In-House Development Vs Outsourcing: Overview of Pros and Cons
Depending on the size of a company, nature of the business, process flows, project sizes, IT budgets, and business strategy, a company may choose to opt for an In-House development or an outsourcing model for its projects. Outsourcing is a trend that has been widely spread across the world for its cost-effective nature and is sure to expand in the next few years.
There are a lot of businesses today that do not prefer to hire a dedicated developer for their development needs. Instead, they wish to save the hiring and training costs of new developers by lending these services to their closest software development agency. As per recent studies, the total IT budget spent on outsourcing has increased to 12.7% in 2019 from 9.4% in 2018 with a market worth of $92.5billion.
But that does not mean that in-house development is not fruitful at all. Instead in the case of long-term project requirements, building an inbuilt team is always a better choice.
To have a better understanding, below mentioned is a detailed overview of the pros and cons of having an in-house development vs outsourcing development team for your businesses.
Basic Difference between In-House Development vs Outsourcing
What is In-House Development?
In-house software development is when a company hires a set of engineers or experienced professionals to work on a project. Usually, companies have a set of engineers dedicatedly working for a particular development project throughout.
What is Outsourcing?
Outsource software development is when the companies development projects are allocated to an external agency or a software development company. Here, the cost of hiring a team of professionals is saved and the cost paid is to hire a good software development service provider from outside on a contractual basis which is over once the project requirements are completed.
What Are the Pros and Cons of In-House Development?
Pros of In-House Development
1. High Engagement and Cultural fit
In-House developers become a part of your organization. They understand your company’s culture, your goals, your projects, and aspirations hence they become an integral part of your company. As a result, they pay more focus on your specific needs and are motivated to achieve the best results and give value to your organization.
2. Smooth Communication
Because the entire team of developers, programmers, operations, and marketers sit under the same roof, communication becomes direct and removes misunderstandings. This saves time usually wasted over delays in approvals and rectifications and improves effectiveness. Language and cultural barriers are also dismissed which leads to fewer cultural boundaries and limitations over communications.
3. Increased Efficiency and Better Involvement
It becomes easy to make changes, update project features and add new features in case of an in-house development team along with identifying and fixing bugs faster. It also allows you to maximize the customization of the in-house engineering process for every minor tech need of your company
4. In-project expertise.
The specialists of your company master expertise in an internal project over time and become professionals over it. Their experience comes in handy in fixings bugs faster, and in giving faster straightforward support to their integral team.
Cons of In-House Development
1. Huge price
The cost of having an in the house development team is huge. It requires many funds to be invested in the initial stages for hiring developers and training and developing them as per the standards of your company. If the developer works as a full-time in-house employee, you will have to pay for their insurance fees, seat cost, holidays, PFs, LTAs, etc.
2. Staff Turnover
Like any other organization, the turnover cost of a company is huge in development companies as well. Most companies invest a lot of money in training and developing their employees over a span of years and they choose to leave the organization without filling a replacement resulting in the company coming back to square one of their hiring and training process. This results in a loss of time, energy, and resources of the company that they invested in their employees.
3. Limited expertise
Now because your employees are in-house, whatever they learn and acquire is from the projects they get from your company along with the work experience (if any) they bring from their previous organization. To have a specific new skill engineer, you need to bear the cost of hiring, training, and developing a new employee from scratch, which is also true in the case of project expansions.
What are the Pros and Cons of Outsourcing?
Pros of Outsourcing
1. Cost Reduction
The moment you decide to outsource your development projects to an external agency, you avoid paying all the costs that come with recruiting and maintaining full-time employees. Instead, you only pay for using the services of the developers of the company you hire for your tasks. Hence with proper planning, the same goals can be achieved with a smarter budget.
2. Easy Scalability
Any external agency can easily increase or decrease the size of the team working on your projects as per your requirements without having to bear any additional cost. For an in-house team, this becomes difficult because scaling a team would mean bearing the cost of sourcing resumes and hiring a new employee, and firing an employee can reduce your team morale.
3. Market Instantly
With an outsourced development team, you can have the liberty to start focussing on building and marketing your product almost instantly thanks to all the time you save from sourcing and hiring the right developer. The same process in an in-house team will take much more time and resources. Hence an outsourced team will decrease your time to market and speed up your product launch.
4. Proven Workflows and Processes
Good software development companies offer experienced teams that have had accesses to some applications in past. They’ve worked on multiple projects and written codes for different requirements which shows the amount of exposure they’ve had over their business. They know how to use well-defined processes and workflows in developing your perfect application in no time. Moreover, agencies provide developers for all your requirements starting from project managers to QA engineers, and UI/XI designers which means they become a one-stop solution to all your development needs.
5. Best Developers
Unlike regular businesses, good software development agencies have access to the best developers in the market. These developers have had good experience handling a variety of projects in the past and are all tried and tested for best performances. You can check this by asking for blind CVs or checking developer portfolios posted on the website of the agency you plan to hire.
Cons of Outsourcing
1. No Documentation
In cases when a project is outsourced, if the team fails to deliver your project, transferring it to another team will become very problematic and involve unforeseen costs (especially if it turns out that you need to rewrite your app from scratch).
2. Limited Control Over The Development Team
It can be a risky task to outsource the critical task of building your software that carries a high business value because you will have limited control over the development team at all stages. It’s easy fairly easy to monitor the engagement of an in-house development team.
3. Risk Of Receiving The Unsupported Code
You can always run the risk of receiving an unsupported code which will make you dependent on your developers forever. Make sure you figure out a way to maintain your codes without your contactor’s involvement in it.
4. Security Risks
You can always run the risk of getting your bank details or project ideas stolen when you outsource your project to an agency. This happens because of a lack of direct in-person communication which in turn results in a lack of trust. To avoid that you can get an NDA (non-disclosure agreement) signed by that agency which puts them in a contract to abide by keeping your project requirements confidential at all times.
5. Communication Gap
Geographical differences, language barriers, and different time zones are barriers you need to watch out for while outsourcing your development projects. Thought Technology has taken care of a lot of these issues with virtual meetings, emails, and messengers, and English being a major language used by the masses, different time zones can still be an issue in better communication. These gaps can increase misunderstandings and delay processes during the development stages of your project. Moreover, your developer team will make your software as per the agreed specifications so you need to be sure at all times that you and your vendor are on the same page.
When is In-House Development preferred?
- You’re planning a long-term development project that may require continuous development and upgrades.
- You have a lot of money and time, where you can allow your team to make mistakes and learn progressively.
- You do not have an urgency to launch your product in the market
When is Outsourcing preferred?
The best instances to seek an outsourcing company are:
- You do not have a development team of your own and no experience in product development ever.
- You have a small team of developers but you do not have the required specialists like UI/UX Designers, QA engineers, Testers, etc.
- You want to build an app quickly at a low budget and you want to save your internal resources for mission-strategic tasks.
What should you choose: In-House Development vs Outsourcing?
Looking at this comparison between in-house development vs outsourcing, we can say that the choice of which model to choose depends on your specific project requirements, company budget, available resources, technology stack, overheads, and various working factors. In-house can be costly and time-consuming in the beginning but can prove to be beneficial in the long run whereas, Outsourcing can be quick and cost-saving and can kick you start with a competitive edge in the market in no time. With the In-House Development and Outsourcing Partner, you can have good development support in the long run.