Due Diligence: A Checklist for Outsourcing Development Company

Are you a company who is on the hunt for an IT outsourcing company for software development? If that is the case then you would definitely need a checklist to choose the most appropriate partner.

In this blog, we will take you through the journey of a detailed Due Diligence Checklist that is created specifically to help you in your decision-making process. Are you ready? Then, let’s begin.

Before understanding the points to be considered in preparing a diligence checklist let’s understand some terms that are associated with Outsourcing.

1. Insourcing: "Insource" or "insourcing" denotes the strategic approach of assigning a task or business process to an internal employee within your organization.  

2. Outsourcing: "Outsource" or "outsourcing" pertains to the practice of delegating a task or business process to an external entity that is not part of your company's internal workforce. This external resource can be an outsourcing agency, consultant, or any external professional. These are termed as Outsource Software Development Company.

Say for example, you have tons of work in accounts payable department at your organization. You have two options first, you can either delegate the work to the in-house accounts manager who can do the accounts payable work from the office itself or you can even outsource the work to an external Accounting firm.

1. Offshoring: It is identical and similar to “Offshoring” where a business organization will outsource the software development work from an offshore development company or can also do IT Staff Augmentation and after hiring your company delegates the whole work and pays the fee or remuneration as per the mutual discussion. The only difference between “Outsourcing” and “Offshoring” is that in offshoring the software development team will be from overseas, whereas an outsourced software Development Company can be from a local geographical boundary.

Sy for example,

"You have a cool tech gadget, and instead of making it in your own country, you decide to have it made in a factory in China. That's called offshoring. Or maybe you want to redo your Spanish ads, so you send them to a marketing agency in Latin America. That's another example of offshoring.”

Deciding whether to send work overseas or hire outside help is a really important choice for your business. It can make your business grow a lot, or it could save it from failing. On the flip side, it might even be the reason your business doesn't make it.

So, it's a big deal! That's why you need to be extra careful about the things on your checklist that help you decide. Pay close attention to those items when making this big decision for your business.

We believe so far you have understood all the terms associated with “Outsourcing”

Now, the next question is

What are the due diligence points to be kept in mind before deciding to outsource a Development Partner? Don’t worry we will keep that covered in this article. But, before that let’s understand why the Due Diligence Checklist is important?

Why is having a Due Diligence Checklist necessary?

Do you read the necessary documents before signing a deal? 

You do, Right? Due Diligence Checklist works in the same manner but the only difference between document two is that the former one tells you about the norms of the deal but the latter one guides you by providing the detailed checklist you need to check before hiring an outsource team.

After understanding and analyzing all the points of the checklist you can decide the right fit that suits your needs and finalize the deal with the vendor.

Another reason why a buyer/seller should have a Due Diligence Checklist is that, by having a Due Diligence checklist the hiring organization can evaluate whether the service that the service provider is providing meets their requirement, this will help them smoothen up their decision-making process.

Now, that you have finally understood the importance of having a Due-Diligence Checklist in place before outsourcing software development company/ an Offshore development or hiring an IT specialist from an IT Staff Augmentation Company, let’s discuss all the points that you should consider before making the decision.

Below is a list of eight checklist points that will help you in making the right decision.

8 Point due-diligence checklist: To hire the best outsourcing software development company

1. Utilize the Screening and Vetting services to their maximum optimum: This is a very important step to focus on. Review the data of all the prospective vendors available on a Marketplace-based Business Service website Clutch, which will help you find both offshore and onshore development companies to meet your software development needs.

2. Ask for a referral to a competent firm: At times, there are chances that a professional in your circle had a very good experience with a software development service provider, his experience can be leveraged if they are delivered good results by giving heed to these warm referrals to help yourself in decision-making process.

3. Compare outsourcing cost by country: This is the third point in the list. Suppose, if you are planning to outsource development services from Asia then do not forget to check the pricing difference between the top nations of Asia like India, Pakistan, China, etc, as finding the differences will help you make the right outsourcing decision.

4. Test Assignments: Doing test assignments as a part of the process before deciding to hire an outsourcing partner is very crucial. By giving test assignments to the offshore developers you can make a prompt decision after running a thorough evaluation through a test assignment.

5. Run a legal background check: You run a background check before hiring a full-time candidate for an opening in your organization in the same way it is necessary to run a legal background check of a vendor by verifying details like origin, criminal records, work proofs, etc.

6. Must-visit Offshore/Onshore Facilities: One of the most underrated points that we often miss out on is visiting the physical facility office of the vendor or the service provider. Doing this will help you understand the process and culture of the vendor’s organization in a better manner and help you decide whether the vendor aligns with your processes and culture. This will help in making the right decisions.

7. Preparation to work with Offshore Developers: Working with an offshore team is never an easy task, when you are managing the team it is easy to manage a team when they are present on-site but the same management becomes difficult when the team is present in a remote location. But, by using some necessary communication tools and collaboration tools the management of work becomes very easy. Some tools like Slack, Asana, Zoom, etc can be leveraged to smoothen up the work process when you are working remotely.

8. The backup plan: Like sports we have a substitute player in the same way, you should always have an alternative to meet an unforeseen situation and risk. For an e.g., when the current vendor underperforms or say is not able to meet the deadlines then in such cases having an alternative vendor is very important as they will work as a backup plan to meet the deadlines of the deliverability.

We hope all the above eight checklist points are clear. If you are looking to hire remote developers / Outsourcing Software Development Team then look no far from Acquaint Softtech - your reliable Software Development Partner.

Conclusion:

Once you've completed a thorough due diligence process with potential vendors and feel confident in your assessment, it's crucial to ensure that the quality of their work is guaranteed in case issues arise post-project initiation.

Include the above-mentioned steps in your software due diligence checklist to mitigate the potential risks associated with selecting an inappropriate Software Outsourcing Company.