In-House vs. Outsourced Development: What Is Best?

Whenever a startup founder or an entrepreneur tries to implement an idea, one of the first troubles he/she may face is “whether I should hire an in-house development team or should I outsource the development of the app?” And there is no definite answer to this question, even though outsourcing in the IT industry is expected to reach a valuation of $98 billion by 2024.

Outsourcing software development is a continuous trend in the 21st century. Organizations used to outsource app or software development by considering the cost reduction. It is still important today but no longer a priority. The motive is to find experienced and skillful talent that knows the latest technologies.

According to a CIO survey by KPMG and Harvey Nash, 46% of CIOs prefer outsourcing to access a pool of skills, and cost savings is a lower priority.

IT industries in countries like India, Ukraine, Poland, Romania, etc., have great talent with highly reasonable rates that western countries like the USA or UK find highly lucrative.

The other way is in-house software development. Creating an in-house development team requires time, patience, and money. We will go through each approach’s underlying pros and cons and analyze which could be the best way for software app development.

What Is In-House Software Development?

As the name indicates, in the in-house software development approach, you have to build your team on your own from scratch. It is like hiring other permanent staff; this team will be responsible for your app or IT software. It involves the long process of job posting, checking job applications, filtering the applications, scheduling & taking interviews, and hiring suitable candidates.

You have to create the list of the required team members, like a designer, developer, QA, content creator, etc., and then fill each of these positions by separate job postings. Big tech giants like Amazon, PayPal, etc., hire in-house developers, allowing them total control of the project at a higher cost. It is mostly recommended when you are building such software whose you can’t afford data compromise or when you have complete control of the project. Let’s know the pros and cons of in-house software development:

Advantages of In-House Software Development

1. Get a Team Aligned with Your Company’s Goals.

Big tech giants always want a highly motivated team that can understand the company’s aim or goals with the product and can embody the company’s core values. In-house development allows you to hire people that align with the startup culture. When a team works in synergy, you can get better results which may not be possible in an outsourcing approach.

2. Direct Communication

This is a clear and direct benefit of having an in-house development team. In the outsourcing approach, you primarily communicate with a project coordinator or project manager who may not understand the technicalities that a developer can. The in-house development team mostly works in the physical office space, which you can quickly contact.

There is no need to schedule meetings or send emails to make them understand the requirements. You will have the advantage of face-to-face access that speeds up discussions, particularly when finalizing the project requirements. It not only saves time but also eliminates any chances of misunderstandings, eventually accelerating the development speed.

3. Immediate Support

This is another privilege of in-house development. Some flaws come up when the product goes live or deploys on the production server. You can find and fix them with an in-house development team without delay. In outsourcing, things may get delayed.

4. Find Team Members with Specific Required Skills

This may be a significant benefit when you are working on a technology whose developers are unavailable in the outsourcing companies. Suppose your project requires various technologies to work upon, and the chosen company developers are not well-versed in any particular technology. They will learn it and still can’t become experts, leading to slow development and many bugs. In the in-house approach, you have the flexibility of hiring a staff of the specific required skills.

Disadvantages of In-House Development

1. High Cost

You must be ready to pay the underlying and visible cost of hiring an in-house development team. The hiring process itself is quite costly in that you have to hire an HR who will further hire other team members.

As per PayScale, the average salary of an IT developer in the USA costs around $71,000 without including the hidden costs.

The hidden costs are sick leaves, health insurance, public holidays, social security, etc. Also, if the team doesn’t have any task and is idle, then you still have to bear their costs, i.e., you can’t just fire them if you don’t have work.

2. Difficult to Find the Right Talent

Generally, IT professionals look for a company that gets outsourced projects, so finding the right talent to meet your requirements becomes difficult. You may end up counter offering your developer better benefits, ultimately increasing costs. Else, you will lose the talents in your team.

3. Improvement of Team Skills Will Be Your Responsibility.

There is a continuous evolution in the IT industry, and the technologies, tools, and languages are changing at a high pace. Thus, you must ensure that your team keeps up with these changes and works for their upliftment. You may need to invest in training and provide them with courses which can be expensive.

When to Opt for In-House Development?

Although in-house development is somewhat expensive, there are sound reasons for building your in-house development team. These are:

1. You Are Ready to Pay More

Suppose you are not a startup and organization with plenty of capital to invest in your business’s digital footprint. In that case, hiring an in-house team will give you many benefits and minimal cons.

2. Planning a Long-Term Project

If you are a product-based company planning to build a long-term product with multiple changes, future scalability, etc., then it makes sense to develop your in-house development team.

3. You Want Complete Control.

The in-house team would be suitable if you can’t afford any problem in your project and want complete control. Having your team lets you make decisions that affect product development and eliminates any chances of data compromise.

What Is Outsourcing Software Development?

In the outsourced development approach, you delegate the process of building the product to an agency responsible for all the activities in the product. Generally, you will share your requirements with a project manager or project coordinator in this approach. 

The manager will understand your needs and provide a quote, Scope of Work, and other documents. If both the parties are on the same page, then a contractual agreement will be made. The manager will also act as a point of contact in the complete project development cycle.

Outsourced development is recommended due to its low cost and scalability. It has become a massive trend in the IT industry, and the outsourced sector has generated $66.5 billion in 2019 globally. Some of the renowned companies that outsource their IT development are Google and Slack. 

It usually happens when the company’s core competency is not IT, or there is already so much on the IT department’s table with other core processes. Now let’s know the pros and cons of the outsourced development approach.

Advantages of Outsource Software Development

1. Dramatic Cost Reduction

No doubt that the outsourcing approach will save you a lot of money. If you are in a country where the local developers cost a lot, such as in the USA, UK, Europe, Australia, and other countries, you will have the advantage of outsourcing. There are IT firms in countries such as India, Indonesia, Ukraine, etc., where highly talented developers work at very reasonable rates compared to western countries. Also, with outsourcing, you don’t have to pay other costs like extra office space, insurance, recruitment bonus, etc.

2. A Large Pool of Talents

While outsourcing, you have the flexibility to find the right talent as per your requirements. Big tech firms like us have talented and skilled developers with expertise in various technologies. Thus, you are no longer confined to a limited choice of candidates within your vicinity. You will have a lot of options with an immense global pool of talented developers to choose from. It exonerates you from going through dozens of resumes just to find a single right developer.

3. Easy Scalability

If there are varied requirements in your product, the hired outsourcing company can easily scale the teams up or down, matching the changing needs of your product. Thus, there will be no roadblocks in scaling up or down your project. This flexibility is next to impossible with in-house development. You have to hire new team members, which takes a lot of time, and firing them after your work will tarnish your company’s reputation.

4. Faster Time to Market

Outsourcing app development means you can get the product development immediately. The hired agency will assign the resources per the requirements and will try its best to start the project as soon as possible. In the internal team process, it takes a lot of time. As per our experience, at least one month is required to recruit a skilled specialist.

5. Proven Workflows

In the outsourcing agencies, experienced teams have already worked for different industries and varied projects. They know how to collaborate and use well-defined workflows for better productivity and deliver excellent code quality.

Moreover, a software development agency also provides you with roles required for development like project managers, scrum masters, QA experts, UI & UX designers, etc. If you wish to improve the ranking of your site, then you can also get digital marketing experts.

Disadvantages of Outsource Software Development

1. Less control

An outsourced doesn’t exclusively work for you on the project. They have their way of working methodology, coding standards, and other practices. Thus, you will have little control over the development, progress, and troubleshooting. You will not have direct communication with the team, so you will not be aware of what’s happening in the project. However, companies like us provide a project coordinator who gives you regular updates on the current tasks going on.

2. Communication Barrier

If you are a company located in the USA or the UK and the hired agency is in India or any other south-east Asian country, you may have trouble scheduling the meetings due to different time zones. But now, many companies also communicate in the client’s preferred time zones. We also have project coordinators who speak fluent English and can provide you with better communication.

3. Trust Issues

While outsourcing, you trust the agency and have to share your confidential data. You may be worried about the agency’s privacy policy and whether they can use or share that with your competitors. However, professional companies like us provide an NDA and keep the data highly secure.

When to Opt for Outsourcing Development?

1. Budget Constraint

If you have a limited budget and, like any other startup, can’t afford a permanent team on your office premises, then outsourcing is the best option. It gives you flexibility in cash flow, and you don’t need to pay monthly salaries.

2. Lack of Available Talent

Somehow, you can’t find the right talent in your location, or the talent is unprofessional. Instead of spending money and time in your city, you can directly reach an outsourcing agency where the IT vendor will provide you with all the required services.

3. Time Constraints

If your industry doesn’t involve any experience in the IT industry, or this is the first time you require software, an app, or a website for your business, you may get stuck in the common roadblocks. When you have a deadline to meet, you can’t afford delays. An outsourcing agency saves you time, and many companies provide expedited development services at reasonable surged costs.

4. Lack of Clarity

It is not a cup of tea to develop complex IT software even if you have in-house developers. There is a gap in turning business requirements into technical specifications. However, an outsourced agency already has such roles as business manager, consultant, project manager, etc., who understand these requirements and can act as an intermediary between you and developers.

In-House vs. Outsourcing Software Development Comparison

1. Quality of The App

Software development companies have multiple stages of quality testing that ensure the high quality of the product. Moreover, these outsourcing partners have multiple developers who can consult with each other if they are stuck in a roadblock and share knowledge. If quality matters much for you, it is better to rely on an outsourced development team.

2. Time to Market

As we mentioned above, outsourcing is a better option if you have time constraints and want to reach the market as soon as possible. By this, you don’t need to hire developers, deal with onboarding formalities and make them understand your project.

By outsourcing the project, you get team members like business managers, team leads, scrum masters, etc., who ensure the project’s faster development and quick grasp.

3. Cost

Cost should not be an ultimate factor when choosing between in-house and outsourced development, but outsourcing development would be better if you have a tight budget. You save a lot of money outsourcing development, especially when you don’t have continuous requirements, and there will be a lot of idle time for development in the project cycle. In the outsourcing approach, either you can buy hours or hire developers when you have a need.

Wrapping Up

Outsourcing and in-house development have specific pros and cons, and your choice can vary per your priorities. Outsourcing will be the best choice if you don’t have any hassle hiring, dealing with technicalities, and want to focus only on your business. However, you can hire in-house developers if you want full control over the project. We provide the best IT outsourcing services at Emizentech, the best web and app development agency. Let us know your requirements.