How to Deal With Outsourcing Fraud

<p>You are smart to be wary of outsourcing frauds. Had a bad experience with a dishonest provider? Here is how to minimize your losses and how to avoid them in the future.</p>

13 / 09 / 19

All types of outsourcing have advantages and disadvantages. One of the most common concerns the clients have is the legitimacy of the provider. It is easy to understand why. It is a big decision for companies of any size to make, from small startups to huge enterprises. It comes with risks.


Types of Outsourcing Scams


Scammers are very inventive. Therefore, it’s impossible to compile an extensive list of all the ways you can be conned. Here are just some of the most popular ones.


Dishonest developers


Sometimes teams just don’t have the right experience and take on the projects which they can’t deliver. They usually don’t intend to scam you out of money. When faced with their own limitations they either miss deadlines or disappear completely. Situations like these illustrate the importance of research but remember, that resumes and portfolios can also be faked. 


Down payment scams


This con is widespread in all kinds of fields where down payments are standard. Once the company receives the money it bails on the project. The work is not delivered and you can’t reach them again. To make sure that the team is trustworthy test them with smaller projects and request shorter deadlines.


Faking the reports


A fraudulent company may artificially inflate the amount of work that is being done. It can fake the number of hours spent on the project, lie about what tasks have been completed, and other similar deceptions. Choose a firm that is ready to be transparent in its development process.


Upselling


Some companies take advantage of your lack of knowledge. They can often try to convince you to purchase services that you don’t really need. For example, outstaffing a senior developer for higher rates when a mid-level developer would suffice. You can get a consultation with unbiased professionals that will tell you exactly what your project needs. 




How to Get Your Money Back


One of the main dangers of outsourcing to foreign countries is the different jurisdiction and governing law. An official contract doesn’t always guarantee the legitimacy of the deal. It can be extremely complicated to hold a party that doesn’t deliver on the terms accountable. That’s why most people who have been scammed don’t seek legal action. Hiring a local lawyer is tricky and the court systems often move at a glacial pace.

However, that doesn’t mean that you can’t get your money back. If you have made the payment through your bank then you have 60 days to file a complaint. It’s not an easy process, but it’s always worth considering. Paypal also offers dispute filing, but the chances of obtaining a successful refund are slimmer.

That’s why you should always be cautious when companies offer you unfamiliar payment services. The vast majority of them don’t offer refunds. So when your money is gone there is nothing you can do to get it back. Consider it a price for a lesson learned.


Security of Intellectual Property


Monetary losses aren’t the only damage an outsourcing fraud can inflict. Ideas and data have value too. Loss of confidential information is catastrophic to any business and often leads to future losses. That’s why intellectual property security is just as important as financial assets.

In order to mitigate this risk, the non-disclosure agreements (NDA) became the standard practice in most reliable outsourcing companies. However, it’s not always simple. It should be explicitly specified which governing law and jurisdiction are applicable in case the agreement is breached. If you have any doubts, never be afraid to negotiate. In fact, since global business becomes more widespread the international NDAs have also become commonplace.




How to Avoid Outsourcing Fraud in the Future


First of all, don’t advertise publicly that you need developers for your project. Most of the responses you will get could be legitimate businesses, but the chance of getting scammed is way higher. Instead, do some research on your own and reach out to trustworthy companies yourself. 

In order to find out whether or not the outsourcing firm can be trusted, check the available information on the internet. Gather as much information as you can about the firm that you want to partner with. Here’s a few essential things you should never forget:

  • Look through their website. If a company doesn’t have one it is a major red flag. 
  • Read their testimonials. See if they have any reputable clients.
  • Contact them directly via an online call. Learn more about them while evaluating their communication skills.
  • Ask the representative about their development process. Be wary if it seems too vague and don’t be tempted by low prices.
  • Ensure that they offer legitimate contract agreements and inquire about warranties. Don’t sign anything prematurely.
  • Demand regular detailed reports and multiple estimates in written form. A payment schedule and an exit strategy should be arranged in advance. 

Conclusion


Keeping this checklist in mind will help you prevent losses to fraud in the future. Yet, shady software development outsourcing providers can always find new schemes. That’s why you should always think critically. At least now you know how to deal with such situations if they happen to you.

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