12 tips how to choose a software development company to not lose money

1. Pay attention to the country of the supplier and the general level of specialists

First of all, what you need to look for in a software development company is professionalism. The transfer of software development to a separate team has become a common practice for leading companies. Working with a company from another country (offshoring) is especially popular. The reason for that is that in some countries the level of developers is higher than in others. In recent studies, Russia, the United States, and China are in the lead.

The reason is the general level of education and a high concentration of specialists and university graduates. In addition, the cumulative experience of the developer community and developed communication skills are a major influence. Specialists from these countries are distinguished by outside-the-box thinking and IT solutions, which help in solving complex problems.

To back this claim up, we present statistics by country from TopCoder, a corporation that conducts programming competitions.

2. Trust only independent international ratings

Special websites will help you evaluate an IT company and choose the right partner. Clutch and GoodFirms are examples of the most responsible and reputable rating agencies. There are many convenient filters on their websites. You can sort companies by country, by rate per hour, by industry specialization and the number of employees.

For example, Clutch takes custom software company evaluation very seriously. Each review must be confirmed by a phone call or documents indicating the existence of cooperation. Clutch checks the credit history, financial strength, legal status and awards its own verification level: gold, silver or bronze. If you see an IT company with this kind of verification, you can trust it completely.

You can also read reviews about vendors on the company rating sites. It helps you find out about the quality of work performed, the final results and customer satisfaction. Companies mostly select positive reviews for their own website. These rating pages show completely different and, most importantly, objective reviews. This will allow you to form an informed opinion and choose the right custom software development company.

The screenshot below shows where to find the vendor verification mark on Clutch.

3. Beware of tight deadlines and low prices

Yes, if you are from the USA and outsource a project to Ukraine, Russia, Belarus, Latvia or Lithuania, the development price will be low. This is due to many factors. Some of them are: exchange rate, general income of the population, average salary of industry specialists. But the price should still start at $25 per hour. If you choose a company for IT solutions with lower rates, you risk getting a poor quality product.

If you do not have a well-written technical specification, create a document. Write down all your requirements in it and describe the expected functionality of the product. Determine a timeline, a budget, and decide if you need a design.

After that, you can request a project estimate from the selected companies. Pay attention to their rationale. If a partner promises a project deadline much less than its competitors, they most likely want to impress you. However, in the future, these deadlines will still be exceeded for many reasons. Also, you might receive a standard template IT solution presented as a unique development.

4. Check the LinkedIn profiles of companies

The outsourcing vendor assessment includes checking social networks. They can either confirm the impression of the company or completely destroy it. Responsible companies that have been successfully working in the software development market are active on social networks. They have a large number of subscribers, talk about their projects, company culture, show their office and employees.

You can find the leader’s page and meet him personally. Conversely, if the last post was a year ago, there is no information about the company, this should raise suspicion.

5. Ask about the payment model

There are two: a fixed payment model and time & material, or in other words, an hourly fee. We always advise you to choose the second model. With it you pay specifically for the work performed and the result. In addition, you can change the functionality of your product at any time. You always know how much and for what specifically you pay.

With a fixed price, you significantly overpay, since it includes all possible risks and additional costs.

6. Pay attention to the experience of developers in your industry

For example, in some knowledge-intensive industries, it is important that the partner has relevant experience. These include security and data protection, drone software development or the energy industry. It will be easier for you to find a common language with such a company and start working on a project faster. You also significantly reduce the risks associated with the project delivery time, costs, and quality of the final product.

The same applies to the availability of the necessary equipment. For example, developing software for network routers. This requires equipment, certifications of employee qualifications, and experience. There is no point in hiring a supplier who doesn’t have all of this. You need to make sure the vendor for outsourcing has enough experience. Study the company’s portfolio or ask when you call if its employees have encountered similar tasks and technologies. If so, ask them to describe their experience, the work performed and the problems solved in the industry.

7. Protect your own and your customers’ data

One of the guarantees of confidentiality of the work performed is a non-disclosure agreement (NDA). This specific contract is legally binding. You can be sure of the security of your trade secrets, personal data of users, and the source code of the product with it.

Make sure the NDA describes all the points that are important to you. Also, ask all involved employees of the company to sign the contract. In addition, we advise you to obtain the appropriate licenses and certificates for your product.

A trustworthy custom software development partner will always meet the client halfway in such matters.

8. Look at the list of services

If, for example, you need a hybrid mobile app, you must make sure that the company includes cross-platform apps in the list of services. Otherwise, there is a risk that unscrupulous organizations will take on all types of work. In order not to lose a client, they agree even if they have no experience in this industry.

Yes, it seems obvious, but too many startups and small businesses are faced with a poorly made final product for this reason.

It will be more convenient to work with companies that have a full-service cycle. This means they provide software development, testing and design. Firstly, you do not have to waste time and urgently look for additional contractors. Secondly, a full-service cycle will be much more profitable for you. Companies, due to a large amount of work, usually reduce the cost of services.

9. Pay attention to communication before entering into a contract

Before signing a contract, you often negotiate with the CEO of the IT company, a manager or a sales specialist.

Remember that you will need to work with the developers throughout the project. Therefore, the CTO and the developers must be present at the calls and be involved in your project.

Also, when you work via an outsourcing or offshoring model, it is important that you have no language barrier. Fortunately, such a problem among IT partners is extremely rare now. All employees who interact with clients are fluent in English.

In the picture, we have provided statistics on knowledge of English by country.

10. Check the age of the company

Yes, when working with a company, you encounter fewer risks than with freelancers, but “one-day” companies also exist. The easiest way to find out the age of a partner is through the age of the domain. Take your time with transferring money and check how long they have been on the market. Companies from 2 years old can be trusted.

11. Learn about communication methods

Many offshore companies that are trusted even by corporations are located in a different time zone. For example, you have your own in-house developers and you decide to add more specialists to the team. Under such conditions a different time zone is even more beneficial for you. The process of creating a product will not stop even at night.

If you are a startup and hiring offshore developers, then there will be no communication problems either. Many companies organize their work in such a way that there are at least 4 hours of total working time with the client. You can call and discuss all working moments during this time.

12. Learn the development methodology

In general, all project management methods are divided into “flexible” and “traditional”.

Traditional methods are suitable if you have clearly defined requirements. With this approach, you will not be able to make changes to the functionality in the process.

Using an Agile methodology, the entire process is divided into fixed or “floating” stages called “sprints”. You can make the necessary changes at any time. Therefore, you will get a product that is more focused on user requests.

For startups, we advise you to choose a flexible approach. You get the minimum viable product (MVP) faster. Besides, you can test the idea in real conditions, analyze the reaction of the market, competitors and customers.

Also, flexible methodologies will allow you to create a better product since testing takes place at each sprint.

Summary

This vendor risk assessment checklist will maximize your security. By following our advice, you will only benefit from software development outsourcing.