Comparing In-House vs Outsourced Software Development

Nowadays, technology plays an important role in business operations. No matter the size of your company, technology brings both tangible and intangible advantages that will help your company gain more money and produce the results your customers demand. As a result, it is recommended for each company to go digital and take the technology benefits. So the question arises: what team of developers to hire – In-house software development or Outsourcing software development.

It is hard to recommend one approach for all cases, as each project has different features and specific requirements to consider. In this article, we will show you the pros and cons of each approach, as well as some advice on which to choose. Are you ready? Here we go!

Definitions:

1. What is outsourcing software development?

In simple words, outsourcing development means a business hiring a third-party company to handle all or part of the tech tasks instead of doing it in-house.

Outsourcing software development will help the business to save initial time and cost as they don’t have to invest in infrastructure and hire in-house workers.

This option is often chosen by companies that are lacking (temporarily) enough own software developers, or are not strong in tech at all (as it might not be their core business competency).

Companies using outsourcing software development:

• Alibaba: The global market from China couldn’t exist without an outsourced team taking care of back-end development.
• GitHub and Skype were two excellent start-ups which have evolved into successful companies with global outsourced teams.
• Slack worked with Meta (a design company based in Canada, to create their web interface).

When to outsource?

Outsourcing is a perfect fit for companies that don’t have enough software development resources or do not have the right skillets in house. Furthermore, it might be the right fit for companies who are lacking an IT team at all. In many cases, outsourcing will also be beneficial for you, as it will help your internal team focus on your core business projects and top-priority tasks.

Another reason to choose to outsource development is to bring some new, fresh and innovative ideas to your company. You might opt to hire only important team members to supplement your core team. In case you can only pay for one in-house developer, it is better to go for an outsourced team with broader expertise.

2. What is in-house software development?

In-house software development means the company uses its own developers to build and implement an IT system that fits the specific needs of the company. To do this, the company needs to have an in-house team, including business analysts, programmers, etc…

This approach gives the company full control over the functions and in-depth knowledge of how the system operates, along with what they need to face with other competitors in the same segment.

In-house development requires time and money to build a team of people from different backgrounds or roles to create a strong base for developing good software.

Companies using in-house software development:

• Amazon: this company has an in-house development team, and works in most business processes to prevent leaking any development secrets.
• PayPal: the in-house approach is used in PayPal to produce the highest quality products all over the world.
• Salesforce: this company has a first-class CRM system that selected in-house over outsourced software development for its projects.

When to develop the in-house team?

To check whether an in-house development team fits your demand, just answer the below questions:

• Do you have enough time to find the right people and train them to fit your company's requirements?
• Do you have enough budget to pay regular salaries for your IT team?
• Do you have skilled IT management to manage, coach, and guide your IT team?

If all the answers are yes, then go for an in-house team.

Note: make sure all your staffs are not all beginners, or else you will lose even more time waiting until they have enough skills.

Pros and Cons

1. The pros and cons of outsourcing software development

The pros:

• Cost-efficiency: One of the biggest strengths of outsourcing software development is the cost. Outsourcing overseas developers can also give you the same work done at a much cheaper price than hiring local developers. (the figure can be a quarter of the cost or maybe less, from the other countries). Then, you will have more budget to develop a bigger, more feature-rich application.
• No office distraction: This might seem foolish, but actually many office environments right now are quite distracting for developers. Many activities like commuting, eating lunch, and office chit-chat leave developers less time to get actual work done at the office. In addition, many developers must work more hours to finish their work than necessary, which may make them tired and break the company culture.
• Long-term commitment: Hiring outsourced developers brings you the ability to get an expert involved in a project basis without paying the associated costs or committing long-term. In the beginning, you may need someone with one skill set, but later you will need others with a totally different skill set.
• Focus on your urgent tasks: in some cases, if you are not good at a field, outsourcing it will be a smart decision. Do what you are best and outsource the rest. By doing so, you will have time to manage your tasks and minimize failures. You can devote your saving time to optimizing your budget, building a marketing strategy, working on urgent tasks, etc...

Free up your team and let them focus on long-term tasks.

• No recruitment hassle: When building an in-house team, you have to find good people, attract them with good offers, maintain them or even train them if needed, etc. This means there are too many tasks you have to do when using an in-house team, and it is also effort- and cost-consuming. On the other hand, if you work with an outsourced team, you don’t need to care about all the mentioned factors at all as the vendor with handles these tasks for you.

The cons:

• Time: One of the major cons of hiring outsourcing is the amount of time to find a suitable agency. Finding an agency that collaborates well with your company and makes your project done in the correct way will take time. Although there are plenty of agencies out there, not all of them have the team fitting your company’s skill requirements.

2. The pros and cons of in-house software development

The pros:

• Direct control to your workers: With a team of developers who work with you full time and have been involved in your project, you know the strengths and weaknesses of each team member and can assign suitable tasks for them accordingly. If a problem happens, you will know who caused it, so it will be solved swiftly. Urgent tasks and fixes can always be treated as top priorities by your in-house team, while an outsourced team can not work in this way as they might be busy with other projects at the moment.
• Ability to build a company culture: It is crucial for a start-up to outline a strict workflow and build corporate codes, events, ethics, etc. from the very beginning. Team spirit is a strong benefit of an in-house team. It is also the thing you will never find in an outsourced team. Good relationships between people in the company lead to good processes of how products are made and, consequently, an excellent final result.
• Expertise in your company’s profile: when you work on your own project, you know what needs to be done and how. Hence, you don’t have to spend many hours explaining to contractors about your requirements and your expected outcome. An in-depth insight into a company’s ethics, philosophy, rank on the market, and even cultural peculiarities are important for the best performance. People owing corporate understanding will be able to tackle problems more easily than an outsourced employee.

The Cons:

• High cost: Hiring an in-house development team takes your company a lot of money. Having developers on the payroll means you have to pay them no matter what. Whether they are working hard for a big project or just maintaining the system performance, you have to pay them the same salary. Furthermore, you do need to provide them benefits such as equipment, health insurance, paid leaves, sick pay, and free meals. Additionally, you still have to pay for your developers even if they are lying on the sofa as they don’t have any project to do at the moment. Your task is to attract them, find projects for them to do, and retain them. Therefore, you either keep your business basic or have to find generous investors.
• Time: To build a strong in-house development team, will take you a lot of time. This is because you need to seek for the right developers and persuade them to join your team. These tasks will require lots of effort than you might think. A suitable developer is one who fits both your required skills and the culture of your company. As the need for qualified developers is extremely high today, finding a suitable developer may take you away from other pressing problems with your business.

Final Thoughts

Now you’ve learned about the in-house and outsourcing software development approaches. Each approach has its own pros and cons, so examine your demand, budget, and goals in order to choose the right option.