How To Choose: In-House Development vs. Outsourced Development

In-House Development vs. Outsourced Development

The age-old question remains – are in-house or outsourced development teams more beneficial to businesses? This question is particularly prevalent in the software development space, but the truth is there’s no hard-and-fast rule. It is worth noting that IT outsourcing is experiencing staggering growth, and is expected to reach $98 billion by 2024. This shows that more and more companies are looking towards more affordable but highly skilled outsourced dev teams around the world.

The benefits of outsourcing your development team are significant. However, there are factors to consider when choosing one over the other as it could have long-term consequences for your business, your product, and your profitability. In this blog post, we take a hard look at the pros and cons of in-house versus outsourced software development teams to help you make an informed decision.

In-house development

In-house development means you can build your own team from scratch. You can fill positions as you see fit and choose talent with your preferred skill sets and experience. It is no different than any other in-house hire and will require the necessary recruitment and onboarding processes. With an in-house team, you must have all the tools, equipment, and resources needed to help your employees perform their jobs.

Pros of in-house development

• Everyone is aligned with the company’s values and culture – The success of a company hinges on teams who embody the company’s mission and values. With an in-house development team, you can hand-pick team members who align with this culture and work together to achieve your mission.
• Communication is not an issue – While many businesses have proven effective in a work-from-home or hybrid setting, having an in-house team allows for easier communication, more effective collaboration, and regular facetime. If your team is located in the same country as your business, you won’t have issues with time zones and language barriers.
• Support is immediate – As a key benefit to having an in-house team, any flaws, issues, and fixes can be executed as soon as they are identified with minimal delay.

Cons of in-house development

• Costs are high – Hiring a full-time dev team will be costly. Besides obvious costs like salaries and equipment, consider costs like insurance, sick leave, recruitment, and onboarding as well. Salaries and insurance, for example, will still be applicable when your team is in-between projects.
• High turnover rates – Good talent is hard to find, yet IT skills are in high demand. Prepare for many of your best talent to be poached by competitors or constantly approached by recruiters. In these cases, you must counteroffer to keep your most valuable team members or risk losing them to a competitor.
• Upskilling your team is necessary – The IT industry is ever-changing with the introduction of new technologies, tools, and languages. If your team members are to keep up with these changes, it’s important to introduce upskilling opportunities. Your team needs the resources to grow and learn, so consider investing in the right training and tools for long-term gain.

Outsourced development

Outsourced development is the process of hiring external agencies to take care of your IT and development needs. A contractual agreement will be put in place, and all requirements will be conveyed to the outsourcing firm. The firm will then assemble a team to work on a specific project. The team could consist of team leads, software developers, business analysts, and testers. Outsourcing development is popular in the IT industry due to its low cost and ability to scale. In fact, IT outsourcing generated $66.5 billion in 2019 globally.

Pros of outsourcing

• More control over costs – When outsourcing, you can choose a firm that best works for your needs and budget. A good option is approaching outsourced teams located abroad in countries where costs are considerably lower, but talent is high. South Africa is one of the top destinations in the world for IT sourcing, thanks to affordable rates and a high level of software development expertise.
• Larger pool of talent – When you outsource, you spread your net far and wide. You are not limited by region, vicinity, or country. You’ll have access to a global pool of talent already set up and ready to hit the ground running. It will also save you the trouble of recruitment and onboarding.
• Say goodbye to technology constraints – Some projects require a diverse set of skills, as well as equipment and tools to get the job done. Hiring an outsourced firm means there are no constraints with technology as they are already set up with the latest resources to build and deliver the solution.

Cons of outsourced development

• Limited control – An outsourced team will likely be working on other projects as well, which means they’re not exclusively dedicated to you. Understand that your outsourced team is juggling various commitments and manage your expectations on their availability outside of the agreed-upon hours.
• Time zone differences – If you’re outsourcing an IT firm in another country, you need to factor in time zone differences and potential language barriers. In the case of language difficulty, you should consider a firm that can accommodate this.

When to outsource development

While outsourcing development is incredibly popular and affordable for many IT companies, it’s the best option if you:

1. Have budget constraints – If you’re operating on a tight budget and can’t afford an in-house team, outsourcing gives you the flexibility to manage your cash flow based on your requirements without committing to monthly salaries.
2. Have a lack of available talent – If there is a lack of talent in your city, you’ll be able to quickly outsource an experienced team without the stress of recruiting and onboarding employees who may not fit the bill.
3. Have tight deadlines – If you have limited software development experience, obstacles could leave you blindsided. With a fully-fledged, experienced team available, they are able to meet tight deadlines and fast turn-around times.

The Bottom Line

Whether to choose in-house or outsourced teams really depends on your needs and budget. What works for one company may not work for another. Evaluate your resources and requirements before making a decision. At Haefele Software, we build dev teams that deliver and fix those that don’t. Contact us today to discuss a project.

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