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What to Choose: In-House vs Outsourcing Software Development

Discover the differences between in-house and outsourcing software development to make the right decision for your company

Updated on December 09, 2021

7 mins read

IT outsourcing is on the rise. Today, not only young startups but also established companies are deciding to outsource. Take Google’s parent company Alphabet, for example. Alphabet has just as many outsourced workers as it has full-time employees. Still, some companies prefer to keep all the work in-house.

Outsourcing vs in-house development is a dilemma every company faces. But to decide between these approaches wisely, you need to know exactly what you lose by choosing one approach over the other.

Take a look at this ultimate in-house vs outsourcing comparison by Intellias. Read further to find out which software development strategy suits your company best.

The in-house vs outsourcing software development battle

What to Choose: In-House vs Outsourcing Software Development

Let’s dive into the advantages of outsourcing software development. For starters, outsourcing is a simple way of finding the best software developers. Sadly, you can’t always find them locally. To get professionals with specialized skill sets for your project, you may need to outsource.

What’s more, outsourcing takes away exhausting recruitment and HR overhead. There’s no need to wait 35 days to hire a software developer anymore. With outsourcing, you can have faster team formation and quick ramp-up. Moreover, outsourcing teams can scale both up and down. This means you can have the exact number of workers needed for each stage without firing anyone. And if the outsourcing vendor handles management responsibilities, you’ll eliminate even more burdens.

You know what else you can say goodbye to when outsourcing? Paperwork. Working with an outsourcing company, you’ll sign fewer contracts and send payments less frequently than with in-house employees. Impressed? And the best part is that the payments you send will be smaller than with an in-house team because another advantage of outsourced developers is that they charge less than local ones. In fact, it’s easy to find qualified software developers worldwide at competitive rates. Additionally, an outsourcing company already has the infrastructure needed for your project. You won’t have to worry about office space or equipment.

The average hourly rate of developers by region

What to Choose: In-House vs Outsourcing Software Development

But most importantly, working with an outsourcing team means freeing your in-house team from part of the work. This way your in-house team can focus on more critical tasks.

Outsourcing may slip sometimes but not fall down

What to Choose: In-House vs Outsourcing Software Development

There are both advantages and disadvantages of outsourcing software development. The main drawback of outsourcing is that this strategy is risky. In the end, everything depends on the partner you choose, and a lot can go wrong if you pick someone unreliable. You may get poor quality software, lose confidential data, or let cultural differences mess up communication. But you may also never experience any of these things if you work with a trusted company.

Outsourcing can also go wrong if you choose to outsource at the wrong time or choose to outsource the wrong type of work. For instance, a company should never outsource its core value services. Those have to stay in-house.

It is important to understand from a business perspective which services are strategic and which do deliver the highest business value. Less strategic and low added value might be a good choice to source from the outside.

Roger Albrecht, IT and Sourcing Consulting Expert
What to Choose: In-House vs Outsourcing Software Development
Read more: Learn why outsourcing is a bad idea for early-stage startups

The scary part about outsourcing is that you may not have direct control over the whole development process. Luckily, that isn’t always the case. When working with an outsourcing vendor, you can usually choose among different models of cooperation. For instance, with a dedicated team you can be deeply involved in the development process. Or you can choose a product development model in which your outsourcing partner takes full responsibility for the development of your product.

Take a look at how Intellias tailors different engagement models for its clients depending on their desire to share responsibility for the outsourced project.

What to Choose: In-House vs Outsourcing Software Development

The benefits of in-house software development

What to Choose: In-House vs Outsourcing Software Development

In-house development has many obvious advantages. To start, in-house teams are reliable. You’ll probably never have any trust issues when working with your own software developers. Also, being a part of the company, in-house teams are deeply involved in the project. It’s their main focus and top priority. Beyond that, in-house teams have a better understanding of the project. They know details about the company that may be hidden to someone from the outside.

Moreover, having an in-house team of software developers within arm’s reach is convenient. You have total control over their work, and arranging an in-person meeting is never a problem. Basically, you can make changes and get immediate feedback whenever you wish. This is why in-house teams are flexible.

In-house software development also has its downside

What to Choose: In-House vs Outsourcing Software Development

Despite all the benefits of in-house development, the strategy is far from perfect. To begin with, building your dream in-house team may be a real problem. You have to go through a tough recruitment process to get all the professionals needed for the project. Also, you have to train hired workers, manage them, and support them. This includes providing a competitive salary, paid sick leave, and other benefits. Unfortunately, the talent turnover rate in the IT industry is high, so you also risk losing your in-house developers at any moment.

Contact Intellias experts to get a consultation on which way to go with your project
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You also have to provide the necessary infrastructure for your workers. Office space and equipment is all on you. And if you need help from a niche expert or need a specific technology to solve a small task, that may be a problem.

The IT domain has technically become so dynamic that companies cannot simply have all relevant technologies in-house.

Piet Schilder, Managing Director of Execom

As you can see, the convenience of in-house software development comes with a twist. The strategy requires huge investments in time, money, and effort.

In-house development vs outsourcing comparison

What to Choose: In-House vs Outsourcing Software Development

Let’s review the pros and cons of hiring in-house vs outsourcing. We’ll see how they differ in terms of cost, communication, time to market, security, communication, and expertise.

Cost. Although outsourcing isn’t cheap, it’s usually more affordable than in-house development. Take a look at the sample cost savings from outsourcing. The main advantage of outsourced developers is that they cost less. Compared to the rates of US-based developers, offshore and nearshore developers charge less per hour. Also, by outsourcing you don’t have to pay for benefits, payroll taxes, and training.

Communication and flexibility. In-house teams are better at responding immediately and making quick changes. By contrast, language barriers and time zone and cultural differences can hinder communication with an outsourcing partner.

Time to market. Outsourcing teams are scalable. You can regulate the number of workers at any stage of development. This allows outsourcing teams to deliver products quicker.

Security and reliability. Frankly, there’s a risk of terrible things happening when you outsource. You can experience loss of confidential data, poor service quality, and cost escalations if you pick the wrong outsourcing partner. Meanwhile, in-house teams have your back.

Expertise. Outsourcing often means working with niche experts. Their deep knowledge of the domain can be really helpful. By contrast, in-house developers have better expertise in the company’s culture.

What to Choose: In-House vs Outsourcing Software Development
Read more: Learn why the late stage is a perfect time for startups to outsource their software development

Whether to outsource or hire in-house developers depends on what you actually need

What to Choose: In-House vs Outsourcing Software Development

There’s no correct solution to the outsourcing vs in-house development dilemma. Both strategies have their benefits and limitations. Which you choose should depend on what your project needs.

So before comparing outsourcing vs in-house difference you should really understand what you want to achieve. Here are a few things to consider.

  • What kind of problem do you want to solve with outsourcing/in-house development?
  • What are the project’s budget and scope? How fast do you need to deliver your product to market?
  • What kind of value does the project have compared to all of your company’s other services?\

Your project may be long-term and need daily support after delivery. Or it may be short-term and urgent. It may be specialized, like mobile development, and require niche professionals. Or not. Either way, you have to decide on all these things before you can make the in-house vs outsourcing software development decision.

If you aren’t sure which approach to choose for your current project, contact Intellias. Our experts will consult you on whether outsourcing or in-house development is right for you. Also, you may find us on DesignRush in the list of Top Custom Software Development Companies Of 2019.

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