In-house vs Outsourcing: Best Choice for Software Development?

If you can’t decide whether you should develop your app or website in-house or outsource development, you’ve come to the right place. In this article, we dive into the in-house vs outsourcing software development debate. We’ll review your mobile and web development options, cover their pros and cons, and offer comparisons.

Outsourcing vs in-house models

First of all, what are the outsourcing and in-house software development models?

In a nutshell, in-house software development means you hire a team of employees who are part of your company to develop your website or mobile app. Usually, this means hiring specialists one by one, through job boards and LinkedIn profiles. In theory, it’s possible to find and hire a full in-house team at once, but in reality, it’s a bit of a unicorn occurrence.

When you outsource development, it means you contract with professionals outside your company and don’t hire employees. You can choose to outsource app development to a company or to freelance developers. Companies usually offer both separate specialists and full-stack teams depending on your needs. You’ll likely need to hand-pick freelancers one by one.

Outsourcing and in-house development are both popular models with their own pros and cons. The following is our breakdown of the arguments for in-house web development vs outsourcing web development.

Advantages of in-house software development

When it comes to creating proprietary software, the advantages of in-house software development are:

• Close control over the development process

• Unhindered communication

• Understanding of business goals on the part of developers

• A team dedicated solely to your product

• Flexibility

Let’s go over each.

Close control over the development process

An in-house team resides where you and your employees work, which makes it easier to reach them. Even during the pandemic, an in-house team will still be in the same state or country, at the very least.

You can monitor your team regularly when they’re a couple of offices or an unscheduled phone call away. You’ll always be able to drop by — physically or digitally — to see how the project is going, ask questions, and suggest changes.

Unhindered communication

Your in-house team speaks your language — both literally and figuratively. The opportunity to meet and discuss the project face to face at any time, without complex arrangements, makes it easy to clearly communicate your ideas.

Understanding of business goals on the part of developers

The job of outsourced third-party contractors is simply to build a product the way a client tells them to. While there are companies that value their clients’ businesses and don’t blindly follow instructions, not all outsourcers are like that. And nothing beats a team whose own future profits depend on the product’s success.

An in-house team is immersed in the company’s business and shares the corporate spirit, so in-house specialists are usually dedicated to the project.

Besides, some inside information that might affect a product can’t or won’t be shared with outsiders.

Dedication to your product

Most outsourcing developers, whether companies or freelance specialists, juggle several products simultaneously. When one project is in the low engagement stage where little needs to be done, they’ll take up another, since they’re usually paid for hours worked.

In-house teams, on the other hand, dedicate themselves fully to the software they’re building for their employers. With an in-house team, you won’t encounter a clash of schedules when you want or need to urgently implement changes.

Flexibility

In terms of software development, flexibility means the ability to make changes right away; it’s one of the big in-house advantages, and it stems from all the benefits above. In-house teams have more flexibility because they’re:

• More geographically accessible

• Better able to communicate with the product owner

• Involved with one product only (or several, but for a single company) and don’t need to re-adjust their schedules too much to make changes

• Able to understand the business well since they see it from the inside

Disadvantages of in-house software development

In-house software development is more often than not used by big companies with software products that are in need of constant long-term development services. There are reasons for that, and you’ll need to keep some things in mind when you choose in-house development:

• It costs more than outsourcing development

• You’ll need to find and keep talent

• You’ll need to think about upskilling and innovation

Higher costs

When you outsource software development, you pay developers only for the time they work on your product. The cost can be based on worker-hours or story points, but either way, you pay for the work done and nothing more.

For an in-house team, you’ll not only have to pay salaries (and competitive ones at that) but provide a social package — sick leave, vacations, holidays, health insurance, etc. If the team works from your office, you’ll also need to provide high-end equipment. Developer-grade computers don’t come cheap.

Finding and keeping talent

Building an in-house development team can be a challenge, especially if you’re not operating from an area with a strong software development industry. And while Silicon Valley isn’t the only place where talented developers reside, not every region and country has a strong IT presence.

Hiring developers to relocate to where your offices are might cost an arm and a leg, and very few specialists are willing to relocate somewhere with little future prospects.

Besides, to keep developers working for you, you’ll need to offer benefits on par with or above the industry standard. This can prove unprofitable when development enters low-load stages.

Another difficulty may arise if you have no experience in IT. You’ll need to consult professionals to know what kinds of specialists you need and what experience they should have.

Upskilling and innovation

It’s not uncommon for professionals working on the same product for a lengthy period of time not to keep up with the latest innovations in the industry. That’s because in an in-house team, developers have little to no competition and, hence, little to no motivation to educate themselves unless they’re passionate about their job.

In this case, it falls upon the employer to motivate employees and pay for their education and upskilling as well as for upgrading their equipment so it’s compatible with the latest technologies.

When to choose in-house development

Considering all the advantages and disadvantages of in-house development listed above, we’d recommend hiring an in-house team when:

• You have a long-term project that will require constant work from developers
• You have no financial restrictions and would like total control over the development process

Advantages of outsourcing software development

More and more companies are choosing to outsource all or part of their software development. Even Google outsources parts of their products. Outsourcing is a sensible decision for:

• Saving money

• Launching faster

• Accessing a wider pool of specialists

• Promoting team education and innovation

• Ensuring skill versatility and team scalability

Saving money

Whether you hire an outsourcing company or separate freelancers, they’ll already be equipped with everything they need to get the job done, including a workspace and equipment. No office-related costs will be on you, which will cut your spending significantly, especially if your project is relatively long.

Additionally, when there’s a decrease in activity within a project, you can put the project on hold and come back to it later with the same people working on it (granted, you’ll have to negotiate with the team beforehand). With in-house development, you can lose your employees to other companies when there’s no work for them, and luring them back will be far more challenging.

Launching faster

Good outsourcers — teams and individual freelancers — usually have several projects lined up. To keep up with everything, they set deadlines and meet them. Besides, most outsourcing agreements include fines for violating deadlines without an acceptable reason. This means that with the exception of some really unexpected circumstances, a team of outsourcers will deliver your project in a timely manner. In-house teams, by virtue of being more flexible with changes and fixes, can fail to meet strict deadlines.

Accessing more specialists

When it comes to in-house software development options, your selection of professionals will be limited to your geographical area. Inviting developers from out of state will cost you extra and might prove impossible for a multitude of reasons. If you live somewhere where the IT industry isn’t very strong, finding quality developers will be a struggle.

With outsourcing, you can choose developers from all over the world. You can combine several freelance developers and/or software development companies from different countries for the best results.

Promoting education and innovation

Outsourcers — both company-bound and freelancers — constantly up their skills. It’s essential for them to stay relevant on the market. Quality software development specialists keep their eyes wide open for everything within the industry that can give them an edge over competitors. You won’t need to nudge them in the direction of new tech solutions or improving their skills, and you won’t need to pay for it.

In-house teams, on the other hand, can sometimes get stuck in the same place if they only work on one product for years. Chances are, you’ll have to motivate your in-house employees to upgrade their skills.

Ensuring skill versatility and team scalability

Outsourcing, especially with a reputable company, comes with the benefit of team versatility. If a certain developer is unfamiliar with a specific technology, chances are there’s a specialist within his or her reach who is familiar with it and can provide expertise without delay. In the same situation with an in-house team, you’ll have to spend time and money on either finding more developers or educating your existing employees.

Disadvantages of outsourcing software development

Despite all the abovementioned pros, outsourcing still isn’t a perfect solution, and it has its own landmines. Here’s what to keep in mind and be prepared to tackle:

• Lack of personal control
• Poor flexibility
• Possible low quality of code
• Fraud and information theft
• Hidden costs
• Communication issues

Lack of personal control

Monitoring and control are some of the biggest advantages of in-house system development. Direct control over the development process is a bit more complicated with outsourcing.

Usually, if you outsource to a development company, you’ll have a project manager to connect with your team and set times for communication, reviews, and learning about progress. You can agree to communicate as often as you need — daily, weekly, or at the end of each sprint. But essentially, you will control the project indirectly through a project manager.

Poor flexibility

With an in-house team, you can introduce changes at any time and expect your team to implement them ASAP.

Most development companies use an Agile methodology and work in sprints. Agile employs short-ish periods of development (usually two-week sprints) following a pre-approved plan. Unless they fix a crucial bug or implement an extremely time-sensitive feature, changes are added to the next sprint.

Possible low quality of code

Software development is a profitable industry everyone wants to be part of. But, as with any job, it takes time, effort, and dedication to be good at developing software. Sadly, not every developer is dedicated to building quality software for their clients. Some decide to half-heartedly pull together a somewhat working code that falls apart the first chance it gets.

With an in-house team, you’ll have control at every stage to check if things are working. The lack of control over outsourced development can result in noticing mistakes too late.

Finding a reputable developer to outsource your project to might take some time. However, a number of services can help with that. If you choose to outsource development to a company instead of freelancers, you can check companies’ reputations and credentials on Clutch, where all reviews are from verified clients. Job boards for freelancers usually also have reviews and ratings.

Risk of data leaks

Depending on your project, your development team might need sensitive information about your business. You’ll have to take this into account when choosing who you work with.

Turning to reputable developers with good ratings on platforms like Clutch is a good way to avoid fraud and information theft. To further minimize the risks, make everyone privy to sensitive information sign an NDA.

Hidden costs

The software development process is rarely set in stone, and unexpected changes happen from time to time — and will cost extra. With a reputable partner, you will be notified of the possibility of such extra costs when your partner estimates the cost of software development.

What’s listed below are things that might cost extra:

• Out-of-turn/unexpected changes
• Upgrades
• Maintenance
• Extra tools necessary to build specific features

When outsourcing, it’s important to factor potential hidden costs into your budget beforehand. It’s a good idea to discuss the topic with your developers and write clauses regulating extra costs into the contract.

Communication issues

Communication between developers and the client can become a serious issue when outsourcing, especially when you work with offshore teams. There can be all kinds of challenges:

• Time zone differences
• Language barriers
• Cultural differences
• Lack of clarity resulting from remote communication

A time difference is possibly the most daunting problem, as it can be hard to navigate. If your team (or part of it) is on the other side of the world, all participants will need to schedule time for communicating, and that time won’t always be convenient. That’s why it’s usually recommended to at least have a team that is within the same country or close enough so they can communicate among themselves efficiently.

Language and cultural differences are usually easier to overcome with careful pre-planning and by finding someone who can communicate clearly both with you and the team. If you speak English, language is rarely an issue today, as most project managers and developers speak it well.

When to outsource development

We recommend outsourcing your software development when:

• You need to stick to a budget
• Your product is aimed at a fast-changing market niche that frequently uses the latest tech and innovative approaches
• Your project will only need occasional changes after launch to successfully keep up with the industry
• Your project doesn’t involve too much sensitive data about you or your business

How to outsource software development

If, having considered the pros and cons of in-house development and outsourcing, you decide to outsource your software development, here are the steps you need to take:

1. Create a comprehensive outline for your product

   To build your product the way you see it and make it the best it can be, you need to convey your vision clearly. Make an outline to better visualize your future website or app. This outline will also help your team (when you find one) estimate the cost of development.

2. Decide on your budget

   You need to know at the beginning how much you can spend on your product. It doesn’t need to be an exact amount — an approximate estimate will do. Later, you can try to raise more money, but you need to know how much you can spend to prioritize features for an MVP.

3. Consider where you’d like to outsource

   The three outsourcing models are onshore, nearshore, and offshore. Onshore means your developers are from the same country as you; nearshore means they’re from a neighboring country, or at least from the same continent; offshore developers can be from the other side of the world.

   Your choice of outsourcing model will affect your communication with your team: the farther away your developers are, the bigger the cultural differences you might encounter.

   Geography will also factor into the development cost. Developers from the US, being frontrunners in the industry, charge the most. Their rates are followed by those in Latin America, Western Europe, and Australia. The cheapest outsourcing comes from Asia — mostly India. Eastern Europe is somewhere in the middle price-wise.

4. Research developers extensively

   Don’t settle on the first company you encounter. Check out as many as you can. See whether they’ve completed products similar to yours or at least in the same niche, what their ratings are on reputable platforms, whether their clients’ reviews seem genuine, etc.

   Having done this, choose up to five companies that seem the best fit to develop your product and contact them. When communicating with these companies, you’ll be able to evaluate how comfortable it would be for you personally to work with each one as well as their expertise in your niche.

5. Communicate with your chosen developer(s) regularly

   When outsourcing software development, it’s important to pay attention to the development process. Communicate regularly, ask for updates, and check out mock-ups and pre-release versions. While outsourcers aren’t fond of micromanagement, good ones will value your input and will in return give advice to build a better product.

So, outsourcing or in-house development?

We live in an increasingly digital world, and while this world offers us a multitude of creature comforts, it asks a lot in return. The easy availability of the internet everywhere allows for the truly magical perks of finding customers and selling things efficiently. But to do that, you need a well-developed platform.

Having an in-house software development team has its perks, as does outsourcing. Moreover, you don’t necessarily have to choose between outsourcing and in-house software development. Even Google outsources development to individuals and teams in addition to the corporation’s enormous in-house development staff.

At Mind Studios, we have full-stack development teams who can cover all sides of your product creation. We also offer separate services for business analysis, design, development, and marketing.