Outsourcing Software Development Vs Keeping It In-house

March 19, 2022

outsourcing of software development

The heart of any company is its software! Without software, no business can survive. However, there are two options for software development: in-house development or outsourcing of software development.

software outsourcing services

After much debate, your business has chosen to embark on a new software development project, and it’s time to decide whether to create the application in-house or hire a third-party vendor to do it for you. This crucial decision will significantly influence your business, so the benefits and risks from both approaches must be considered and assessed in detail.

However, this blog post will address whether or not software development should be done in-house or by a software development outsourcing partner. It will also examine why each model works, where it makes sense, and its advantages and disadvantages.

Software development outsourcing

The term “software development outsourcing” is broad, and businesses are increasingly inclined to outsource their IT needs. This choice includes a high price-quality ratio, reduced employment hassles, and a faster time to market.

project management tools

The second option is to develop software in-house. There are risks involved in both techniques. It takes a long time to build an in-house. Find out in this guide by figuring out what in-house software development and outsourcing software development are all about.

Then look at both in-house and software development outsourcing, focusing on the advantages and disadvantages.

Outsourcing vs. in-house models

What are the differences between outsourcing software development and in-house software development? Developing your web and mobile app in-house means you engage a team of workers who are part of your organisation to do it. This typically implies hiring specialists one at a time through job boards and LinkedIn profiles.

In theory, it is feasible to locate and hire an entire in-house staff at once, but this is a rare occurrence. When you outsource software development, you engage with third parties rather than hire personnel in your company. You can either employ an outsourcing company or freelance software developers to create your app.

software testing

Software development outsourcing and in-house software development are both common approaches, each with its own set of benefits and drawbacks.

Software development outsourcing and in-house software development are both common approaches, each with benefits and drawbacks. Depending on your requirements, some best software outsourcing companies provide separate experts and full-stack teams. It will most likely be necessary to pick freelancers one by one.

However, the pros and cons of outsourcing software development vs. in-house software development are outlined below.

The key advantages of outsourcing software development

Many companies are turning to software development outsourcing to free up time and resources for other business areas. Google, for example, has begun outsourcing specific components of its services. However, outsourcing is a wise decision for the following reasons:

Cost savings

Whether you hire a software outsourcing vendor or individual freelancers, they’ll already have everything they need to complete the work, including a workspace and equipment. There will be no office-related expenditures on you, significantly lowering your costs, particularly a long-term project.

software development services

In addition, if a project’s activity drops off, you may put it on hold and return to it later with the same project development team working on it (provided that you negotiate with the team ahead of time). When you develop your custom software solution, you can lose your staff to other businesses when there is no work, and bringing them back will be a lot more complicated.

Launching faster

Software development companies (both outsourced teams and individual freelancers) typically have many software projects on the go. They stay on top of things by establishing deadlines and following through.

Furthermore, most outsourcing contracts include penalties for missing deadlines without a reasonable cause. This implies that software outsourcing companies will finish your project on time in most cases. It’s much easier for the in-house remote tech team to miss deadlines when they’re more adaptable with modifications and fixes.

Getting access to more specialists

When it comes to developing software in-house, you’ll be restricted to your region’s talent pool. Inviting out-of-state software developers will cost more, and it might be difficult for various reasons.

benefits of software development

Finding excellent developers may be difficult if you live in an area where the IT sector isn’t well developed. You can hire developers from all over the world if your companies outsource. You may get the best results by gathering several independent developers or software development companies from different countries.

Promoting education and new technologies

Software development companies (both outsourcing vendors and independent freelancers) are always learning new skills. They must stay competitive in the industry. To remain competitive in an ever-changing market, software development experts seek new ideas and ways to improve their code while staying mindful of everything else within the sector that may aid them in doing so.

digital transformation strategy

You won’t have to persuade them to adopt new technology options or develop their skills, and you won’t have to pay for it. On the other hand, in-house teams may be prevented from progressing if they solely focus on one product for years. The chances are that you’ll need to persuade your in-house to improve their skills.

Ensuring skill versatility and team scalability

Team flexibility is one of the advantages of the outsourcing company. If a certain developer is unfamiliar with a certain technology, there’s almost certainly someone in their network who knows it and can provide assistance right away. But with an in-house, you’ll either need to spend time and money finding more software engineers or teaching your existing personnel.

The potential risks of outsourcing software development

Even though there are several benefits to a software development company, it isn’t without its drawbacks. The following are what to expect and be ready to tackle them:

Lack of personal control

The main advantages of in-house system development include monitoring and project management. It’s more difficult to maintain tight control over the software development process when you outsource it.

core competencies

Typically, suppose you outsource to a software development company. In that case, you’ll have a project manager who will interact with your software development team and arrange times for communication, reviews, and learning on the status of the software development project.

You may agree to talk as often as necessary — daily, weekly, or close each sprint. You’ll be manipulating the project indirectly via a project manager.

Poor flexibility

You can make changes in your company anytime, and you can expect your dedicated team to work on them as soon as possible with an in-house team. Most software development outsourcing companies use an Agile development approach and operate in sprints.

The agile methodology follows a pre-approved plan for short (usually two-week sprints) periods of development. Unless they address a critical flaw or introduce an extremely time-sensitive feature, the next sprint adds new changes.

Possible low quality of code

Everybody wishes to be a part of the lucrative software industry. However, just as any other career, software development requires time, effort, and dedication to be successful. Unfortunately, not every software developer is committed to producing high-quality work for their clients.

world software

On the other hand, some individuals try to put up with a somewhat functioning code that promptly breaks down. With a dedicated in-house team, you’ll have control at every stage to ensure that things are running smoothly.

Due to limited control over outsourced team development, errors may be discovered too late. It may take some time to locate a responsible developer who can assist you with your software project.

However, some software development outsourcing services may assist you with it. If you hire a firm to complete your project rather than freelance, you may research their track record and qualifications on Clutch, where all evaluations are from verified clients. Freelance job boards often contain feedback and assessments as well.

Risk of data leaks

Your project’s requirements and the nature of your business may necessitate sensitive data on your company. You’ll, however, need to consider it while selecting who you work with.

Using reputed software development companies with excellent ratings on platforms like Clutch is a good practice to avoid fraud and data theft. To lower the dangers, have everyone who has access to sensitive information sign an NDA.

Communication issues

When you outsource, communication between the outsourcing partner and the client might become a big problem, primarily if you work with overseas outsourced teams. There are some challenges that you may face:

  • Language problems
  • Time zone differences
  • Cultural differences
  • Lack of clarity from remote communication, and so on

However, the most difficult challenge is undoubtedly a time difference since navigating might be challenging. If your development team is located on the other side of the world, all participants will need to plan time for communicating, and this might not be possible at all times.

rapid pace

Because of this, it’s usually suggested that a team have members from the same country or close enough to communicate with one another effectively.

Differences in language and culture can often be reduced with preparation and finding someone who can communicate effectively with you and the team. Most project managers and outsourcing developers now understand English; thus, language is rarely an issue today.

Hidden costs

The software development process is rarely rigid, and unforeseen adjustments occasionally will cost extra. With a good outsourcing software development company, you will be informed of the chance of additional expenses if your outsourcing partner calculates software development costs.

  • Upgrades
  • Maintenance
  • Out-of-turn/unexpected changes
  • Extra tools necessary to build specific features

However, when outsourcing software development, it’s essential to consider any unforeseen fees into your plan ahead of time. It’s a great idea to talk about it with your dedicated team and include provisions restricting additional expenses into the agreement. The following are some of the additional expenses that you may expect:

When to outsource development

It’s is recommended to outsource when:

  • You need to keep to a spending plan/budget
  • Your company’s product is designed for a fast-changing market sector that frequently embraces cutting-edge technology and creative techniques
  • Your project will only require occasional updates to keep up with the competition in the market after the launch
  • Your project doesn’t contain any highly personal or business-related information

The key advantages of in-house software development

When it comes to developing proprietary software development projects, the following are some of the benefits of in-house software development:

High levels of control over the software development process

An in-house team is based where your employees work, making contact with them more accessible. Even if pandemic conditions persisted, an in-house team would still be in the same country or state.

security risks

You may keep an eye on your team when they are a few offices and unexpected phone calls away from you. You’ll be able to visit — physically or virtually — to check how the project is progressing, ask questions, and offer suggestions.

Unhindered communication

Your in-house staff understands both the literal and figurative meaning of your language. It’s simple to explain your ideas when you have the freedom to meet and discuss the project face-to-face at any time, without extra hassles.

Understanding of business goals on the part of developers

Outsourced third-party contractors create a product in the manner directed by a client. While outsourcing companies appreciate their customers’ businesses and don’t blindly follow orders, not all outsourcers are like that.

business processes

Nothing compares to a team dependent on the product’s success for its future success. In-house teams are more likely to be committed to the entire development cycle since they are familiar with its culture and share the corporate spirit. Moreover, specific inside knowledge about a product that might influence it cannot be disclosed to third parties.

Dedication to your product

Many outsourcing developers, both corporate and freelance professionals, operate on more than one project at a time. When one project is in the low-activity phase, requiring very little work, they’ll jump to another because they’re generally compensated for each hour worked.

In contrast, in-house teams completely commit themselves to the software development processes they’re developing for their clients. When you work with in-house developers, you won’t run into a clash of schedules when you need to make adjustments right away.

Flexibility

In software development, flexibility entails the capacity to make modifications right away; it’s one of the significant in-house advantages, and it derives from all of the above benefits. In-house developers are more flexible since they are:        

dedicated team model
  • More effective at communicating with the product owner
  • More geographically accessible
  • Have just one product on which they are focused and don’t need to reset their schedules much to make changes
  • They are known because they understand the company from the inside out, having seen it grow

The essential drawbacks of in-house software development

Large organisations frequently utilise in-house software development with existing software development projects requiring constant long-term improvement services. There are several reasons for that, and when you pick in-house development, you’ll need to keep some things in mind.

Higher costs

When you engage a software development outsourcing company in developing custom software solutions, you pay them only for their time working on your project. The cost is based on labor hours or story points, but you must pay for the task accomplished and nothing else.

outsourcing market

Suppose you want to run an in-house team software development. Developer-grade PCs aren’t cheap. You’ll have to pay them salaries (and competitively priced ones at that) and provide social packages such as sick leave, vacations, holidays, medical insurance, and lots more. If they operate from your office, you’ll also need to provide top-of-the-line equipment.

Finding and retaining top talent

Creating an in-house development team may be challenging, especially if you don’t have a strong software engineering sector to draw from. While Silicon Valley isn’t the only location where excellent coders can be found, not every place and country has a strong IT sector.

Relocating developers to your company may be costly, and few experts are willing to relocate to a location with limited future possibilities. Moreover, to keep developers happy, you’ll need to provide comparable or more significant benefits than the industry average.

However, you may run into trouble if you do not know IT. This may be detrimental to your business growth when the development process enters into low-demand phases. You’ll need to check with specialists about the kinds of professionals you require and how much experience they should have.

Upskilling and innovation

It’s not unusual for experts who have worked on the same product for a long time to fall behind with the latest industry developments. This is because in-house developers have very little competition and, as a result, little motivation to learn unless they are enthusiastic about their work.

business  analysis

In this case, the company must encourage employees, pay for their education and upskilling, and invest in technology to keep up with the latest advancements in the sector.

When to choose in-house software development

Given the benefits and drawbacks of in-house software development described above, it is recommended to hire an in-house team when:

  • You’re working on a long-term project that will necessitate continual development efforts from developers
  • You have no budget limitations and want absolute control over the entire development process.

Outsourcing vs. In-house: The criteria to compare and choose

The following are the criteria to compare and choose:

Technological potential

You have a well-established team of experts at your disposal when working on an in-house project, each with its area of expertise. Although it isn’t always negative, you’ll experience some problems as you transition to new technology. To keep up with the market demands, you’ll need to invest in infrastructure and training.

software architecture

On the other side, outsourcing eliminates investment and generates a fresh pool of talents. Outsourcing vendors have professionals that are well versed in the company fields. Technical support companies also can access any technical knowledge at a moment’s notice. Furthermore, if you require assistance with any issue, an outsourcing partner allows you to engage a professional specialist.

Training

In-house employees may be great trailblazers in technology, but they must first be trained and educated. Even if you hire experts who have already mastered their fields, they will undoubtedly encounter a learning curve over time.

If you collaborate with a software outsourcing company, you will not pay for organisational or training expenses.

If you collaborate with a software outsourcing company, you will not pay for organisational or training expenses. When you outsource, the outsourcing team is in charge of training. As a result, you’ll probably have to pay a significant training fee.

Recruiting speed

Is it possible to have high-quality coders and fast hiring? You probably can’t if it is in-house software development. The internal hiring process might take three months unless you’re incredibly fortunate. Even if you manage to locate the correct employees, synchronising and optimising their method will take time.

experienced team

The outsourcing company can find the ideal candidate or a whole team of specialists in two to six weeks if you need a custom software development hire. On the other hand, outsourcing companies generally offer pre-trained teams that quickly scale your development capacity. Thus, you can start working on your project at any time.

Flexibility

Internal development teams are less likely to be altered because they are a more established group. You can’t ignore or request fresh recruits when hot or sluggish market. On the other hand, a software outsourcing company allows you to adjust service consumption to business demands and support your company through future development phases.

It’s more feasible to maneuver with changes in internal procedures and improvements. Furthermore, you may also take advantage of fixed labor expenses by converting them into variable costs, which means you only pay for the development services you use.

Workload

Another aspect to consider when deciding whether to do tasks internally or outsource them is workload. As a company owner, you may have a changing workload, including peak and off-peak times for your internal employees.

web and mobile

A company must ensure that employees are suited to the demands of their jobs to operate efficiently. Yes, you can only engage permanent specialists on a full-time basis. On the other hand, it can assist you in locating both full-time and part-time employees to help with enormous volumes of work or with defined responsibilities.

As a result, you fulfil the present demand without incurring the associated costs of employing new full-time employees. You may also upgrade or downsize your software development team as needed.

Communication

When kept in-house, the exact time spent at work and shared office space contribute to a pleasant and straightforward communication process. In addition, open conversations can assist you in avoiding misinterpretation and reducing wait times.

Communication technologies are also used to interact, except that it isn’t face-to-face interaction directly. You may also express your company or technical goals or provide feedback by establishing the project manager as a point of contact. Most vendors generally provide both communication methods.

Communication language

In-house software development entails that you and your software development team use the same language and have a similar mindset. It can certainly help create a more pleasant working environment, but it doesn’t ensure your project’s success.

outsourcing development

If a company is outsourcing work to another country, the employees on that team will not speak English as their native language. To avoid verbal mistakes, pick a firm with English proficiency testing.

Corporate culture

Your company’s internal and external personality is defined by its organisational culture. It has a positive influence on staff and helps build an atmosphere of optimism that is difficult to resist. However, if your primary goal is to create a digital product, an outsourced team with its own culture may benefit.

Cash flow

Outsourcing becomes more cost-effective than creating and maintaining an in-house development team over time. When it comes to technical work, overhead, staff acquisition, and middle management expenses are not your concern.

project scope

You’ll also save money by ramping up or down your staff as quickly and inexpensively as feasible. However, if you decide to increase the internal team, your firm will be responsible for all expenses.

How to outsource software development

After you’ve weighed the potential benefits and drawbacks of in-house development and outsourcing your software development, you should follow these steps if you decide to outsource it:

Make a comprehensive outline for your product

You must convey your vision clearly to develop your product the way you want it and make it the greatest it can be. Sketch your future mobile app development to comprehend it better. This outline will also assist your team (if you find one) in estimating the development cost.

Decide on your budget

You must first establish how much money you may spend on your product. It does not need to be a precise amount; an estimate will suffice. Later, you might try to raise more money; however, before figuring out how much you can spend on features to build an MVP.

Take your time to consider where you’d want to outsource

Onshore developers originate from the same country as you; nearshore developers have a similar background but originate from a neighboring country or the same continent; offshore development professionals can be located anywhere.

software development needs

The type of outsourcing you choose will impact how you interact with your staff: the farther apart your developers are, the more cultural differences you’ll encounter. Geography will also have a significant impact on the overall development cost.

Developers from the United States are industry leaders; therefore, they charge the highest rates. The charges in Latin America, Western Europe, and Australia are comparable. The most cost-effective outsourcing software development is found in Asia, with the majority of it originating from India and the Philippines. Central and Eastern Europe are roughly in the middle regarding cost savings.

Research developers extensively

Don’t be rushed into deciding by the first software development company you come across. Take a look at as many as you can. Check whether they’ve done projects similar to yours or in the same niche, how their ratings compare on reputable platforms, whether their clients’ feedback seems genuine, etc.

software development project

Then, after you’ve done your research and compiled a shortlist of top candidates for the job, contact up to five outsourcing companies that seem to be a good fit for creating your software product. You may learn more about these firms by assessing how pleasant it would be for you to work with each one and their knowledge in your industry.

Stay in touch with the chosen developer(s)

It’s critical to note the development process while outsourcing software development. Stay in touch by frequently communicating, requesting updates, and checking out mock-ups and pre-release versions. Outsourcers despise micromanagement, so good ones will value your advice and will, in turn, provide guidance to improve the product.

Conclusion: How outsourcing software development vs. keeping it in-house improves your business

It is critical to move effortlessly through a fast-paced world, particularly in the fast-expanding IT sector. It’s even more crucial to avoid letting go of a strategy that has already run its course. That is to say; it’s more beneficial to constantly assess your circumstances and act appropriately than it is to seek a one-size-fits-all custom software development solution.

The fact is that neither outsourcing software development nor in-house business practices are inherently superior or inferior. They may bring several benefits to your business if used at the right time. It’s over to you as the business owner to determine if the appropriate time has arrived or whether you should take advantage of what the world offers.

About the author: Joe Silk -

Joseph is a Start-up Consultant, Copywriter & Business Owner with 9 years of PQE. He is extremely client-centric, able to work on a wide range of topics and deliver high-quality standards on projects of all sizes for clients all over the world. View on Linkedin

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