Safe outsourcing 2025

Outsourcing has become a central strategy for many companies. Companies often choose it to concentrate on their own core activities while getting access to cost-effective talent elsewhere in the world. However, to truly benefit, outsourcing companies need to consider “safe outsourcing”, with careful attention to minimising risks. This article explains what companies that are planning to outsource need to know about safe outsourcing and how they can apply this knowledge in their business.

This article was originally written in August 2024. It has since been updated to reflect new EU legislation and other factors that have changed since it was originally written.

What is outsourcing?

Outsourcing or offshoring refers to the delegating of specific business processes or tasks to external partners, locally or internationally. It may be to partners near or far, or it may be what we call blended outsourcing.

• Offshoring involves moving some parts of the business to or tasks to countries with lower labour costs, such as India, Vietnam, Sri Lanka or the Philippines. India is particularly prominent for its high IT and software development expertise, English-speaking, well-trained workforce, and cost efficiency. However, cultural differences and different time zones can cause some challenges.

• Nearshoring refers to outsourcing to nearby countries rather than distant destinations. For Sweden, this often involves the Baltic states or Poland. For the UK, nearshoring typically points to partners in Eastern Europe, such as Poland, Romania, or the Czech Republic, or even to Ireland, given its close ties and shared language. The main advantages are: shorter travel distances, minimal time zone differences, and, in many cases, shared or at least similar business culture and working practices. These factors can make communication easier and collaboration more straightforward than with offshore teams based in Asia.

• Blended outsourcing combines local resources with offshore capabilities. This approach can create a balance between cost efficiency and regional expertise, and is typically beneficial for projects that require in-depth local knowledge and large-scale budget efficiency.

Every model has its pros and cons. Offshoring can deliver impressive cost savings, but it’s not without its communication challenges. Nearshoring reduces the gaps, but it may be more expensive. Apart from these, there’s a middle way, blended outsourcing, which tries to have both the cake and eat it – mixing the local touch with the economic advantages of offshoring. Is there any catch? Well, it requires good coordination to maintain smooth workflows and consistent quality.

With the proper management and a clear plan, outsourcing can be a very effective route to greater efficiency, access to talent, and sometimes fresh ideas and perspectives. Partnering with countries like India can bring the best of both worlds, highly skilled professionals coupled with cost advantages, making it a combination that’s hard to beat.

Benefits of outsourcing

Reducing costs

Outsourcing can lead to significant cost savings when used correctly. Companies can benefit from lower labour costs in other countries and reduce the need to invest in infrastructure and technology.

Focus on core business

By outsourcing the right functions, companies can focus on their core business, reach their strategic goals, and improve both competitiveness and efficiency.

Access to skills and expertise

Outsourcing provides companies with access to expertise that they may not have internally or locally. This can improve the quality of the services and products delivered. Additionally, hiring Indian experts on a consultancy basis can sometimes be more cost-effective than hiring your own staff.

Flexibility and Scalability

Outsourcing allows companies to adjust fast to market changes and scale up or down as needed, depending on demand.

Risks of outsourcing

Security risks

There are always risks involved in sharing data with third parties, which is why it is always important to protect sensitive information..

Companies also need to be ready for new risks, such as cyberattacks that use Artificial Intelligence to automate and personalise threats. Outsourcing partners should have security monitoring that takes such threats into account, along with regular staff training, to identify and respond to these threats quickly.

Quality control

Ensuring that outsourced services maintain the same quality standards as internal operations can be a challenge. Continuous monitoring and quality control are therefore essential.

Communication and Coordination

Cultural differences and working across different time zones can create communication problems. Effective coordination and clear communication are necessary to overcome these obstacles.

Dependence on the Supplier

A company can easily become overly dependent on its outsourcing provider, which may create problems if the provider does not perform as expected or goes out of business. However, at the same time, dividing risk or frequently changing partners also present other challenges and may be more costly in the long run.  Therefore, this needs to be mitigated, which may be a case-by-case decision.

Safe Outsourcing: Strategies and Best Practices

How to choose the right supplier

Choosing the right supplier is the cornerstone of safe and successful outsourcing. It is not just about checking off technical skills or going with the lowest price. What matters is the supplier’s ability to deliver reliably, securely, and on time.

It is also good to consider the big picture, such as geopolitical stability and the effects of tariffs, export controls, sanctions, or cross-border data rules. This becomes critical when working in countries where political or regulatory changes can come with little warning. The last thing you want is for a well-planned project to be disrupted by risks that could have been anticipated.

Security and Compliance

Your outsourcing partner must meet sufficient security standards and comply with different legal requirements. This includes regulations such as GDPR as well as recognised industry benchmarks for information security.

For EU-based companies, ensuring compliance when outsourcing software development outside of the EU is not just a box-ticking exercise. For large enterprises, it’s a clear legal obligation. For smaller businesses, it’s a smart move to protect your reputation and maintain customers’ trust.

In fact, several EU legislative frameworks require larger organisations to carry out thorough audits of non-EU suppliers. Choose partners who share your values, and you’re not just securing a service; you’re building a partnership based on trust, quality, and shared responsibility. That is the kind of outsourcing that truly delivers value: building your reputation, encouraging genuine collaboration, and laying the groundwork for long-term success. That’s the kind of outsourcing that pays dividends well beyond the balance sheet.

1. General Data Protection Regulation (GDPR): Perhaps the most significant piece of legislation regarding outsourcing, the GDPR imposes strict data protection and privacy rules for all individuals within the EU and the European Economic Area. It also addresses the transfer of personal data outside the EU and EEA areas. Software companies are obliged to ensure that their non-EU outsourcing partners are GDPR compliant to avoid costly fines and breaches that could lead to severe reputational damage.
2. Directive on Security of Network and Information Systems (NIS2 Directive): This directive requires companies in critical sectors, including digital services, to maintain high levels of security for their network and information systems. NIS2 does not directly target the outsourcing of software development, but it sets a precedent that impacts contractual obligations for IT outsourcing, emphasising the need for stronger security measures.
3. Digital Operational Resilience Act (DORA): Introduced to enhance the financial sector’s resilience against ICT-related disruptions, the EU’s Digital Operational Resilience Act (DORA) applies to various economic entities and their critical third-party service providers, including those outside the EU. If your business provides software or IT services to banks, insurance companies, or investment firms within the EU, DORA may apply indirectly to your operations. It demands proper risk management, incident reporting, digital testing, and contractual governance of third-party providers. Even non-financial businesses should be aware of DORA, as its resilience, security, and accountability are expected internally and across the entire supply chain.
4. EU Cybersecurity Act: Strengthening cybersecurity across the EU. This act establishes a framework for setting network and information security standards across all member states. Companies involved in software development and outsourcing must ensure that their suppliers follow these standards to maintain the integrity and continuity of security.
5. EU Artificial Intelligence Act: With the EU Artificial Intelligence Act now in force, companies outsourcing development of systems using Artificial Intelligence must ensure that their partners comply with new transparency, risk management, and safety requirements, particularly for high-risk systems. This may include documentation of training data, the ability to explain the output to humans, and following ethical practices when it comes to Artificial Intelligence.
6. Labour Laws: EU companies need to make sure that their non-EU outsourcing partners follow labour standards that at least meet the International Labour Organisation (ILO) conventions, which cover a range of issues, including unfair dismissal, discrimination, and workers’ rights to unionise. Although local labour laws may vary, EU companies should seek to work with suppliers who provide fair working conditions, appropriate wages, and reasonable working hours that are consistent with globally recognised labour standards.
7. Modern Slavery Act: The Modern Slavery Act, introduced in the UK, requires companies to report on the steps they take to prevent slavery and human trafficking in their supply chains. For EU companies, even if this law does not directly bind them, it remains important to ensure that outsourcing partners are free from such practices. This means checking suppliers’ labour standards to confirm that there is no use of forced, bonded, or child labour.
8. Corporate Sustainability Reporting Directive (CSRD): Companies subject to the CSRD must ensure that their outsourcing partners contribute to sustainability data, including environmental impact, labour practices, and human rights records. Smaller suppliers may be required to provide relevant data for clients’ ESG disclosures.
9. Other Legislation: Similar to the Modern Slavery Act, other EU legislation and directives focus on enhancing transparency and ethical practices in business operations. For instance, the EU Non-Financial Reporting Directive requires large companies to disclose information on managing social and employee aspects, respect for human rights, anti-corruption and bribery issues, and diversity on company boards. Although this directive primarily applies to large companies, smaller firms benefit from aligning with these practices to ensure comprehensive compliance and ethical operation.

Even smaller companies – although not always under a legal obligation to conduct formal audits – can gain a lot of leverage by ensuring their suppliers follow these regulations. This is a hallmark of best practice, and it sends a clear message to potential clients: we take compliance and corporate responsibility seriously.

Take, for example, a European start-up outsourcing app development to a company in India. To remain GDPR-compliant, the start-up should confirm that its partner has data protection measures in place, which may include end-to-end encryption, secure transfer protocols, and storage solutions that meet the EU requirements. These safeguards should be backed by clear legal contracts clearly defining exactly how personal data is handled, stored, and protected against breaches.

Or consider an EU-based software company using a service provider in Southeast Asia. Beyond GDPR, the European firm should also ensure its partner aligns with the EU Cybersecurity Act by having strong security policies, incident response procedures, and a track record of protecting systems against attacks.

In short, whether required by law for a multinational company or chosen as a strategic action by a smaller business, auditing non-EU software outsourcing partners for compliance with EU rules offers strong protection. It ensures you remain legally compliant, protects your reputation, and builds credibility in the global market. In outsourcing, trust is as valuable as talent.

Technical solutions to ensure Safe Outsourcing

Ensuring compliance with the GDPR and generally creating the conditions for safe outsourcing requires comprehensive security measures, some of which involve process management. Still, others focus on creating an appropriate IT environment.

• Encrypted channels for all communications,
• VPN connections and ensuring that all communications are encrypted using Transport Layer Security (TLS).
• Use individual restrictions and controls to distinguish each user’s behaviour in logs.
• Only those who need to access personal or critical information are allowed to do so.
• Update all software regularly.
• Only use recognised antivirus software.
• Encrypt all hard disks to secure systems both locally and remotely.
• Ensure all USB ports are blocked.
• To ensure that data privacy and security are prioritised, all staff must receive regular GDPR training and sign confidentiality agreements.
• Limit the use of communication software to verify secure alternatives.
• When outsourcing outside the EU, be aware that some countries’ legislation may allow public authorities to access data stored in cloud solutions.

Read more here on how we at Gislen Software protect clients’ data.

Contract terms and conditions

A well-drafted contract is central to any outsourcing relationship. It defines expectations, responsibilities, and remedies in clear terms, helping to prevent misunderstandings in the future. When applicable, this should include precise Service Level Agreements (SLAs) for support functions, explicit details on security measures, and a thorough approach to managing intellectual property. If an issue is important to your business, it should be written into the contract – and stated clearly, not hidden away in complex legal wording.

Continuous Monitoring and Evaluation

Signing the contract does not mean the end of the process – it is rather just the beginning. Companies should obviously keep a close eye on how their outsourcing partners perform, using regular audits, performance reviews, and feedback sessions to ensure both sides are sticking to their commitments. This does not mean micromanaging; it’s about building a culture of transparency and continuous improvement. After all, the earlier you identify a small problem, the easier it is to fix before it becomes a costly one.

Crisis management plan

Even with the best planning, things can go wrong, and when they do, speed and preparation matter. A crisis management plan should be ready to roll out at a moment’s notice. It should outline procedures for handling data breaches, supplier failures, or any other unexpected disruptions. The purpose is to protect your business, your customers, and your reputation, while ensuring your operations run as smoothly as possible during turbulent times.

Gislen Software: Your Partner for Safe Outsourcing

Gislen Software is a trusted Swedish-owned IT outsourcing company with extensive experience delivering high-quality, secure IT services. We offer customised services and solutions tailored to your specific needs and goals. We provide several different services. From product development, upgrading and migrating legacy systems to newer, more modern technologies, Artificial Intelligence, mobile applications and apps, support and maintenance, and other IT services such as customer support, accounting and support for various HR functions. The aim is to streamline operations, reduce costs and improve quality. Together with our partner, Epical Group, we also offer first-class blended outsourcing, especially in systems integration.

Expertise and Experience

With over 30 years of experience in the IT industry, Gislen Software has developed a deep understanding of software development, cloud solutions, and IT support. Our team comprises highly qualified professionals with deep expertise in their respective fields. Perhaps more importantly, with our Swedish connection, our staff has much experience understanding the Scandinavian market. We also train our staff on cultural understanding. Because we are so “Scandinavian”, we believe we are one of the best at working with Scandinavian customers.

We also have many good references. We have worked with many well-known companies and organisations including ABB, Epical Group, European Association for Cardio-Thoracic Surgery, Kantar Media Research, PostNord, Scandinavian Airlines, Svensk Byggtjänst, Swedish Match, Vaisala, and Volvo Cars, as well as small and medium-sized companies like Clarendo, Planter Norden, and Dineflow.

Safety and Compliance

Safety is one of our highest priorities. We follow strict security standards and data protection rules to protect your information. We are used to working with high-security standards. Our employees are trained to understand GDPR and other security requirements. The applications we build are designed for security and with security as a default. We also have a third-party supplier code of conduct signed by all our suppliers, and we are a carbon-neutral company.

Cloud and Data Sovereignty

When outsourcing to non-EU providers or using public cloud platforms, it is critical to assess where data is stored and who may legally access it. Increasingly, European firms are opting for EU-based cloud providers or adopting sovereign cloud strategies to remain compliant with the GDPR and avoid accessing third-country data. We don’t store any data in Cloud Services outside of the EU, and all systems in India are on-premises in our own server hall, which is entirely under our physical control. Read more about this in a report on whether US cloud services can no longer be trusted.

Flexibility and Adaptability

We understand that every business has unique needs. That is why we offer flexible and scalable solutions that can be customised to your specific requirements. Whether you need a small team augmentation or a comprehensive IT solution, we can help. We can also help with administrative services such as accounting and some HR-related services.

Outsourcing partners must now excel in technical capabilities and remote team integration. This includes utilising modern collaboration platforms, agile project management tools, and transparent documentation to minimise friction and enhance trust in distributed setups.

Quality Control and Continuous Improvement

Quality is at the centre of everything we do. We use proven methods and tools to ensure our solutions meet the highest standards. We always want to improve and optimise our services through continuous feedback and evaluation. Our testers are capable of both manual and automated testing.

Frequently Asked Questions about Safe Outsourcing

Below, we have collected some frequently asked questions about Safe Outsourcing.

Summary

Safe outsourcing is not mainly a cost-saving strategy; it’s a smart, strategic move in today’s competitive market. The key lies in concentrating on what you do best, while partnering with someone you can rely on to handle the rest with skill and integrity.

By balancing the benefits against the risks and utilising proper security and compliance practices throughout the process, we believe companies can get the advantages of outsourcing without undue concern for potential challenges.

At Gislen Software, we take pride in being a dependable partner. We combine high-quality delivery with a commitment to safety, compliance, and a focus on your unique business goals. If you are looking to extend your team, streamline operations, or bring new ideas to life, we will adjust our approach to suit your exact needs.

Let’s work together to take your business to the next level – safely, efficiently, and with the confidence that comes from having the right people on your side.

Contact us today to discover how safe outsourcing can benefit your company.