What need to know about outsourcing vs in-house software development



Before creating a digital product, every startup or a business owner has to choose between hiring in-house engineers or a software development outsourcing company. As in-house employees work in your office, you have higher control over the team. 

At the same time, delegating technical tasks and challenges to an IT service provider, you can not only reduce expenses but also access a large pool of talents, including field-specific skills and expertise. So, which option—in-house vs outsourcing—will be best suited to your requirements?

At YSBM Group, we’ve prepared a guide for business on how to decide between outsourcing a software project and recruiting in-house specialists:

  • What is software development outsourcing?
  • Pros and cons of in-house software development 
  • Advantages and disadvantages of outsourcing software development
  • In-house & outsourcing development comparison 

Find out what you should choose for building your project!

 

What is software development outsourcing?

IT outsourcing is a practice of delegating software development tasks to a third-party contractor located abroad. Say, if your company is based in the USA and you decide to “send” your project to Poland or Ukraine, this is outsourcing. 

 

There are many technical challenges that be resolved by hiring a reliable IT service provider, for example: 

  • Building a mobile or web application
  • Creating a complex platform that consists of a mobile app and website
  • Migrating the existing system to the cloud
  • Testing a digital product for errors and security vulnerabilities, debugging
  • App or website design or redesign
  • Migrating an application from the outdated technology stack
  • Extending the functionality of the existing system
  • Project consulting services
  • Other

 

Globalization, together with remote collaboration tools (messengers, video and audio conferencing software, file sharing apps, etc.), has allowed companies worldwide to reduce costs while saving product quality due to outsourcing.

However, in-house development also has a lot of advantages that you should know about.  

 

In-house software development: pros and cons

When deciding between two options, you may ask how to define in-house. In-house development means that you assemble a team with the required skill set to make your project. In other words,  you recruit and onboard employees who work in the office completing tasks while directly collaborating with you and other specialists. 

 

Advantages of in-house software development:

1) The full project control inside your company - Improved coordination, effective cooperation throughout the working day, fast access to each member of the team.

2) Enhanced security of sensitive data (in most cases) - You and only you decide how to protect sensitive data while being fully responsible for it.

3) Faster communication - The team members work in the same office and can actively communicate with other company’s experts.

4) Flexibility and shorter turnaround time - You can quickly make changes to your project and adjust the requirements. You can monitor every step of the process and spot it immediately.

5) A dedicated in-house development team - Your team is fully dedicated to your project. You have full control over coding and other standards and define the best ways for future software maintenance.

 

Disadvantages of in-house software development:

1) Constant and substantial costs - You carry all costs associated with hiring, onboarding, and motivating specialists that include salaries, taxes, bonuses, overtime pay, sick pay, health insurance, changes in the law on wages, and more.

2) It takes a lot of time to find and onboard in-house employees - Searching specialists who have the required skills and will become a great part of your team is a time-consuming process. It may turn out that you will have to wait before they can join the company while the project time is ticking.

3) Staff turnover - When someone leaves the project, finding and onboarding a new team member might take a lot of time prolonging the project completion or even freezing it for some period.

4) Technology requirements - If your project is not as simple as a redesign of a one-page website or making 5 screens for Android devices, you will have to cover various domains of expertise. 

 

For instance, to build a mobile or web app from scratch, you will need to hire a full-stack engineer (or separately frontend and backend engineers), designer, tester, and a project manager. In some cases, you should also recruit a business analyst and developers with field-specific expertise, say, in IoT or machine learning. 

 

If you don’t have a technical background, it may be quite difficult to check numerous resumes, candidates' skills and level of experience. This is where a provider of software outsourcing services may come into play.

 

A perfect scenario is that you put in-house experts together, who work hard to achieve given objectives. You have full control over the process, quickly resolve arising issues, and have fast access to each employee. As a result of close collaboration, you make a great product and launch it on the market.


However, it is difficult to take into account all the nuances when assembling your own in-house development team. When you recruit full-time designers and engineers, you have to verify their skills, knowledge, code quality, and many other things to ensure that an applicant really fits your requirements.


Then, you will have to choose the technology stack to create a software system, clarify project specifications, define the number of specialists whom you should hire. 


Remember about constant team training and motivation, task and workflow management. To prevent staff turnover, you should provide the right motivation, set and maintain a strong corporate culture to keep them interested and involved.

 

Software development outsourcing: pros and cons

When you decide to outsource software development, an IT service vendor undertakes all technical challenges picking a team with the required skills and experience. You don’t have to worry about recruitment, onboarding, and motivation issues. A company will help you specify project requirements in detail while managing all activities. 

 

Clutch, a trusted provider of B2B review and ratings, surveyed 529 organizations in the United States to find out the primary reasons for outsourcing software-related tasks. It revealed that today organizations choose this option in order to:

  • Raise the overall efficiency (24%)
  • Get access to high expertise of IT specialists (18%)
  • Improve flexibility (16%)

Other reasons to outsource development challenges involve: relieve the time of in-house workers for other activities (15%) and optimize expenses (12%). As you can see, cost reduction is not included even in the top three list, which implies high quality of services.

 

Advantages of outsourcing software development tasks:

1) Minimized overhead costs
You are charged only for the product delivery that involves design, development, testing, debugging, deployment. As a consequence, you don’t pay for team training, motivation, hardware and software used by engineers, etc. 

 

2) Reduced labor costs
One of the main reasons why so many companies outsource development tasks are reduced labor costs. There are plenty of countries and regions that offer competitive prices, especially if compared to the USA and Western Europe where hourly rates of qualified specialists vary between $40 and $150. 


In Ukraine and Poland, for example, engineers work at $25-$50 per hour while the service quality is the same and sometimes even better. Therefore, you can significantly cut expenses by outsourcing your project.

 

3) No long-term commitment
Providers of software outsourcing services offer the opportunity to hire a dedicated team of specialists to launch your project. Then, you can turn to them with the view of maintaining the app in production, scaling it, or developing something else.

 

4) A wide selection of IT professionals
A today’s market is very competitive and provides a wide geographic diversity, which allows you to find a trusted outsourcing software development company with any skills. 

You can access a large pool of IT talents choosing them by multiple parameters such as tech stack, years of experience, industrial expertise (e.g., banking software, medical devices and mobile apps, etc.), culture, time zone, and a lot more.

 

5) No license obligations
When choosing a software development outsourcing company, you don’t have to worry about purchasing the required tech devices, hardware, programs, and licenses to create and test your product.

 

6) Fast start and team cohesion
An IT outsourcing company quickly assembles the team tailored to your project, which means that everyone has the required skill set. As specialists have already gotten used to working with each other, they cooperate more effectively helping each other complete tasks and discussing technical issues. 

Furthermore, you don’t recruit each employee on your own, which leads to fast project start. Sometimes the search process takes 2-6 months and even longer. 

 

7) Well-established workflows
An IT outsourcing service vendor that successfully delivered dozens of projects, has efficient workflow management established in the company. A trusted and experienced firm employs the best practices that help create quality solutions faster. 

These practices include Agile, continuous deployment, continuous integration, MVP development, UI testing, etc. You don’t have to search for and adopt them on your own.

 

 
 

 

Disadvantages of outsourcing software development: 

1) Picking a wrong vendor

The outsourcing market is very large, which poses a risk of worse product quality, especially when picking the cheapest options. There are businesses who stay away from this practice due to an unpleasant experience or lack of information on the subject.

 

That’s why it is so important to hire a trusted software development outsourcing company. When looking for the vendor, pay attention to client testimonials, firm’s experience and speciality. You can also find project and customer reviews on trustworthy B2B platforms like Clutch and GoodFirms.

 

 
 

 

 

2) Communication difficulties
Communication difficulties may arise due to different time zones, cultures, and hours of operation. Sometimes it may be rather challenging to find even 2 overlapping hours to work on the project, for example, when you need to give feedback or discuss some technical issues with the team. 

 

When thinking about how to outsource software development right, choose an IT company that has a similar time zone and culture. Based on our experience, it is enough to have 3-5 hours per day for close collaboration with the customer. 

 

Software development outsourcing gives you access to qualified specialists with any field-specific skills and knowledge. An IT service provider will tailor a team exactly for your project, help you prepare a technical specification, and assist in post-launch software maintenance.

 

You won’t have to spend a lot of time and money on searching, recruiting, and onboarding employees, checking their expertise, paying salaries, bonuses, etc. An outsourcing firm will take care of full-cycle development that comprises a discovery stage, design, programming, testing, debugging, deployment, and app monitoring after release. 

 

To avoid issues associated with the lack of industrial expertise—this refers to hiring an in-house team, too—you should consider the vendor’s speciality. For this purpose, you should research the contractor’s portfolio, the range of sectors it specializes in, and client testimonials. 

 

A good way is to look for the partner in ratings such as “Top machine learning developers in Europe”, “The best outsourcing companies”, etc. Also, you can always request a project consultation to ask for meaningful recommendations, give an approximate budget estimation, and learn more about a potential software development outsourcing partner. 

 

Wrapping it up: In-house vs Outsourcing

Let’s sum up comparative characteristics of IT outsourcing and in-house development in various aspects on the image below.

 

Aspect

In-house

Outsourcing 

Costs


Higher (staff salaries and other overhead costs)

Potentially lower (wide choice of specialists, geography and paid hours)

Expertise

Accurate and narrow

Wide range of specializations

Resources and Technology

Limited to a specific project

Variety of technologies and resources

Work speed

Consequent and stable

Consequent and fast

Quality of work / product

High level

High level

Flexibility at work

Less flexible

More flexible, adaptive

Control

Centralized, efficient

Less manageable due to remoteness

Communication

Good feedback, the ability to work "face to face"

Complex (language barrier, cross-cultural differences, timezone)

Data security

High

High

Legal issues

Easier to work within the local legal framework

Potential difficulties due to differences in the legal framework

 

An in-house software development team will be a good choice when:

  • You have the time and resources on hiring and onboarding specialists with the required skill set.
  • You or some of your employees have a technical background that will allow you to verify experience and knowledge of each candidate.
  • You need to have full control over the project with 7-8 hours per day for close face-to-face cooperation and issue discussion.

 

Hire a software development outsourcing company when you:

  • Want to access sector-specific expertise and knowledge.
  • Aim to boost employee’s productivity by outsourcing software development tasks. As a result, they will have more time for other important activities.
  • Need to quickly start the project and improve time-to-market.
  • Want to reduce labor and overhead costs.
  • Aim to receive post-launch project monitoring and maintenance.

 

When choosing between software development outsourcing and in-house specialists, consider three key points: budget, expertise, and time. Assembling your own team can be a challenging, expensive, and long process. However, this option provides a higher level of control and face-to-face communications.

 

Hiring an IT outsourcing company, you reduce not only costs but time-to-market. What’s more, you can also set up effective cooperation thanks to multiple remote collaboration tools such as enterprise messengers, file editing apps, task management and time tracking systems, audio and video conferencing software.

 

If you have questions about outsourcing software-related challenges or want to request a 

consultation, drop us a message. Our experts will get back to you and help you address them!

 
 
Daniel CEO
Daniel
CEO
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