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Outsourcing vs. In-house Development: Pros. and Cons.

Gone are those times when companies were relying on their internal resources only in various technical tasks implementation. As the world faced globalization, and collaboration & sharing values started to grow as trends in business strategy, more and more companies moved to tasks outsourcing. What made companies resort to extra help from the outside? Some companies were lacking human resources possessing special knowledge and skills to work on a project, other crews were in need of additional resources with specific knowledge, and the rest were trying to make the development process cheaper and faster. 


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Today people tend to delegate their tasks to outsourcing companies in many spheres of life & business including accounting, telemarketing, etc. Software development outsourcing has become a very convenient way to subcontract massive and/or urgent issues to companies with ready-to-start staff and various strategies prepared. There are thousands of software outsourcing companies located all over the globe, so the hiring companies do have plenty of choices.

1. Why some companies are doubtful about outsourcing

Reduced costs and availability of resources are the major advantages of outsourcing. So, why do some companies never outsource? Here are some reasons why some companies give up on the idea of subcontracting their IT development tasks and find your company among the described below if you’ve been against outsourcing:

1. Some companies simply have negative outsourcing experience from the past. 

After delegating the specified responsibility to another crew and receiving negative effect from it, it’s most likely that the company will never resort to outsourcing again, believing that all outsourcing companies share the same working strategy and business approach, which is not true;

2. Some companies want to have 100% control over the project. 

They don’t want to let other people from other companies, countries, and even continents into the important details. This in most cases concerns the development of innovative products and systems when the non-disclosure means much;

3. Some companies are afraid of hidden costs outsourcing may bring. 

These companies are sure that there is no such thing as a free lunch, so they are often put off by unbelievable advantages willing to find the pitfalls;

4. Some companies are just fully satisfied with their in-house development team

The team is implementing its tasks on time and introduces good work, so there is no need to look for extra help from the outside.


doubts about outsourcing software development

2. When to use outsourcing software development

 

So, taking into consideration the profound global experience and feedback from numerous companies that were lucky to obtain qualified help from a 3rd party company, we’d like to provide you with a brief comparison of outsourcing and in-house development pros and cons. 

PROS AND CONS OF OUTSOURCED DEVELOPMENT

2.1. Pros of software development outsourcing:


  • Quickly access high-quality talents anytime, anywhere.
  • Save time and resources.
  • Exquisitely reduce the size without leaving a vacuum.
  • Rent the best at the lowest cost possible.
  • Only the service fee is paid, not the tool fee.
  • Easily change the skill set while the project is in progress.

Advantage
Details
Improved financial planning
It lets you know the exact cost of the functions and services of the company. There are many outsourcing companies that offer affordable prices all over the world. Thanks to a large number of talents, low tax rates, and government support for the IT sector, Eastern European development companies have become very popular.
Reduced operational and recruitment costs
The necessity to hire individuals is excluded, so besides money-saving, there is the advantage of time-saving
Proven expertise
As a rule, the tasks are subcontracted to the vendors who narrowly specialize in a given area or field. The outsourcing company has more options to choose from, starting from the level of experience and finishing with other professional characteristics
Expansion availability
Software outsourcing helps companies expand their activities in the market, enter new market areas by taking the point of production or service delivery closer to their end-users.
Huge talent pool
The IT outsourcing market provides a large number of technical experts with deep knowledge and experience. Outsourcing provides you with unlimited recruitment opportunities. As a result, the recruitment process may only take a few days instead of months.
Scalability
If you need to speed up the software development process or reduce the number of experts when there are no dev tasks, you can change the size of your team.
Faster project deliverye
Outsourcing software development allows you to cut time to market thanks to scalability options.
Wider tech stack for your project
You don’t have to limit your project tech stack to the expertise of the developers you have direct access to. You can choose the best option for your specific business requirements and plans.

2.2. Cons of software development outsourcing


Disadvantage
Details
Language and cultural barriers
In most cases, companies outsource to companies located in other countries. Still, this disadvantage is not that serious, because the use of the global communication language (which English is) is well-spread;
No ability to meet face to face
Being located on different continents makes regular meetings a hard, though not impossible, task.

cons f outsourcing software development

The advantages and disadvantages of in-house development are precisely the opposite of the advantages and disadvantages of outsourcing development. Everything (and what is more important – everyone) is at hand because all the developers are located in the same office, so they are able to communicate with no cultural or language boundaries. Moreover, the company gets exactly what it wants. Sometimes there is a lack of mutual understanding between an outsourcing company and vendor, and as a result, the product developed (or its parts) does not look like what the customer described in the beginning. Finally, in-house development is not necessarily cheaper. Taking into consideration all the tax issues, in-house development doesn’t guarantee lower costs.

 

2.3. Companies that outsource software development

There are several examples of companies outsourcing their software development and reaping considerable benefits.

  • Google
  • PayPal
  • Toyota
  • Xerox
  • Slack
  • Beiersdorf

If you want to create high-quality products at a reasonable price, outsourcing software development is a good solution. 

3. In-house development

3.1. When To Use In-House Development?

Advantage
Details
Cultural fit
Developers who are permanent members of the team tend to pay more attention to the specific needs of the company. This means they are motivated to achieve the best results and bring as much value as possible. Internal developers can more easily integrate with your company’s culture.
Face to face communication
Having the same working hours and being in an office can make the communication process more comfortable and clear. Direct dialogue helps avoid misunderstandings and increases efficiency.
When To Use In-House Development?

3.2. Disadvantages of in-house development

Disadvantage
Details
Loss of employees
Software developers tend to change the workplace frequently. As a result, you may face some labor challenges and waste time. Finding new developers is always time-consuming, so your project development may stop or slow down for a while
High cost
Internal development is much more expensive than working with suppliers. The final price consists of many expenses, such as rent, taxes, software, hardware, etc. In fact, there are some additional expenses, such as training employees, sick leave, and benefits.
Lack of technical talent
The growing IT market has created an overwhelming demand for technical experts. It has been difficult to hire the right people in certain areas.

3.3. Companies with internal teams

There are some examples of companies forming internal staff teams.

  • Amazon
  • Salesforce

To sum up, due to the difficulty of hiring suitable employees, internal development may require more time and resources. However, you may prefer to hire an internal team for long-term cooperation.


4. Which strategy is better to build software?

 

There is no right answer to the question above because it all depends on several factors people and companies back on while making such kind of decisions. You would better choose outsourcing in case of:

  • The insufficient level of proficiency of the developer on-site. Sometimes experts in technology/language are lacking, so the company can resort to outsourcing the task to some other company that has enough experts with the skill set required;
  • The lack of time left before the planned product delivery date. In cases when there is no time that can be spent on the search of an applicable candidate and his integration into the team, the best option could be outsourcing;
  • The importance of rapid sharing and collaboration on the project, the meaning of the feedback, and its influence on the success of the project.

        Using outsourcing services you can win more advantages because of time-saving time and having all the management issues easily dealt with by professionals. 

Which strategy is better to build software?


4.1. When To Use In-House Development?


Despite the seemingly high cost, there are still good reasons to build an internal team.

  1. You have no budget constraints. 
  2. You need to have complete control over the team.
  3. You have all the necessary expertise to manage an IT team in-house. 


4.2. When To Use Outsourced Development?

If you have the following business requirements and limitations, outsource development is the better option.

  1. Have some budget constraints.
  2. You cannot find available talent to hire locally. 
  3. You have tight launch deadlines. 
  4. You don’t know how to manage an IT department. 

5. How to outsource without fail?

Outsourcing your software development requires some preparation and market investigation. Therefore, we decided to name some pitfalls you can face.

1.Quality development cannot be too cheap.

Definitely, developers in Eastern Europe and Asia are cheaper than in the USA. However, choosing too cheap developers can be tricky and risky as today software developers with decent experience and level of expertise have rather good wages. You won’t be able to find a 10$/hour senior developer in Belarus, for example, taking into account that salaries in the region start at 3K. To understand thу real level of hourly rates, you can make a quick overview of salaries in the region. Plus, you should understand that companies also pay taxes and need some margin.  

 How to outsource without fail

2. Research previous experience & feedbacks

When you want to hire a software outsourcing company, first check the case studies, references, and their reputation (at least, quick online check). Every reliable developer tends to show the projects that have been released, for example, you are welcome to browse SumatoSoft’s case studies.

3. Protect your data

An NDA agreement must be signed to protect your idea and any development process even before the first call with a company’s representatives. In addition, the contract should contain information about the process of data collection, transmission, and access.

4. Check transparency

Software development companies should ensure transparency of their processes and actions from the very first call. They should show, explain and prove everything they say or show. During the development process, such transparency is ensured through regular and clear communication and project management tools setup (e.g. Jira, Trello, etc).

Download our free whitepaper and learn how to choose the right software development provider:

6. Why hire software developers at SumatoSoft?

SumatoSoft is headquartered in the USA, Boston. Our development center is located in Eastern Europe (Poland and Belarus) and works with highly qualified developers.

There are 5  main reasons for outsourcing your project development to our company:

  • We have a very thorough process of talent hiring. We check their hard and soft skills, test and train for recent technologies knowledge. We don’t hire the cheapest candidates, but the best ones. 
  • We have processes of knowledge sharing that ensure that the developers’ change won’t affect your project. 
  • Our developers and project managers speak English (some even speak German, Polish and Spanish), so the communication process is easy and comfortable.
  • If we are in different time zones, our team builds the process in such a way that you and the team will be updated according to the schedule convenient for you.
  • And, finally, we’re definitely cheaper than hiring, for example, local developers in-house. But not too cheap as we do deliver value. 

Get in touch with us and we’ll prove to you that we know how to build the software that will change your business. 

7. Frequently Asked Questions

Frequently Asked Questions about software development outsourcing ut

- In-house or outsource - which is better?

There is no fit-for-all answer to this question. Everything depends on project requirements and your objectives.

- What is in-house software development?

The in-house software development team means a team of engineers that works in your office. This option requires time and money due to software developers’ interviews, on-boarding processes, and training.

- What are the 8 advantages of in-house development of software?

  • Cultural fit.
  • Face-to-face communication.
  • Quick changes.
  • Cost flexibility.
  • Huge talent pools.
  • Faster project delivery.
  • More technologies to choose from.
  • Scalability.

- What are the 5 disadvantages of in-house development of software?

  • High cost
  • Staff turnover
  • Lack of tech talents
  • Security risks
  • Communication gap


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