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In-House Software Development vs. Outsourcing: Pros and Cons

April 19, 2022 • Andriy Obrizan • 12 min read

In-house software development enables easy communication that’s only possible when interacting with people face-to-face. Outsourcing allows you to tap into tech talent not available in your location. The former might blow up your budget with costly recruitments, while the latter might leave you grappling with cultural differences. Whether one option is better than the other depends on your company’s circumstances.

In-House Software Development

With an in-house arrangement, a team made up of direct hires builds software for your company. If you choose this option, you’ll have to take responsibility for the entire development process and deployment pipeline. In case you don’t have an IT team in place, you will also have to shoulder the burden of hiring tech specialists with the right expertise.

Pros of In-House Software Development

You can expect the following advantages if you go for in-house software development.

Ease of Communication

You can enjoy easy and effective face-to-face interactions since you’re working in the same office. You will also avoid technical difficulties that sometimes disrupt online communication. And because you and your team speak the same language, no instructions will be lost in translation.

Developers Aligned With Company’s Culture and Values

In-house developers are fully immersed in your company’s culture, attend the same corporate events, and spend time in the same office as the rest of your employees. So they have a deeper understanding of your values. On top of that, you are more likely to pick candidates fitting your corporate culture, as you will be the one handling the hiring process.

Accumulated Expertise

As an in-house team, developers can work on the same project for a long time and build up specific expertise. Direct hires also have more stakes in your company, so you can expect greater involvement from them — your success will be their success. And with everyone working under one roof, you can directly monitor and enforce QA standards.

Faster Iterations

You can manage your team more effectively as you deal with direct hires working exclusively for your company. Setting work schedules or requesting fixes and changes is a pushover. So, with in-house developers, the path from idea to production is often much shorter and quicker. Plus, the team is readily available whenever you need technical assistance.

Now, let’s take a closer look at the downsides of having an in-house software development team.

Cons of In-House Software Development

In-house software development comes with disadvantages that you may not be willing to put up with.

Skill Shortages

Tech talents are often hard to find. When recruiting for an in-house team working in the office, your options are limited to local candidates. Alternatively, you have to hire people ready to relocate. In short, the talent pool, in this case, is limited.

High Costs

There’s a high demand for tech talent, but the supply is limited. It means every specialist comes with a hefty price tag. Hiring developers full-time can put a strain on your company’s resources. After all, you’ll have to cover not just their salaries but also ongoing training, office space, equipment, and benefits. What’s more, in-house developers must get paid during downtime, too.

A Lack of Expertise in Other Areas

In-house developers usually specialize in specific projects they’re working on. So if your company has additional tasks at hand, you’re likely to require technical skills that your team does not have. It means you’ll have to hire new employees, which could blow up your budget and slow down the development process.

Risk of Having a High Bus Factor

Working with in-house specialists means that the loss of just one employee can cripple your operations. One tech expert might be working on critical code components or use skills that cannot be shared with other team members. Once they leave your company, software development will pause until another engineer with similar qualifications is found.

Now let’s look at some common stereotypes surrounding in-house software development and check if they make sense.

Common Stereotypes

Here is a brief rundown of typical misconceptions that might steer you down the wrong path.

In-House Teams Are More Productive

It’s easy to assume that developers will work more productively in one office under your manager’s watchful eye. But this is not always the case.

Equipped with sophisticated collaboration systems, outsourced teams can keep you just as updated on the project’s progress. Supervised by seasoned team leaders, the outsourced developers can follow the project roadmap with minimal roadblocks.

On the other hand, in-house teams dealing with certain issues for the first time might have difficulty circumnavigating those roadblocks. As a result, your budget could get blown out of proportion with programming errors and missed deadlines. So an in-house team does not equal better productivity.

Domain Expertise Is Only Possible with In-House Developers

An in-house team may have a deeper understanding of a company’s industry and business model. But this does not mean they have deeper expertise in building the software you need.

Software development is in a different league altogether. Outsourcing agencies are more likely to have the cross-industry expertise needed for specific projects. You can even home in on a team that developed a similar project once and already knows all the ropes.

If you choose a dedicated team model, team members will be as involved in your company and project as in-house employees. Another big advantage of outsourcing is that you can look for programmers in any country globally, not just in your city.

Companies Preferring In-House Teams

Is in-house software development the right option for your company? The answer depends on your specific needs and circumstances. Here are some companies that consider an in-house setup superior to outsourcing:

  • Amazon. A giant e-commerce company, Amazon needs an in-house team to keep up with its growth and industry leadership. It has enough resources to invest in top-grade developers who can stick with the company for the long haul.
  • PayPal. Another industry leader, PayPal, needs first-rate developers who can stay loyal to the company, safeguard its databases, and infuse innovation into the system.
  • Salesforce. A leading SaaS CRM provider, Salesforce owes its loyal clients top-grade software and unparalleled service. They can honor their obligations only with an army of in-house developers maintaining their systems.

Now let’s explore the pros and cons of outsourcing.

Outsourcing Software Development

More and more companies are opting to outsource software development, hiring an external workforce to complete specific projects. In this arrangement, you can work with independent freelancers or commission a software development company.

Pros of Outsourcing Software Development

Working with outsourced developers comes with benefits that can cut your expenses and accelerate your project schedule.

Quick Time to Market

Recruitment takes time, especially when searching for rare tech talent. There’s also a risk of ending up with a job mismatch. An outsourcing arrangement lets you forego a tough hiring process — simply onboard a development team with all the expertise and experience you need. Should any cross-domain issues occur, developers from outsourcing companies can consult with their colleagues.

Finally, outsourced teams often have the necessary resources to quickly put together the tech stack required for your project. So, your software will be ready for launch faster.

Access to Large Talent Pool

You have better chances of finding the right tech talent if you don’t restrict your search to your area or country. The internet lets you cast your net wider and catch top pros from all over the world. Zero in on the countries known for their top-notch tech specialists — for example, Ukraine.

Easy Team Up-Scaling and Down-Scaling

Outsourced teams are simple to scale up or down. You won’t have to fire employees if you no longer need their services, and you can easily bring in more people should you need to expand a project. Your business can pivot with greater agility. You can also catch opportunities without missing a beat.

Well-Established Development Processes

Outsourcing companies that specialize in software development have acquired an expertise that allows them to streamline processes. You can count on them to put together the right tech stack to complete your project, provide proof of concept, develop prototypes, closely monitor the progress, and do regular testing. They can also mitigate the risks of making bad estimates or hiring the wrong people.

The agency will take the time to study your project requirements, understand your business goals, and identify potential problems. They can form a dedicated team matching your specific needs.

What might then be the disadvantages of outsourcing your software development team?

Cons of Outsourcing Software Development

Although increasingly popular, software development outsourcing has a few downsides.

The Risk of a Communication Gap

Working with an outsourced development team, you’ll have to rely on online communication via email, chat, or video conferencing. Some important nuances might be lost, especially if your team comes from a culturally different country or has a poor command of English. That’s why it’s essential to hire developers that can find common ground with you.

Time-Zone Differences

Time-zone differences come with logistical challenges that could derail communication and slow down development. Fortunately, major tech hubs often have comfortable working hours. For example, Ukraine’s time zone overlaps well with the EU and the US.

Let’s now challenge some misconceptions around outsourcing.

Common Misconceptions

Steer clear of stereotypes that may prevent you from going for the right option.

They Have Project, not Product Mindset

Some clients view outsourcing as a way to delegate the software development project to an external team. The outsourced team is expected to just go through the motions — an arrangement that often results in all-around business solutions that don’t necessarily meet the client’s needs.

However, you’ll find software development companies that play a more proactive role. Shifting from project to product mindset, these outsourcing companies can also offer a dedicated team working closely with you to create a product that fits your business needs.

You’ll be working with business-savvy developers doubling as business consultants. They will offer alternatives should your functional requirements or product specifications seem to be a poor fit for your company.

You’ll Be Exposed to Transparency and Security Risks

Many organizations are wary of working with software development companies that cannot provide compelling evidence of their security practices. Some developers simply don’t have the wherewithal to enforce security measures.

You can calm these worries by working only with outsourcing service providers who back up their commitments with solid contracts. Reputable companies lay out their security policies clearly, ensuring that their tech specialists follow strict compliance standards.

There Are Risks of Getting Bug-Ridden Spaghetti Code

The goal is to get fully functional software and code that won’t give other developers a headache. A typical stereotype is that an outsourced team will dump an unstructured, error-riddled code on you. The truth is that you will never stumble upon this problem if you work with the right software development company.

Reputable outsourcing companies take full responsibility for the deliverables, ensuring quality control on every step of the way. They even replace bad hires at no cost.

Global Companies Outsourcing Software Development

Even tech giants find merit in outsourcing software development.

  • Google. Google entrusts software development and technical support to external teams.
  • Alibaba. A world-famous Chinese e-commerce platform, Alibaba, grew out of a small website developed by a US company.
  • Basecamp. Basecamp, a top-rated project management tool, meets a growing demand for its product by outsourcing software development.

Ready to work with a reliable software development company? Look no further than LeanyLabs.

Why LeanyLabs?

Do you think an outsourced team could work for you? LeanyLabs is a perfect match. We pick candidates from our large IT talent pool and leave you to choose the tech specialists who fit your needs best.

LeanyLabs takes over HR, administrative tasks, training, and office management, so you can focus on your core business processes.

You get to manage your remote team as your direct hires. And you’ll be working with tech specialists operating from the same office most of the time, which guarantees better collaboration and greater efficiency.

Conclusion

Before we move to conclusions, let’s summarize the benefits and drawbacks of the two approaches based on specific criteria.

In-house teamOutsourced team
CommunicationFace-to-faceOnline via sophisticated collaboration tools
Time-zone differencesNoYes
RecruitingHard, costly, and often lengthyHandled by an outsourcing company
Scaling team up or downDifficult (you must go through a hiring process or fire employees)Easy (you can just re-negotiate the scope of services with an outsourcing team)
Development processMight be chaoticWell-established
Time to marketStandardAccelerated

In-house software development is associated with benefits like ease of communication and better cultural fit. In this increasingly interconnected world, however, outsourcing can offer the same benefits. Still, either option has its pros and cons that might weigh more for your company, depending on your specific needs.

Have got a project in mind? Contact us at LeanyLabs. We can quickly test your idea with an MVP. We can also seal the deal with a dedicated team that will be involved exclusively in your project and see it through to completion.

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