Behind every software development project, there is a million-dollar decision (literally) to be made: Should you outsource or hire an in-house team?
This choice really matters for both the project’s success and the overall business. Did you know? 34% of B2B organizations in the UK outsource their IT support, making it the most popular service to outsource in the UK.
However, there’s no clear-cut answer here; it really depends on different factors.
In this article, we will delve into the advantages and disadvantages of in-house vs outsourcing software development. This will help you make an informed decision when choosing the right approach for your project.
How Does Outsourcing Work?
Outsourcing isn’t a new thing—it’s been around for years. When it comes to software development, it’s actually a common practice.
But what exactly is outsourcing?
Outsourcing means delegating certain business operations or projects to external companies or service providers. Usually, outsourcing companies specialize in certain areas and offer their services to businesses that require those skills.
In the case of software development, this could include tasks such as coding, testing, and keeping the software up to date. They’ve got teams of skilled developers, designers, testers, and project managers to supplement your own team and ensure high-quality deliverables.
StarTechUP offers a wide range of outsourcing services, including software development, web design and development, and mobile app development. Learn our services here.
In-house teams, on the other hand, refer to employees hired directly by the company to work on software development. This means the team is solely dedicated to accomplishing the entire project.
Outsourced Team: Pros and Cons
If you’re thinking about outsourcing your software development team, you have to know if the pros outweigh the cons of your project.
Remember that this business strategy works for many companies, but it might not be the best option for yours.
Pros
Having an outsourced team brings a lot of benefits to the table.
Let’s take a look at some of them:
1. Control over costs
Outsourcing is a cost-effective approach, especially if you hire a company in a country where the cost of hiring software developers is much lower. But they can offer the same level of expertise.
Typically, this is what you see with agencies in Eastern Europe, Latin America, and various parts of Asia, for example. The Philippines is a hot spot for IT outsourcing. Companies outsourcing to the Philippines can slash their labor costs by up to 70%.
[Also read: Offshore Software Development: Philippines vs. Spain]
2. Global talent pool
Outsourcing opens up opportunities for tapping into a larger global pool of tech talent. This means you can have access to specialized expertise without being restricted by geographical location.
Moreover, outsourcing companies are constantly investing in training their employees to stay updated with the latest technologies and trends.
3. No tech constraints
Some projects require specific technology expertise that may not be available in-house. And it can be difficult to find individuals who are a master of all trades.
Outsourcing allows you to have access to specialized teams that are well-equipped with the necessary skills and can handle complex projects. This makes it easier to scale up your project without worrying about technical limitations.
4. Enhanced flexibility and scalability
You can scale up or down quickly as needed. Outsourcing acts like an on-demand service, letting clients freely adjust their contracts based on project needs.
Whether you’re a small business or a large organization, outsourcing offers scalability. It eliminates the need to hire and train new staff, as the outsourcing firm manages this.
Cons
While outsourcing sounds like a dream come true, it’s important to also consider the potential downsides.
These include:
1. Communication barriers
As with any remote-based work, communication can be a challenge. Navigating different time zones and cultural differences can be tricky when working with an outsourced team.
But again, you can dodge these problems by teaming up with a trustworthy outsourcing partner and sorting out the best ways to communicate, including when to catch up.
2. Less of control over processes
In in-house development vs outsourcing, this particular point will always favor the former. Outsourcing means you give up control over your project’s processes and trust that the outsourcing partner will know what they’re doing.
While complete control is not always possible, you can still set up communication channels and project management tools to stay updated on the progress of your project.
3. Intellectual property concerns
Before signing any contract, make sure to establish clear guidelines on intellectual property rights. You don’t want to lose ownership of your ideas and innovations just because you chose to outsource.
This is where a non-disclosure agreement (NDA) can come in handy. By having a legally binding agreement in place, you can protect your intellectual property from being shared or used without your consent.
In-House Team: Pros and Cons
Hiring in-house employees is like starting a team from the ground up.
Going for in-house software development is pretty much the same as adding permanent staff to your organization, but it comes with its own pros and cons.
Pros
In-house operations bring several advantages because your team is right under your supervision.
Below are some of the benefits:
1. Greater control over processes
Having an in-house team means you have full control over the entire development process. This can be beneficial for projects with strict deadlines or specific requirements.
You can easily make changes and updates as needed without having to go through a third party.
2. Better communication and teamwork
In-house teams have the advantage of working together in the same office space, promoting better collaboration and integration. This can lead to faster decision-making and problem-solving.
Daily standups, weekly meetings, and team-building activities can also help improve communication and teamwork within the team.
3. Align with the company’s culture
In-house teams are picked just for your company and can quickly get in tune with its culture, values, and goals. This forms a tight-knit team all moving in the same direction, making work more efficient.
When everyone’s working together like a well-oiled machine, you’ll see better results—a big plus you might not get if you outsource your project.
4. Protected intellectual property
An in-house approach secures your intellectual property rights. When you have a team working solely for you, there’s no need to worry about sharing confidential information with third-party companies.
If you already have a strong IT security infrastructure in place, you can rest assured that your projects are safe and secure.
Cons
But, just like outsourcing, there are also downsides to having an in-house team.
1. Costly overhead costs
Hiring in-house staff is a significant investment. On top of salaries, you also cover employee benefits, sick leaves, vacations, insurance, ongoing training, and taxes.
The recruitment process is already strenuous, and this often leads to hiring a recruitment agency, adding extra costs. Small businesses with tight budgets may find this option costly.
2. Talent pool is limited
Unlike outsourcing, to hire in-house developers limits your access to a global talent pool. This means you’re only able to hire from within your geographical boundaries, making it harder to find specialized skills and expertise.
Moreover, training and keeping up with new technologies can be challenging for smaller businesses that can’t afford to invest in regular training programs.
3. Higher turnover rates
In-house employees have the freedom and flexibility to leave your organization at any time, causing disruptions in your project’s progress. This is especially common among younger generations, who tend to switch jobs more frequently for career growth.
Moreover, if a key employee leaves, it can be challenging to find someone to fill in their shoes, affecting the project’s timeline and budget.
4. Limited scalability
Handling projects in-house can also be a challenge when it comes to scalability. As your project grows, you may need to hire and train new employees, which can be time-consuming and costly.
Plus, if the demand for your services fluctuates, you may end up with employees who are underutilized, resulting in wasted resources and budget.
Key Factors to Consider Before Making the Decision
Some aspects of your business will be the deciding factors between in-house vs outsourcing.
Here are some key considerations to help you make the right decision for your project or business:
Budget
Determine if the budget and financial resources of your company can support the costs associated with in-house development. If not, outsourcing may be a more low-cost option.
Project deadline
Working with a tight deadline may require direct control over processes and immediate support, making in-house development a better option.
Required tech expertise
Consider the required skillset for your project. If it’s highly specialized or niche, it may be more difficult to find the right talent in-house.
Company Culture
If your company places a strong emphasis on company culture and values, in-house development may be the better option as you have more control over hiring team members who align with your culture.
Data Security Concerns
All, if not many, projects deal with sensitive data or proprietary information, and having an in-house team can provide better security measures compared to outsourcing.
Project Scalability
Consider the scalability of your project and whether it may require a larger or smaller team in the future. This can help determine if in-house development is feasible for long-term growth.
5 Tips to Manage Offshore Development Team
If this is your first time working with an offshore development team, here are some tips to help you manage the process effectively:
1. Ensure both parties are on the same page
This means clearly defining project requirements, goals, and expectations from the beginning. Miscommunication can lead to delays and misunderstandings.
2. Take advantage of collaboration tools
Collaboration tools benefit both outsourced and in-house teams, but staying connected is one of the challenges of the former. So, invest in collaboration tools like project management software, video conferencing, and communication platforms to stay in sync with your offshore team.
3. Establish regular check-ins
If you are hiring a team in a different time zone, be sure to schedule regular check-ins at times that work for both parties. This allows you to stay updated on progress and address any issues in a timely manner.
4. Build trust
Trust is the foundation of achieving business objectives with an offshore development team. Be transparent and communicate openly to build a strong working relationship.
5. Plan for cultural differences
Working with an offshore team may mean navigating different cultural norms and business etiquette. Take the time to understand these differences and be respectful when communicating and collaborating.
StarTechUP as Your Outsourcing Company
When companies outsource their projects, they often look for skilled and experienced partners to handle the job. StarTechUP provides just that!
As a trusted outsourcing company based in the Philippines, StarTechUP has worked with clients from various industries worldwide, providing high-quality and cost-effective software development solutions.
From web development to mobile app development and more, our team of experts is equipped with the latest technologies to deliver exceptional results that meet your business needs.
If you want to learn more about how we can help with your project, contact us today!
