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All you need to know about outsourcing vs in-house software development

At some point many companies face a difficult choice - hire a vendor or get their own in-house development team. In this article we will try to compare outsourcing vs in-house development, all the pros and benefits as well as the cons and risks.


Globalization and innovative technologies enable companies to save resources and optimize internal processes more effectively. This is where outsourcing comes into play. On one side it allows one to reduce costs, on the other hand allows you to concentrate on the development of the main activities. However, there are those who stay away from this practice because of an unpleasant past experience or lack of information on the subject.


We will try to objectively and thoroughly consider the pros and cons of outsourcing and in-house software development, in order to facilitate the final decision for you.

In-house software development team pros & cons

Pros:


1. All control is inside the company

Coordination, support and fast feedback are all inside the company.


2. Higher level of sensitive data security

You decide how you want to protect your data and are fully responsible for it.


3. Faster communication

The team members work at the same office and can actively communicate with other company members.


4. Flexibility and shorter turnaround time

You can make quick changes to your project and quickly adjust the requirements. You can monitor every step of the process and spot it immediately.


5. Dedicated team aligned with your company’s standards

Your team is fully dedicated to your project. You have full control over coding standards and decide what is the best for the future maintenance.


Cons:


1. Constant and substantial costs

You carry all costs - salaries, taxes, increases, bonuses and overtime pay, sick pay and insurance, changes in the law on wages, etc.


2. Hiring is time-consuming process

Searching for right people with the appropriate skill set and negotiating with them to join your team is a long process. There is also the possibility that you will have to wait before they can join you, and the project time is ticking.


3. Technology requirements

You need to cover various domains of expertise. When developing software you won’t always be able to find a full-stack engineer that will be able to cover all gaps. You will be fully responsible for that.


4. Staff turnover

Whenever someone leaves the project, finding and onboarding a new person might take a lot of time and can extend project completion time or even freeze it for some time.


The perfect scenario is that you create a solid team of high-class developers on-site, who work together to achieve a common goal. You have complete control over the development process, know every detail of it and quickly solve the problems that arise. After a while you create a great product and successfully launch it to the market.

However, it is difficult to take into account all the nuances when building a team. When you hire a full-time developer you have to check his skills, knowledge and code quality to ensure that he fits the project.

There is also a thorny issue about resources and tools you need for your future software and amount of engineers you actually need. Don’t forget about constant training, difficulties in planning and managing workflows, internal conflicts and other issues that may occur. As a last point the specialists that you invest into may gain experience in your project and can leave you at any part of the project. You have to make sure to provide the right motivation, team spirit and strong corporate culture to maintain your talented professionals.

Outsourcing software development team pros & cons

Pros:


1. Reduced overhead costs

The customer pays only for the development of the product and does not bear the costs associated with the operation, technology or training.


2. Reduced labor costs

The outsourcing team of the company will independently resolve all issues with personnel accounting.


3. No long-term commitment

Outsourcing provides an opportunity to hire a team of professionals for a project based on the “as consumption” model. Based on the performance assessment, you can continue with the selected team or find someone else.


4. A wide selection of professionals

Thanks to the competitive outsourcing market and its wide geographic diversity, the chances of finding the exact company of developers who have the experience and skills in the field that your project needs are really high. At the same time you can save on the cost of their services, while maintaining high quality.


5. No license obligations

The customer does not need to worry about acquiring the necessary tools and technologies for development and related licensing costs.


6. The balance between costs & expertise

No need to hire additional staff. In an outsourcing company, the staff is sufficient and all employees interact with each other. If a problem arises, it will be solved quickly and competently. It also allows you to plan a budget more efficiently.


7. Well-established workflows

The development team has the necessary experience in working with different projects. Workflows are organized and established. Optimal solutions for each case can be found quickly and responsibly.


Cons:


1. Picking wrong company

The outsourcing market is wide and big, and as everywhere else there too is a risk of facing deception, especially when picking the cheapest options. This often concerns inaccurate data that the contracting company ascribes to itself. Fortunately you can always check how to choose the right software company and make sure you pick the right one.


2. This person is not from your company

When outsourcing your development you start working with a person that might not be as involved in your business, which can lead to lack of understanding on how to solve particular issues 


3. Communication difficulties

This applies due to different time zones, hours of operation, cultural differences, language barriers.


Outsourcing  gives you access to specific skills and experiences that will be concentrated on the company you hire. They take care of all the main and difficult stages of working on a project: business input, programming, design and maintenance of a software product.

The risks of outsourcing should include the question of the competence of a potential partner (does he have enough resources, knowledge and capabilities to complete the work on your project), unforeseen costs that were not initially taken into account and even a danger that the contractor’s company will simply go broke after taking your money.

The ready-made team is hired by companies that can not yet afford to employ several employees and / or waste time on their selection and training. If the result is needed as quickly as possible or budget savings are important, a hired outsourcing team is the best choice. When you choose an outsourcing partner do it with all responsibility. Be sure to find a company with a proven solid reputation, products like yours, and real-world experience.


Outsource vs. In-house 

Comparative characteristics in various aspects


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


Summing up the numerous pros and cons of outsourcing and in-house - both methods require a lot of attention, understanding and responsibility. Consider three key points - budget, scale and time. Setting up your own team can be a challenging, expensive and time-consuming process; on the other hand getting the right outsourcing team is not an easy task either. Depending on your current budget and project requirements, pick the best option from the ones listed above.



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