In-House vs Outsourcing: Pros, Cons and Use Cases
Every software development company experiences distress when the critical technical requirements of its projects exceed the expertise and workloads of its existing team. In such a situation, it is hard to decide where to go for help without adding an unnecessary spike to your budget. This is why, in recent years, many businesses have shifted towards outsourcing their IT projects with the promise of cost-efficiency and high quality.
A report by global newswire states that by 2026, the global IT outsourcing market will be worth $425.19 billion.
Some of the factors that have made outsourcing a more viable option are such as a shorter time to market, a price-quality ratio, and fewer hiring hassles.
The other option is building an In house team that requires time and investment, but this could be a more suited option in some cases. So which option to consider between In-house vs. Outsourcing?
In this blog post, we will discuss the difference between In-house and outsourcing, explain their pros and cons, and help you make the right choice.
Recommended Read: All-In-One Guide to Software Development Outsourcing
In-House Software Development
Adding full-time employees to your business is known as in-house hiring. In-house hiring requires you to go through the complete hiring process. This can take weeks, even months, before you have an entire team ready for your development project.
So it makes sense to hire internally if your firm is solely focused on IT products and needs resources for long-term engagement. Companies like Amazon and PayPal hire in-house developers, giving them control over the project at a higher cost.
Pros and Cons of Managing Projects In-House
There are so many good reasons to leverage the talent that you already have. But your team might not be a perfect fit for everything. Consider these pros and cons of in-house project development.
Pros of In-house Development
1. Talent Development
If you need some domain expertise, you can easily upgrade their skills according to their needs whenever required without going outside and searching for new talent. It is difficult when you are outsourcing a team from outside.
Even if you do, you will have to invest more money than what you are already paying to the in-house team to upgrade their skills. A lack of skill set reflects in the product quality later.
2. On-site Availability
Being able to connect helps to work effectively and reduce any misunderstandings. As the team works together within the same office and time zone, it’s easy to get the changes done more quickly. With an in-house team, one can leverage several benefits, such as;
- Long term association
- 100% visibility of work
- IP and Data protection
- Same work timezone
- Better communication
Cons of In-house Development:
If you are considering setting up an in-house team to develop your software product, be ready to deal with any of these possible challenges.
The cost to hire developers in-house is significantly higher than offshore developers. It’s simply because this cost includes the infrastructure, overhead salaries, other employee benefits, training costs, etc.
2. Lack of Necessary Skills
It is impossible to have an in-house team with all the skillsets and experience. Different individuals have distinct areas of expertise. So as per your project requirements, you will have to hire someone with expertise in your domain.
And this is where hiring outsourced developers come in, as they have an elaborate team with specialists across the technology stack who can be hired on a need basis.
3. Low Retention Rate
Due to the higher demand and luring packages offered by other companies, programmers in western and European countries keep switching jobs more frequently. Thus, there’s always a risk that your lead developer may switch jobs during the crucial phase of the project. Additionally, long hiring cycles are another concern that can create unnecessary delays in project development.
Outsourced Software Development
Outsourcing software development is a business strategy that involves giving a software development project to an outside company rather than handling it internally. It is a good idea to outsource your project when you need more expertise to manage it internally or need developers for a shorter duration.
Recommended Read: IT Outsourcing Trends that Will Rule in 2023
Pros and Cons of Outsourcing
You have an in-house team to get things done. If you already have an experienced team of engineers, why would you choose to outsource software development?
There are several benefits of building an in-house team of developers, but your team might not be suited for every project. This is where the role of outsourcing comes into play. Let’s discover its pros and cons.
Pros of Outsourcing:
Let’s look at what you gain with the outsourcing team:
1. It’s Cost-Effective
One of the most significant advantages of hiring a dedicated outsourcing team is saving a considerable amount of money. Hiring an outsourcing partner lets you cut hiring costs, onboard specialists at competitive pricing, save big on infrastructure or invest in large workspaces and resources.
You pay the pre-defined rate per hour or total amount for the entire project as per the mutual agreement. Further, you do not need to pay salaries when the project has been completed and the team is idle. It is the responsibility of the outsourced company to cover all the engineer expenses, such as the offshore development center and work resources.
2. Short-term Commitment
It is the most underrated benefit of outsourcing. Bringing an expert on board without long-term commitments is a great advantage.
As mentioned earlier, outsourcing allows you to hire developers based on three engagement models:
Just to give you a heads-up, here are the resources you might need to build a software, website, or mobile app.
- Team of designers and developers
- Quality Assurance Testers
- Project Manager
- Infrastructure (Hardware and Software)
With outsourcing, you can hire these resources separately or build an offshore development center and make it an extension of your in-house team or company.
3. Core Competencies
According to Deloitte’s 2021 global outsourcing survey report, outsourcing allows businesses to focus on their core competencies and business growth. When you hire an offshore development team, you allow your internal team to focus on other project requirements entirely.
Leveraging outsourcing development services enable you to reassign time-consuming tasks to the external team. Your team can also receive a third-party opinion of your software by outsourcing. As a result, you will be able to make more robust decisions for your core business initiatives.
4. Risk Mitigation
Leveraging offshore development services enables businesses to mitigate risks involved in a software development lifecycle, such as operational risk, schedule risk, and technical.
Partnering with an outsourcing partner means you can efficiently decrease the risk percentage since they are experienced in handling complex projects.
Outsourcing is always bound by a legal contract. It includes the scope of work, NDA (Non-Disclosure Agreement), and other vital aspects like payment, time, performance, and confidentiality.
5. Quick Team Change
If you are not satisfied with the dedicated teamwork, you will quickly get an immediate resource replacement. Many offshore providers offer a replacement within a week from the existing resource pool. However, if the client wants to hire a new developer, your outsource IT services partner will fill in occupancy at the earliest but within a pre-defined period.
With in-house specialists, it’s quite complicated.