In-House vs Outsourcing: Which Software Development Method to Choose

Today, more and more startups and companies need software development. Sophisticated software solutions are especially in-demand in the healthcare, telecommunications, and fintech industries.

However, whatever task a business faces — process automation or software product implementation — the eternal question will remain: is it best to use an in-house or outsourced development method?

The reason for such active growth is budget savings and flexibility in work. 70% of surveyed companies say they choose outsourcing because of the opportunity to reduce development costs and get a ready solution in a short time. Nevertheless, some companies still prefer in-house development. To understand which model is right for your business, let’s take a closer look at each option.

Outsourcing software development: how does it work?

The concept of outsourcing involves the transfer of particular responsibilities and tasks to a third-party contractor. Thus, the customer company receives those services that it cannot perform on its own, and in turn, the contractor company ensures the high-quality execution of tasks assigned to it by a team of its specialists.

With outsourcing, communication between the customer and the contractor team is usually handled by the project manager. The client company discusses all issues with the manager of the contractor company, and the project manager distributes tasks to his team of specialists and monitors the work.

There are a lot of benefits of outsourcing software development, but also some potential issues if things are not managed properly.

Outsourcing software development: pros

Fast start

The ability to begin quickly is one of the main advantages of outsourcing for many companies. In urgent need, the execution of urgent IT tasks can be immediately transferred to an outsourcing company with a ready-made team of specialists who will immediately get down to work.

A global selection of experts

Outsourcing means the ability to work with highly qualified specialists not only from the city or country in which the business is located, but anywhere in the world. The choice of an outsourcing company is not limited to location, which means there is access to a larger number of specialists with a set of unique skills.

Save time

When choosing outsourcing, the contractor carries out the team selection, the division of responsibilities, control and payment for the work independently, which saves time for the customer.

Cost savings

Reducing costs in addition to other benefits is another bonus of outsourcing development. For example, paying for the services of an outsourcing company is much cheaper than hiring IT specialists, and you can plan your budget in advance.

In addition, the team works remotely, which means the client saves on office management, corporate expenses, HR, and other spending areas that are associated with in-house employment.

Reducing risks

You have the opportunity to study an outsourcing company’s successful projects, identifying strengths and weaknesses before applying for their assistance. The risks of misunderstanding or a failed project, in this case, are much lower.

Outsourcing software development: cons

Data confidentiality

As with any third party service providers, there is a slight risk of data breaches or other security related issues. Therefore, it is essential to ensure that outsourcing companies have established themselves in the market with positive reviews and comply with security standards.

Communication

Due to time or cultural differences, it can be challenging to establish clear communication.

Especially when there is a severe time difference between the customer and the contractor, without proper communication channels and a well-functioning method of cooperation, the effectiveness of work on a project can suffer.

Deadlines

Estimating time can present problems for the customer. Very often, third-party developers underestimate the timing and complexity of the project, which inevitably means more work time needs to be allocated, and accordingly, higher costs for the customer.

Eventually, for companies that want to remain cost-efficient but have fast and high-quality results, outsourcing is a good, convenient, and low-risk option. Additionally, you will have the opportunity to get the delivery you desire without having to control the entire process, as there’s a skilled team involved.

Cases where it’s better to choose an outsourcing team

When discussing the pros of outsourcing, we found that working with an outside team is financially more beneficial. This option is suitable for those who have a limited budget. Delegating the development to an outsourcing company will allow you to get a reliable product at a low cost, as compared to hiring your own team.

Alas, it is very difficult to find and get the right employees in a short time. That’s why outsourcing is preferred by those companies that need to get a solution in a short time. Here we should also mention the difficulty of selecting a personal team. You may simply not have the right specialist in your city. But an outsourcing company gives you access to talent from all over the world.

Another case when outsourcing development is preferable is the lack of logistics in the company. The IT service provider has everything you need for each specialist to be productive. Therefore, as a client, you do not need to worry about technical resources.

Finding an outsourcing team

Before you begin your search, it’s important to determine the right outsourcing model. You can choose from three types of collaboration:

• Onshore – the outsourcing company is located in your country but may be headquartered in another city. With this model, the problem of cultural differences is leveled out.
• Nearshore – the IT service provider is located in a country close to yours. It is usually in the same time zone as you. This solves the problem of organizing communication.
• Offshore – the vendor is located in a different time zone.

After deciding on a cooperation model, choose a way to search for outsourcers. This can be either an online platform or word of mouth. But first things first.

• Web sites with ratings and reviews on leading outsourcing companies. These include Clutch, The Manifest, Good Firms, and the like. Here you can customize your search filter to suit your needs, see reviews from former and current clients, and explore the company’s website.
• Search online. Just be prepared for the fact that the search engine will give you many different sites. To find the most suitable company, adjust your query and add details. For example, specify the desired country, type of development, etc.
• Social networks. The most popular is the professional online platform LinkedIn. Many IT companies and freelancers have their pages here. Also, a social network, Spiceworks was created specifically for cooperation in the development field.
• Word of mouth. It’s corny but effective. Ask your acquaintances or partners about their experiences with outsourcers. Can they recommend any company or platform to search?

Outsourcing teams have an extensive online presence. Therefore, finding an outsourcing company is not much of a problem. All that remains is to look at the candidates you find and decide who will handle the implementation of your business project better.

In-house software development: how does it work?

In-house development involves hiring the team with the necessary skills to work internally in the company. With an in-house team, you can track and control work processes, and monitor the efficiency and growth of employees more closely.

In-house software development also requires an office or infrastructure with all hardware and software. So let’s take a closer look at the pros and cons of in-house development.

In-house software development: pros

Confidence

When hiring in-house, you develop a better connection with the team, which facilitates communication and streamlined delivery processes. Additionally, employees that are part of an internal team are often more accountable and involved in the project.

Communication

The ability to communicate personally helps to make work more effective and reduce misunderstandings. In addition, since the entire team is working together in the same office and in the same time zone, it’s easy to make changes faster.

Understanding the specifics

Generally, the staff member better understands the business aspects, goals, and pitfalls, and responds more quickly to changes in processes. They are also well acquainted with your customers, prospects, and communication channels. This knowledge allows the IT specialist to offer unique development solutions and promptly solve problems that arise.

In-house software development: cons

Expansion of staff

For the correct development of any project, a whole team is always needed — not only programmers but also designers, testers, product owners, and product managers. You need to put them together, and also to make them work effectively.

Searching for experts

The labor market does not always have the necessary specialists, and if there is, the cost of their services may go beyond the project budget. In addition, finding a good specialist with specific competencies is an expensive and challenging task.

High price

The cost of hiring in-house developers is significantly higher than that of outsourced developers because these costs include infrastructure, overhead costs, other employee benefits, training costs, and more.

In the case of retaining a specialist with a low workload, the company will essentially pay for the “downtime”.

Competitive Risks

Due to high demand and attractive packages offered by other companies, developers are increasingly changing jobs. Thus, there is always a risk that your lead developer might change careers at a critical stage in the project.

Hiring new employees instead of remote ones may initially seem like a good idea. But the process of finding specialists causes some difficulties. Attracting qualified developers, explaining your needs, and getting the most out of your future employee takes a lot of time and effort.

In addition, it can distract you from core business functions, leading to confusion and at worst, loss of the project.

When it is worth choosing your own team

Hiring several IT specialists in a company involves financial expenses and material support for future employees: office furniture, equipment, etc. But hiring developers is just right for you if you do not have budget constraints and there is room for a whole team in the office.

In-house specialists are more cost-effective if you need complete control over the project. Thus, you will constantly coordinate the work and solve problems or difficulties in development together with the team.

We have an expert article on this topic: Outsourcing vs. Offshoring – which is better to choose?

Where to look for developers for your team

To find the right specialist, you should pay attention to specialized online resources and various technical events. Let us consider them in detail.

• Recruiting Internet services

You can start your search on general job sites and more narrowly focused ones. The second option, a priori, contains more profiles of development specialists. So you will have more suitable candidates to choose from, regardless of who you are looking for: a backend developer, a designer, or a tester.

• Hackathons and IT conferences

These technical events attract hundreds of developers from all over the world. Every year a calendar of conferences is compiled. Each event is often dedicated to one programming language or a certain technology. For example, attend a Java conference if you are looking for a Java developer. It works the same way with other professionals.

Hackathons are also divided by specific technologies. They are good for finding software engineers because they gather experts working on general software around them. A hackathon is a perfect place to find a qualified engineer for your startup. By focusing on the direction of the event, you can choose the one that best suits your project.

• Universities

You can find really talented programmers among engineering students. They may not have work experience, but most are great at development tasks. There is a lot of enthusiasm in such candidates, as well as a strong desire to develop in programming. This makes it possible to quickly train them in the right direction and get a great person on the internal team.

Recruitment process for the in-house team

When recruiting specialists for your development team, you should be guided by several rules:

• Think about what skills your team should have. Depending on this, select the specialists who know the appropriate technology stacks.
• Prioritize correctly. Guided only by the fact that the candidate should think “technically,” you might miss the specialist who can find non-standard ideas to solve problems.
• Evaluate candidates objectively. To assemble a productive team, you need to focus not only on core skills but also on additional skills. Select employees who can complement each other harmoniously.

In-House vs. Outsourcing: software development at different stages

After considering the strengths and weaknesses of your own team and the remote team, let’s look at the peculiarities of their activities at different stages of cooperation.

Analytical stage

In-House

Hiring an analyst with a narrow specialization for a large and complex project is better. It will cost a bit more than outsourcing services, but it can provide more effective results. Having your own company specialist makes it easier to conduct market research and make a product concept. After all, an in-house employee is well acquainted with your company’s specifics and business goals. In addition, they can actively participate in all discussions and briefings within the company.

Outsourcing

A remote team also performs analytics. The services of an outsourced specialist are usually significantly cheaper. In order to get a quality market analysis, it is necessary to set up competent management and convenient channels of communication.

UX and UI design stage

In-House

The in-house team has direct access to research on your target audience. Based on this data, they will be able to design the most user-friendly interface for the user.

Outsourcing

At the design development stage, remote specialists have more advantages than in-house. So, the price for the services of offshore developers is lower, and the quality of work is very high. To get the desired result, you must communicate your thoughts clearly and competently, formulate the right terms of reference, and establish constant communication with outsourcers.

Software development stage

In-House

It is much easier to manage the development process if you have your own IT department. But when unforeseen problems arise, sometimes you have to turn to a specialist with broader skills. At the same time, the team may not have such an expert. Then you have to look for it on external resources or solve the problem yourself. And this can significantly slow down the process.

Outsourcing

The contracting company provides you with the best people with the skills and talents you need for your product. It also promptly engages other experts in case of force majeure. Therefore, it is possible to create good software quickly and at a low cost. The only drawback is management. But, as mentioned above, a well-functioning communication channel can solve the communication problem.

Testing stage

In-House

QA specialists (Quality Assurance) lead the testing process from the beginning of creation to the very release of the project. But if your in-house team is relatively small, hiring outside testers is an additional expense.

Outsourcing

The contracting company always employs a team of QA experts because the verification of software operability is performed at each stage of its creation. All arising problems are solved in conjunction with other tasks. Thus, you will be assured of the reliability of the created IT product.

Scaling stage

In-House

Scaling is not an easy process and requires the full commitment of your employees. They must be able to work together and be equally interested in developing and improving the software. But due to the high competition in the employment market, no one is safe from an employee leaving for another company. There is a problem of staff turnover, provoking difficulties in working together.

Outsourcing

A remote company offers turnkey team services. This is a close-knit team of developers who can quickly integrate into your business activities. Remote specialists have a well-established algorithm for working on various projects. This means you don’t need to organize the cooperation of team members as you would in a full-time team.

Choosing a solution

Based on what we have presented above, we have compiled a comparative table, “In-House vs. Outsourcing Development,” which clearly shows the effectiveness of both methods.

Based on this, for companies that are not focused on information technology and do not have competent IT specialists on their staff, it is better to choose outsourcing, entrusting all the work to outside professionals.

Outsourcing takes over most of the planning and execution of your workload, thereby freeing up your efforts to focus on the tasks that require your attention.

By choosing outsourcing, you can grow your business in an unstable market without any significant risk. Glorium has been a reliable provider of the best software development solutions for over 10 years, so if you need a trustworthy outsource partner, get in touch!

FAQ