How you spend your time and money can make or break your business. Nowhere is this more clear than making the choice between keeping your software development in-house, vs outsourcing it. You need software that’s streamlined, reusable, and most of all, that works. But what’s the most resource-efficient way of developing it?
Some IT decision makers like using in-house teams because they have institutional knowledge, while others love the fast access to expertise that comes with outsourcing a project. So what are the pros and cons of each? And is there a better way?
Comparing Software Development In-House vs Outsourcing
| In-House | Outsourcing | |
|---|---|---|
| Popularity | Common among larger businesses or those with specific, unique requirements. | Common among businesses of all sizes, particularly startups and small-to-medium enterprises. |
| Applications | Ideal for projects that require close supervision and control, as well as a deep understanding of the business. | Ideal for projects that require specific expertise or when there’s a need to reduce costs or speed up delivery. |
| Key Advantages |
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| Key Disadvantages |
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| Cost-Effectiveness | May not be as cost-effective due to high overheads, but offers greater control over resources. | Generally more cost-effective due to lower wages and operational costs in other regions. |
| Infrastructure | Requires existing infrastructure and resources, or necessitates investment in them. | Provided by the outsourcing company, reducing the need for infrastructural investments. |
| Training | May require training for the team, particularly if new technologies are involved. | Less training is typically required as outsourcing often involves hiring specialists in their fields. |
| Communication | Seamless communication due to co-location. | Requires more structured communication; time zone differences can be a challenge. |
| Flexibility | Limited by the skills and availability of the internal team. | High as there is the ability to scale up or down quickly based on project needs. |
| Security | High; because you have full control over data and information. Explain: Since all work is done internally, it’s easier to control and protect sensitive information. | Can be high, but depends on the outsourcing partner. Explain: You must rely on the partner to maintain security, which should be clearly defined in the agreement. |
| Tools and Processes | Chosen and controlled by your internal team. | Often dictated by the outsourcing company, but can be negotiated. |
| Agreements | Long-term commitment to hiring and maintaining an internal team. | Can be short-term or long-term, depending on the project and terms of the contract. |
To choose between keeping your software development in-house versus outsourcing it, you’ll need to know more about each. In-house development means you must assemble and manage a team yourself. You pay each employee’s salary directly and often house them within your IT organization at your headquarters.
Outsourcing software development services, on the other hand, means hiring a third party to do the developing for you. Your outsourced team’s location will differ, based on the company you’re working with. For example, offshore software development occurs in overseas countries. Nearshore software outsourcing goes through firms located closer to your location. In the case of the United States, nearshore software development often takes place in Latin America.
The Pros and Cons of Software Development In House vs Outsourcing
IT decision makers have a lot to consider when determining whether to pursue software outsourcing. For example, statistics show that the virtues of software outsourcing have made it a popular option, as 54% of US firms use outsourced teams to connect w/software-development-services/software-outsourcing/ith their customers. But why?
Forty-five percent of firms who use outsourcing do it to control costs, while 46% say it helps them access a wider skill set than in house teams alone can offer. So what makes some IT decision makers choose to move operations in-house? Here’s an overview of the pros and cons of each.
The Pros of In-House Software Development
- You may feel more in control of your project: When development is in-house, your team may be just a hallway away. This makes it easy to have in-person meetings and to give requirements, feedback, or approvals. And, having a team onsite makes it easier for them to adopt the company’s culture and standards, as the development team becomes part of the firm.
- Long-term development may be easier: In-house teams are often well-suited for long-term projects. These devs come to learn the details of their project and its history, giving them the right background to make changes or fix bugs quickly. However, there’s always the risk that a top employee may leave your company. If this happens, you’ll have to spend time on recruiting a replacement yourself, which can slow your project’s progress.
The Cons of In-House Software Development
- In-house teams are expensive: Hiring talented developers directly is expensive, as you must provide all of their benefits in addition to their salaries. You must navigate overhead costs, and find a new project within your organization for your employees after their current project is complete.
- Staffing in-house teams takes a lot of time: Before work on a new project can begin, you’ll have to spend a lot of time recruiting, negotiating salaries, and determining benefits packages with developers to fill holes on your current team. Not to mention that large enterprises like Google and Amazon have already hired most of the good developers. This can impact your ability to meet deadlines if you’re on a tight schedule. Outsourced development firms have a highly expert staff ready to go on a moment’s notice.
- You must cultivate your own technical expertise: An in-house development team doesn’t have anyone to turn to when problems arise, which is taxing for your existing technical experts and may require extensive training, which drains hours and resources. Hiring additional senior professionals is also a strain on your budget, so your team may find itself stumped on complex challenges.
The Pros of Outsourced Software Development
- Reduced operational costs: An outsourced software development team can help you reduce operational costs in many ways. It removes the costs of recruiting and training. Nor will you have to pay for equipment or brick-and-mortar overhead.
- Greater development expertise: A specialized outsourcing firm that only focuses on software development can achieve greater levels of precision than any in-house team. They offer instant access to highly-experienced staff, no matter when you need them. Specialized teams create deliverables that are highly accurate, effective, and delivered on time.
- You’re free to focus on your core business model: When you outsource your software development projects, you place it in the hands of experts. This removes all the headache and hassle, which could divert resources away from your business model and objectives. This frees you to work on your core business model and expansion goals—which is what you should be free to focus on, anyway.
The Cons of Outsourced Software Development
- Poor logistics: It can be hard to coordinate meetings, phone calls, and deadlines when working with an outsourced team. When working with an offshore team, for example, significantly different time zones might mean that communications are scheduled at inconvenient times of day—or even the middle of the night.
- Frequent miscommunication: Offshore development firms often hire people who may not speak the same language that’s spoken at your firm. Or, there may be cultural barriers that make communication difficult. This is why if you’re choosing an outsourcing firm, you should look for one that’s nearshore and staffed with multilingual experts.
How to Transcend the Limitations of In-House Software Development with Nearshore Outsourcing
As important as time and money are to your business, there’s another resource that’s just as valuable: people. That’s what gives outsourcing an advantage over in house development; it offers access to the best talent and diverse skills, at a price that helps control costs.
But not all outsourcing is created equal; nearshore outsourcing is far superior to offshore outsourcing. Nearshore developers are closer to home, so they make it easier for you to control your development projects. They often operate within a similar culture, have teams who speak a shared language, and are located in similar time zones. So not only does this make communication easier and more convenient, the right nearshore outsourcing firm can staff projects in as few as 72 hours.
Your time and money are precious. So why bear the workload of in-house development, or waste time miscommunicating with offshore firms? Nearshore development solves these problems—and develops software to your specifications—right in your backyard.
