Dorota Jasińska
Agata Tomasik
In today’s fast-developing digital world, many businesses often face the dilemma of whether to build software projects using their internal teams or outsource to an external service provider. This decision is complex on many levels so it needs to be well-informed.
Starting with the direct impact on a project’s success through sticking to a budget and creating a cost-effective solution. So, what needs to be taken into consideration? Software development can be taken care of both in-house and outsourced. Both choices have pros and cons, so let’s look closely at them.
In-house development
In-house development involves building and managing a team of developers within the company’s structure. This type of software development is prevalent in businesses with long-term software projects and those with high data security.
Pros
Software development offers both advantages and disadvantages. However, the company needs to analyse which elements of the list are the most important and decide which solution fits best. So, what are the benefits of in-house development?
Greater control
When a business decides to have an internal development team, it’s easier to control what they do. This includes a close oversight of how the project is developed and if it meets the timelines and deadlines. The decision-making process is also faster thanks to a direct connection with the company and the decision makers.
Company culture
When the company has an in-house team of developers, they can get involved in the company culture and learn its values. Thanks to such an understanding of the business, the solutions developed by in-house teams are more likely to suit the company’s needs. In-house teams can understand the business goals better thanks to their knowledge of the company.
Direct communication
Thanks to the fact that the team is within the company, feedback and updates concerning the product they work on reach them faster. Direct communication allows for easier collaboration of the team with the company and other teams. This may positively influence the timeline of software development.
Enhanced security
When the team is in-house, they’re already in the company infrastructure. This solution ensures proper security measures and better control over security protocols. The code stays within the company and no outsiders can access it. If the project is sensitive, it’s important to stick to the compliance requirements.
Cons
Even though in-house development has many pros, it also involves some cons and risks that need to be taken into consideration. The business must know all the downsides of the solution as well. So, what are the cons of in-house software development?
High costs
An in-house team involves extra expenses such as competitive salaries, benefits, and ongoing employee training. Moreover, the teams often need office space or equipment and infrastructure to work from home, software licenses, office equipment if necessary. Another aspect is the recruitment process, which is expensive and time-consuming.
Limited talent pool
Given the limitations of the local talent pool, it’s possible the company won’t be able to find the required specialists. It may also take a lot of time to convince skilled people to relocate, which can also involve additional costs. Some companies offer accommodation as a benefit or help in finding an apartment. However, the whole process may be too time-consuming. The lack of specialized skills in the team may also negatively affect the project.
Time-consuming recruitment
Finding the right candidates and conducting interviews which usually have a few steps also involves a lot of time. Let’s not forget about creating tasks to check the candidate’s skills. It’s also possible that the right candidate is not available right away. Then, the onboarding process for in-house developers can also be lengthy. The full process may take a few months before a person joins the team.
Team and tech limitations
It’s possible that due to the limited talent pool, the software may not be developed properly because of some technical limitations. For example, the required technology may not be known by the current team. Moreover, the project may lack the right management or expertise. In such a case, there is a huge risk the software may not meet the requirements.
Consequences of project completion
Another thing worth mentioning is that when the software is finished, it usually leads to layoffs. Especially when there’s no need for maintenance and support for the project, it may be hard to reduce a team in some cases. Obtaining a specialist often involves an employment guarantee, but a team with no tasks is an unnecessary cost for the business.
Looking at the pros and cons of in-house software development, it’s important to be aware of all of them. The company must avoid high risk and uncertainty for its development. That’s why companies often decide to outsource instead of having an in-house team.
Outsourcing IT development
Outsourcing IT development involves signing a contract with an external company that specializes in software development. It’s a good choice if the company has a defined project scope and doesn’t need in-house expertise.
Pros
Outsourcing development offers a few advantages worth considering when deciding whether or not to outsource. Some of them may be very important in terms of the overall benefit for the company. Considering them should help with the decision.
Cost-effectiveness
Outsourcing a team can be cheaper compared to building an in-house one. With outsourcing the company reduces expenses such as benefits, infrastructure or recruitment. This is a significant aspect of long-term projects. Overall, the costs may be much lower compared to an in-house team.
Access to global talent
Outsourcing offers access to a wide choice of candidates outside the local market. It helps connect to skilled developers worldwide. This way, the chance of finding the required expertise increases. Outsourcing opens your company to new talents and possibilities.
Quicker time-to-market
Thanks to the expertise and a team that is ready to work, the project’s delivery time is much shorter. Instead of building a team from scratch, outsourcing offers vetted specialists ready to develop the product required by the company. Skipping the time necessary to find proper employees allows for quicker results.
Lower risks of failure
Thanks to the wide range of skill levels and expertise of the outsourced team, the risk that the project will fail is very low. Outsourcing enables access to reliable specialists with lots of experience in terms of delivering specific projects to the client. That’s why the chances of getting what the company needs on time are higher than with a new, inexperienced in-house team, or mismatched outsourcing partner. However, to get the expected results, the company needs to find the right outsourcing services to reach the goal. Otherwise, the risk of failure may be a reality.
Expert skills and quality
Outsourcing is a gate to a huge choice of talents with solid experience. This way, the company is provided with high-quality processes and professionals who can deliver top-notch services. Experts, along with quality, guarantee success for the company. This results in great end results and satisfied client expectations.
Different outsourcing models
Outsourcing is a very broad term that involves different types of cooperation. The company can choose from a variety of cooperation models and find the one that best suits its needs. Depending on the needs, the company can consider offshore outsourcing, staff augmentation, and many more outsourcing solutions.
Cons
When considering the right solution for the company, it’s important to consider the disadvantages too. There are some cons that should be analyzed before making a decision. After all, the company’s success may depend on.
Reduced control
When choosing to outsource, the company must remember that the decisive process and introducing changes may take more time. The flow of cooperation is extended due to more people involved. This results in less direct control over the project’s operations and decision-making.
Communication barriers
In some cases, when the company decides on offshore outsourcing, it may be possible to encounter potential challenges due to time zone differences and cultural or language gaps. It’s hard to coordinate work and pass on feedback when the outsourced team works in a different time zone or can’t understand the language very well. This may impact the quality of the product. However, nowadays such problems no longer impact the cooperation. This really depends on the solution and communication provided by the partner.
Security risks
Using outsourcing services involves potential security risks. It may be an issue to take care of handling sensitive data and protecting intellectual property. Outsourcing services mean using an external provider from outside the company infrastructure that may not have a proper safety level to ensure security of files and data.
Finding the right partner
It’s not easy to find an outsourcing service that can align with specific requirements, such as tight budgets, deadlines, communication styles, etc. This may take a while and negatively impact the plans and performance of the company. A poor match may also turn out to be a waste of time and money.
Knowing all the pros and cons of outsourcing development, it should be easier to decide if this solution is right for the company. It’s important to realize all risks and challenges before involving in cooperation that may not fit your needs.
In-house team vs. outsourcing development
Once we know pros and cons of both solutions, let’s look at the main differences between them.
The first one is the project scope and complexity. In the case of large, complex projects, it’s worth considering to set up an in house team. The main reason is a better and direct control of their actions and the cost should pay off in the long run. However, staff augmentation is also a great solution in such situations. External specialists help fill in the gaps in employment with experts within a short period of time.
For smaller, specific projects, the outsourced team is a sensible option. Their expertise and experience and guaranteed high quality of work is another advantage, along with cutting cost on recruitment, infrastructure and training.
Looking at the budget, the company must analyze the true cost of in-house development (recruitment, ongoing costs) versus outsourcing fees. If the project is ongoing and needs to be made within the company infrastructure to deliver required quality, in-house team is a better option.
Still, in-house team has limited talent pool to recruit from ant it may not be enough to meet the company’s requirements. Also, the cost of benefits, salary, training and recruitment itself may be too much to invest. In such a case, it’s better to outsource.
What’s worth mentioning is that if software development is core to the business, in-house teams offer long-term sustainability. Knowing the company well is another benefit to delivering a good product. Outsourcing teams may not know all the quirks and it might take some time to learn them all.
Finding the right people for the company maybe tricky. That’s why we created a comprehensive guide to hiring IT specialists. Neontri specializes in outsourcing and you can find out why in this article.
Conclusion
Looking at the the key differences between outsourcing and in-house development, it’s not an easy choice to make. That’s why every company needs to deeply analyze its needs and possibilities, set up a budget and specific goals. Then, they can go over all pros and cons and choose the best solution.
There is no right answer here, as the solution varies depending on the goals and expectations. That’s why the best choice depends on unique circumstances and project requirements of each company.
Considering all the above, it’s important to take into consideration the goals, budget, limitations and expectations. Then, a thorough analysis of the advantages and disadvantages of both solutions should be made. Finally, once the company knows what it needs, it can start creating their own team or finding the right outsourcing partner.
FAQ
How does intellectual property management differ between in-house and outsourcing?
In-house IP management offers greater control over confidential data. However, it may be necessary to have a dedicated team to deal with intellectual property management. Having an extra team generates extra costs. In the case of outsourcing, the solution may be more cost-effective, but it also involves security risks. That’s why it’s necessary to find a reliable partner and sign strong contracts, ensuring transparency and data safety.
How does the speed of project delivery compare between in-house and outsourcing?
It’s hard to estimate the speed of delivery without knowing the project, requirements and team. However, there are some general assumptions we can make to compare the two options. In-house development can be faster when the project is simple, the team knows its specifics and has the necessary expertise. If the situation is different, then outsourcing would be faster as it’s quicker to find a team with required skills instead of training employees. Outsourced teams have established processes that can accelerate the process of delivering the project. The speed of delivery varies based on the project’s complexity, the size and experience of the team involved.
