In-house vs Outsourcing Software Development – Which is Better For Small & Medium Businesses?

Software development 06 November, 2018 Sean Boyle & Ha Bui


Weighing up the pros and cons of in-house vs outsourcing software development is an increasing necessity for many businesses. Questions of cost, quality and capacity must be carefully answered, if the finish line is ever to be reached with a cost-effective product that satisfies or even exceeds expectations.

With every project having its own requirements, there is no definitive answer as to which is the optimal approach between in-house vs outsourcing software development. However, there are certain factors to consider before choosing the right path.

1. In-house software development

Just as “Every coin has two sides”, there’re advantages & disadvantages of having an in-house development team.

1.1. The advantages

a. Long-term product development

The often grueling process of taking a product from beginning to launch requires a flexible, devoted team who’s able to adapt to any changes. By geographical proximity alone, an in-house team is better than a remote one to do so.

b. Shared vision

The IT team plays a vital role in most businesses today as they work and learn about your website, app and entire infrastructure everyday. The understanding of who your company is and what your goals are takes time and effort to impart.

c. Increased control

  • Are you a priority for your developers?
  • How can you be sure that they sustain the quality standards that are pivotal for the future maintenance of your product?
  • How much are you going to end up paying?

These are the questions you would never have to ask if you have an in-house development team.

d. Shorter turn-around time

Local teams can offer closer monitor of the development process and quicker response when urgent issues do arise. Direct communication with the team provides an increasing level of input and the ability to identify potential problems ahead of time, which can ultimately lower costs in the long-run.

e. Improved productivity 

Teamwork and collaboration breed productivity, it is difficult to replicate the existing culture of an in-house team when outsourcing. You could hire top freelance specialists, but if there are cultural clashes, your project will surely not run as efficiently as it can.

1.2. The disadvantages

a. Broader skills on demand

When developing an app or a software, you want experts who are best-fitted for your project. They can be found, but you’ll most likely to look beyond your own team. If the product has technical shortcomings due to a lack of specialized expertise, the long-term costs can be astronomical.

b. Complicated hiring process

  • What are your IT department core function?
  • What do you need to focus?
  • Do they have time and crucially required know-how for your project?

Finding and vetting the right people is a skill in and of itself. It is a process fraught with many hidden costs and the one you never want to get wrong.

c. Hard training effort

Even after finding a suitable developer, on-boarding is a lengthy and possibly never-ending commitment. Developers’ skills need constantly updating and trying to adapt, and shoehorning your in-house team into each new project is an unrealistic approach that will produce sub-standard results.

d. Lower productivity

Unless you are planning on constantly developing new software, it will be difficult to fully utilize the talent that you have hired and paid a top developer salary. Placing an extra burden on your existing IT team could also diminish their ability to support your core business functions. An overworked employee can quickly become an unhappy one.

e. Hidden costs

A highly competent and fit-for-purpose in-house team would surely brings great efficiency and productivity to a project. But assembling and maintaining such a team is at best extremely costly and at worst unfeasible. With salaries, benefit packages and project administration among a growing list of costs you will have to meet, in-house teams can become expensive endeavors.

2. Outsourcing software development

Similar to the in-house, there’re strengths and weaknesses when it comes to outsourcing.

2.1. The strengths

a. Efficient use of resources

Outsourcing can greatly reduce project up to 60% overheads. By harnessing lower labor costs and advantages such as more working hours due to time zone differences, a dedicated software development team can offer higher levels of productivity at a reduced cost.

b. Higher flexibility

Specialized vendors are able to ‘parachute in’ to work to your schedule and project requirements. This means you can build a highly tailored offshore development team specific to the development and evolution of your project. This can be achieved much quicker than building your own in-house team.

c. The ability to scale up easily

With a team of senior engineers, digital and creative talent plus established QA/ QC system, professional outsourcing software development companies like Fram^ often have the capability and experience to go successfully from development to market.

d. Specialized outsourcing

Once you have decided to outsource, the challenge becomes finding the right talent to deliver results for your project at a competitive price. There is an ever-increasing market to outsource software development. Many companies have specialized expertise and experience in various markets to bring you top talent from emerging markets.

e. Focus on core competencies

Like in any production line, the division of is key to efficiency. By working with an outsourcing partner, the development work is streamlined. This leaves you to focus on your company’s daily business operations.  

2.2. The weaknesses

a. Unexpected costs

The Aberdeen Group reports that 76% of outsourcing customers paid more than anticipated in order to reach completion of their projects. Often these costs are incurred by inefficient vendor management and project administration. Outsourcing providers need to have sufficient organizational capacity to meet your needs, to prevent any headaches in your accounting department.

b. Hidden costs

Some contractors will offer an eye-catching rate per hour, but if they are providing you with inexperienced developers, you will end up with non-scalable and low-quality code. A sub-par product will cost you much more in the long run, than paying for the best talent available. It is possible to find professional outsourcing vendors who source and vet top talent for you at a reasonable costs.

c. Risk of varying quality

With huge pools of outsourcing developers available in markets such as Vietnam, India, and Bangladesh, the benefit of having a wide range of choices available is complicated by the wide range of quality also available. Open and direct communication channels are vital for trust and understanding between the in-house and outsourcing development team.

d. IT contractors high hourly rate

If you choose to use a freelance developer you may find the required expertise comes at a premium. Often freelancers will work on more than one project at a time and where your project’s importance will fall is anyone’s guess. You need to be able to ensure your project is prioritized as much by your dedicated development team as it is by you.

e. Security and confidentiality

The risks of a breach are present in-house and are even more prevalent when outsourced. Any company considering contracting work out must be able to feel confident of the integrity of their partner, this can only be done through due diligence and an extensive search for a reputable outsourcing company.

In summary,

With upsides and downsides of both the in-house and outsourcing software development, it is a matter of examining your own needs and goals before choosing the path you wish to take.

If you plan to compete with the giants of your industry for a long term, confidently assemble a sustainable team to build and tend to your product, in-house development could be the best option.

If you are a startup with a limited budget, a company pushing for a three month MVP or an in-house team that needs to expand with specialized experts, let’s try outsourcing to software companies in Vietnam.

Outsourcing is growing so fast according to Deloitte’s 2016 Global Outsourcing Survey. It cites cost-cutting, the ability to focus on core business and capacity issues as the most prevalent reasons to hire a development team outside of their own business structure.

It is an increasing challenge of finding the right talent at the right price. With more and more success stories like Skype and GitHub coming from outsourcing developers, it comes as no surprise that more companies are now going down the path of outsourcing software development services.

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