How to Evaluate Vendors before Outsourcing Software Development

Before you outsource your software development project to an offshore/third party vendor, you’d have to undertake an official vendor evaluation procedure to select the best partner. This includes a thorough background reference check and a more intensive examination of the vendor’s development standards and security policies, talent pool skills, and budget and pricing negotiation. But, first, let’s explore all the important criteria. 

General vendor evaluation criteria are listed below; however, you can examine more as per your business discernment and requirements. 

Company information/reputation

The factors to consider regarding evaluating a company to assess their performance potential and to analyse if they’re a good fit. 

Their expertise – What kind of off-shore support do they provide? What is their specialist service/offering? Does the talent pool offered by the vendor include professionals with the latest skills and knowledge of the latest AI/ML trends, IoT software development, and even newer trends like Edge Computing? Their competencies should include up to date business and statistical analysis, knowledge of the latest blockchain technology features, industry-standard encryption, design and IT skills to deliver the best software product. 

The outsourcing company must offer or integrates the right kind of private/hybrid cloud storage (private cloud preferably for sensitive information). 

You can check the outsourcing vendor’s professional repertoire and job skills by asking for their CVs or checking the reviews on LinkedIn or Glassdoor. 

Their Experience

Another vital aspect of evaluating is how old is the outsourcing company (not that start-up vendors are not capable). But you might want to check what their experience is in projects similar to yours. It would be a great idea to be given a guided walkthrough of their portfolio by a team of project lead and developers, just like in a pitch meeting or an interview where you can ask important questions to get detailed answers from their team. 

It’s ideal if the outsourcing company is resourceful enough to gain knowledge, tools, and techniques that may not be available within the company or create additional capacity to accommodate more resources and infrastructure if the project needs unforeseeable alterations or expansion. 

Additionally, they should have the strategies and ideas to reduce capital investment and measures for cost-cutting. 

Financial stability

Check if the outsourcing company is self-reliant and on its feet when it comes to cash flow getting stalled or obstructed. 

Size of the company, location, infrastructure

The client must know if the outsourcing vendor has a team similar to the size of their own. At times, it may happen that if a vendor is more prominent in size than your entire project, they may sideline your project as minor. Conversely, if the size of the vendor is smaller, they may not be able to meet the requirements of your project. In other words, if you’re contributing to most of their revenue or contributing less than 3%, there could be some imbalance. 

Take into account where the offshore vendor is located, as it makes sense to outsource your project to a country that has enough experience in software development, whose legal framework is favourable for international software outsourcing. Also, the employees must communicate well in English. 

Security measures 

The software outsourcing company should provide legal/contractual and physical protection of your data, idea, source code and trade secrets. In addition, it should have ISO 27001 secure development policy to safeguard your data.

This should include Intellectual Property Rights Protection alongside a Non-Disclosure Agreement, Non-Compete Agreement, Statement of Work and Data Processing Agreement, all of which should be securely accessed and stored in their physical location or a private cloud. 

More importantly, the outsourcing company should have a firm security policy and information security management system to provide the necessary security guarantee to the client. Their General Data Protection Regulation measures (under the statute of their legal framework) should cover security protocols like Early Security Evaluation and Risk Assessment and Gap Analysis to assess the security needs of your project and the gaps in their current security practices to meet those requirements. 

Company culture and work ethic

The outsourcing vendor’s mission, vision, and values should align with yours, and a spirit of transparency and accountability should run the strongest in your partnership. 

Your outsourced teams should remain flexible and quick to external factors and market competition. They should be oriented towards constant learning and be agreeable to constructive feedback. At the same time, they should withstand deadlines and pressure in precarious scenarios while maintaining data integrity and security protocols. 

They should be available for communication during late hours in times of urgent requirement. In other words, they should offer the necessary flexibility with timing and work hours to get the project in alignment with the deadlines and within the budget. 

The vendor should have domain and technical expertise and quality infrastructure with a sustainable foundational software/hardware architecture to execute your project professionally. In addition, they should have immaculate reporting procedures for review and project planning, risk management, and analytical tools to provide intelligent and actionable business insights. 

Their coding, designing, testing, deployment and delivery environment should be the best in the industry and adhere to the best global development practices. 

Contract and Pricing

Your outsourcing vendor should provide you with contract options like Times and Materials contract based on hours and resources, fixed price based and others as per your project type and size, along with flexibility in payment scheduling and guaranteed deliverables in the written contract. To keep the price constant throughout the contract duration, choose a fixed price contract, the cost of which may increase by 20-30% in case of renewal, although it can be negotiated. 

Ensure that the company offers severance terms and remedial clauses in breach of security or any other violation of contract stipulations.