Nataliya Yaremenko

In-house vs. Outsourcing Software Development: What Is the Right Choice?

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Outsourcing IT budgets rose to their highest in 2017 (11.9%), and larger IT companies are growing their outsourcing budget the fastest in 2020. The demand for software solutions and services is increasing by the day. IT solutions and tech have brought us to such significant breakthroughs.

Let’s have an in-depth study of the pros and cons of hiring in house vs outsourcing software development, check the top reasons why outsourcing is a great idea for startups and businesses, and discuss the most important in-house vs outsourcing software development questions to ask in order to get the best value for your business

In-house vs. Outsourcing Software Development

Summary of In-house Software Development

When you develop software within your company made by your trusted employees, it is called in-house software development. Among CEOs, this type of software development is always preferred. If you have an IT business with trusted and dedicated employees, in-house software development is a good option to perform better in your main projects.

The Basic Principle Of Work

The process of in-house software development is simple but first, you need to have a team ready to embark on this journey. This team should include software developers, designers, project managers, technical lead, software testers, and quality assurance officers. Once you have your reliable employees on-board, then you can assign them specific tasks. The team and deadlines depend on the project and the type of software that you need to develop.

Advantages

In-house software development has a number of pros especially related to trustworthy professionals and reliability. When you have everything under control, the leak of information is not something to be worried about. Some other benefits of in house development:

  1. Face-to-face communication — since your team works in front of you, you can talk to each member personally and make sure they understand the tasks. Face-to-face communication helps to clear out doubts by looking at the expressions and body language.
  2. Project engagement and reliability — an in-house software development has better engagement since the project manager will be there to control the development. Therefore, all the team members will be fulfilling their responsibilities to be able to finish it on time.
  3. Better check and control — since you have the project inside the company, you can benefit by controlling each step of the process and resolve issues quickly. Your quality assurance team will be there to make sure everything is optimized using specific software tools. In-house development is great as all the information stays within the organization, providing better security services.
  4. Independent management and continuation — it is easy to manage a project when it is in-house. It remains within the hands of a few trusted people. In-house software development provides easy management as each team member has a specific task. Also, the project is developed inside the company where there is more control and less interference.

Disadvantages

In-house software development also comes with a list of disadvantages. Starting from a higher budget to a higher number of risks related to losing skilled employees, in-house software development has a few features to be considered. The following is a list of cons:

  1. Harder to manage the budget — when you have in-house software development, you need to have a high budget apart from proper management. Even the smallest projects require a high quality of budget management. You would be required to pay the salaries of skilled workers, insurances, taxes, and other recruiting expenses.
  2. Harder to find skilled employees — your location might prove to be a disadvantage in finding suitable candidates for work. If you want skilled professionals from other places, you would have to go through another set of problems of transportation, housing, and other services.
  3. Risk of losing developers (talent turnover statistics) — it has been noted that in 2017, the job turnover rate has been the highest in the IT industry up to 13.2% as compared to any other industry. This means that a high number of employees are leaving jobs in the middle of the project. This can cause an interruption in the whole work process.
  4. Providing the necessary infrastructure — it is important to provide appropriate infrastructure to professionals like a room, table, chairs, computers, a temperature control device, and others as required. All of that increases the budget.
  5. Hiring a niche specialist — when you have a company, you need to have the best in every way. Thus, you need to have a niche specialist. Also, you need to hire specialists to solve certain problems. You might also need to pay for a particular technology in order to solve an issue.

If you want to carry out daily projects for the company, and you have trusted employees, in-house software development is the option of choice. When you outsource your project, security remains the main risk. However, you can use a hybrid model of working and use both in-house and outsource at once. You may use this model to bring in expertise for specific channels or target customer base. You might want to have at least one experienced professional who can help others in case they need it.

Outsourcing Software Development

Summary of Outsourcing Software Development

Outsourcing software development refers to hiring professionals who do not belong to the company from different towns, cities, states, and countries. The IT outsourcing market might cross a whopping $96.7 billion in 2021. This is owing to saving costs and finding competent staff from all around the world. So let’s look at the advantages and disadvantages of outsourcing development.

The Basic Principle of Work

The basic principle of outsourcing lies in hiring an agency or any expert individuals who offer their services not bound to a specific company or those who freelance their service. First of all, you would need to make the crucial decision of whether or not you would like to outsource your project. Make sure you have a clear idea of the projects and tasks to outsource the work. Go through the reviews and talk to other companies who have outsourced the experts. The outsourcing provider agency must be able to give appropriate coding and quality assurance according to the budget.

Advantages

You might be thinking that outsourcing could be your option. Well, that is true, but it also depends on the project you work on. If you believe that the project is quite big or your company’s expertise cannot complete it without external help, you may outsource services to get a better product. Here are some of the other advantages of outsourcing software development:

  1. Easy to discontinue — if you think you do not want to maintain the relationship with the people because of incompetence or any other reason, outsourcing is the best option since you do not have much bonding with the team. Once they deliver the project, you can simply cut ties with them. This is not the case with the in-house development team of the company.
  2. Overcoming significant staffing problems — one of the main issues of in-house software development is hiring skilled people, investments, and managing the budget. All these problems can be overcome by outsourcing. You will get competent people at a more interesting price. You can just sit back and relax while your work is being done.
  3. It is cheaper compared to the in-house — a major outsourcing vs inhouse difference is the price. Outsourcing is the option of choice for many people because of its competent prices. You can pay much less compared to your in-house prices and get quality work. One of the reasons it is cheaper is because you do not have to pay taxes, insurance, rents for office/equipment, and some other notable prices not related to the project.
  4. Avoiding expenses for processes — the main advantage of outsourced developers is proficiency and no need for training. Training is one of the things that grabs the attention of people towards companies to work in. As good as it seems, it is an expensive task. Therefore, outsourcing bypasses all the money-consuming activities like recruiting, training, interviewing, and other HR activities.
  5. Timely work performance and team proficiency — since you choose an agency or a company after a lot of research and reviews, you would expect timely submission of the project. Also, you can expect high team proficiency as they have done various such projects for other companies. Once their price and time expectations are met, you can expect high-quality work within a set deadline.

Disadvantages

As good as outsourcing sounds, it comes with a number of disadvantages. One of them is security. A leak of information may easily happen and you can never guess what causes the problem, and resolving it might become an issue. Before you outsource your project, go through the following list of disadvantages and the associated solutions:

  1. Language/cultural boundaries — outsourcing is the cheapest when you give the projects offshore but that comes with a list of restraints like language, time zone, currency, cultural values, and others. Usually, the outsourced company takes all these matters into consideration and copes with the problems.
  2. Confidentiality and security — due to the security issue, many companies put more money into their company rather than outsourcing. However, you can also choose online experts or an agency with good reviews and ratings. And as far as hacking is concerned, it is actually a global problem even if you have an in-house model of working.
  3. Finding reliable experts with a good reputation — it might be difficult to find reliable experts at the beginning. Additionally, there are so many fraudsters online with fake reviews and profiles. Looking at the right place is the first step in that direction. Do not look for the cheapest option. You might want to ask another company who has outsourced their project and get some inputs.
  4. Lack of transparency — the outsourced company is not in front of you and you have no idea of what is going on at any given moment. That might be annoying if you face some problems later on which could have been fixed earlier. So make sure you ask PMs to send blueprints of the project at each step or use the SDLC model.
  5. Lack of face-to-face communication — since you do not know the team members, you may not know whether they have understood your requirements properly. You may try to have communication through Hubstaff or use other management tools with the team members or connect individually. Talk to the agency beforehand and get your doubts cleared in case you are not satisfied with project details, deadlines, funding, submission, and others.

For bigger projects when your company cannot take the workload or when the timeline is short, outsourcing is the best option. Outsourcing is perfect when your company does not possess the qualities or expertise that are required for the completion of the project.

In-house vs. Outsourcing Software Development

If you are having difficulty in choosing which one is better, the following table will clear your doubts. In-house vs. outsourcing comparison has been provided in a table form for better understanding.

Parameter In-house Outsourcing
Project’s budget & scope Small projects and an expensive budget Big projects with shorter deadlines at a cheaper price
Estimate costs Higher (insurance, taxes, HR prices, rents) Lower as compared to in-house
Timeline More time is needed because of the limited workforce Less time is needed
Communication and flexibility Better communication and more flexibility Limited communication along with some language barriers and definitely not so flexible
Team proficiency and expertise It depends on the age of the company, limited proficiency, and expertise if it is a startup Comparably much higher expertise and proficiency
Security and reliability Much higher and completely secure Reliable if you choose an expert company, renowned contractor, or a professional team
Involvement with the project More engagement with the project Less involvement with the project but providing faster decisions
Recruitment and hiring Must be done by an expert recruitment company along with training and HR charges Not required
Quality assurance High-quality project delivered every time High-quality results delivered within the trusted company

Summing up the cons of outsourcing vs inhouse development, it is clear that more money is required for in-house development while security is the biggest issue in outsourcing.

Final Thoughts

Finally, in this eternal fight of in-house vs. outsourcing software development, it can be said that both of the models are attractive. You need to decide whether to choose outsource or in-house development model based on the project-size, workload, expert employees, and budget. For example, if you have a huge project but have less time to work with your limited professionals, go for outsourcing or use both models. If you have a relatively smaller but important project with a proper deadline, getting it done within the company is a better option.

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