passionate about building flashy interfaces.

While they might have the knowledge and skills to build the solution you’re looking for, they may not have the drive to seek out the innovative solutions that set you apart from other financial services firms. Worse, settling for an indifferent engineer can lead to high turnover, employee rotation, or decreased performance, all of which can cause projects to suffer.

When you’re outsourcing to another country, you’ll also need to think about that country’s cultural and political climate.

For firms outsourcing surveillance systems, military or government projects, or applications that handle sensitive user data, it’s important to consider whether what you’re asking requires the development team to enter a “moral gray zone” based on what’s considered culturally acceptable in their home country.

Establish Objective Measures for Evaluating Provider Capabilities

Establish Objective Measures

You’ll need a system for “scoring” vendor capabilities based on their ability to deliver on the requirements discussed in the last sections. To do that, you’ll need to do the following:

Put together a team. First, create a team of internal stakeholders from different departments.

Each group—be it the internal development team, product managers, upper management, and so on—brings a different perspective to the table. It also means that they may have different beliefs about what to look for in an outsourcing partner. Here, the goal is to bring these varying expectations closer together by defining evaluation criteria as a team.

Develop a scoring method. With multiple stakeholders involved, you’ll need to develop a systematic approach for evaluating potential partners against the same set of objective measures to eliminate bias during the selection process.

Categories might include:

  • Availability and talent pool. Even if you’re only hiring a firm for one project, you should evaluate if that firm could provide more engineers in the future, particularly if you’re expecting growth.
  • Experience. Do they hire certified employees? How do they vet talent? What types of credentials do they have? Look at tech skills, experience in your industry, and results achieved from similar projects. Seek partners with long-run projects or recurring clients. This is an indication that existing clients are happy with the results and getting a return on their investments.

    You’ll also want to find out whether they have a mature Agile practice. As Tiempo’s Leon Castellanos Rellstab puts it, “using the Agile framework correctly helps reduce instances of poor communication and bad requirements and uses an iterative process to achieve project goals. This allows any misunderstanding to be resolved in less time.”

  • Budget. Budget is always important. It’s as important to understand that it’s not just about finding the lowest cost provider as it is about finding outsourcing partners that deliver the highest return on your investment. For example, it may be worth investing a bit more on projects related to your core business function than those focused on experimental or secondary features/applications.
    Paul Estrada

    “We can make a choice depending on the size of the project. If the project is small and not especially risky, you could hire a less experienced firm; you will spend less and help that firm grow. For medium or large-scale projects, you could go with a more experienced or expensive firm.”– Paul Estrada, Software Engineer Lead, Tiempo Development

How you decide to score each item on your list depends on your priorities. The most important thing is to have all stakeholders on the same page in terms of how the scoring system works.

For example, if you’re rating vendors on a scale of 1-5, there needs to be a consensus on what makes something a 1 versus a 3 or a 5.

Create a checklist of selection criteria. Many organizations use a standard evaluation form that everyone involved in the decision-making process will use to score potential partners.
As an example, you might opt to use something like ITIL’s six-step process as a template for performing vendor evaluations.

Here, the goal is to maintain as much consistency as possible and keep evaluators focused on analyzing candidates through an objective lens.

Finally, make sure that evaluations are performed independently to eliminate the risk of group-think and bias from creeping into the review process. Stakeholders should score vendors on their own, then meet to compare results after they’ve completed the process.

Once you’ve narrowed your list to the highest-scoring potential outsourcing partners, you’ll move into the negotiations stage. Ultimately, your goal is to identify and select the software outsourcing provider(s) that promise to bring the most value to both your company and your customers.

Obviously, you want to get the most “bang for your buck,” but it’s important to note that price shouldn’t be the sole focus. Instead, focus the conversation around “value” and “outcomes.”

Final Thoughts

In the end, there’s no one-size-fits-all answer to “how should a company select an outsourcing provider.” Instead, this choice is about examining your options from multiple perspectives and evaluating potential partners based on what’s most important to your business both in terms of strategy and cultural fit.

Tiempo offers cost-effective access to top software development talent with Agile expertise and a laser focus on client outcomes. To learn more about our process and how we get results, contact an expert today.