As you kick off your software development project, you may find yourself at a crossroads. Should you choose in-house or outsourced teams?
There’s no one right answer. Either option may be right for your business, depending on your needs and goals.
Get key considerations for choosing in-house development vs. outsourcing in our guide below. Go in-depth into the pros, cons and best uses for these options. From here, you can confidently determine next steps for your software development project.
As the name suggests, in-house means building an internal team from scratch. These staff members are permanent hires who will be managed by your company's own CTO or IT director.
In-house development has key advantages if your business is willing to invest in it. Overall, building an internal IT team is ideal for stable, long-term needs.
When you craft your own software team, you retain total control of your talent. Businesses often want 100% visibility into progress, as well as each team member’s efforts.
Holding the reins yourself is also useful for generating efficiencies. You determine the team composition, project processes, security protocols and so on. This can give you peace of mind that the project is meeting your rigorous expectations.
Creating your own in-house team is also beneficial for getting everybody on the same page.
To this end, you can hire IT professionals who are well-suited to your company culture. You’ll also be able to onboard new staff in a cohesive way, so that workflows are as smooth as possible. Just consider that 46% of businesses cited “productivity” as the #1 benefit of a strong culture.
Having your own company culture is also essential for aligning core values. This extends to project goals, quality standards, security expectations, etc.
Not all outsourcing partners give you full access to your developers. A big plus with in-house teams is that you get a direct communication line. With it, you can monitor progress and know exactly what’s going on. Direct access also speeds up collaboration and synergizes feedback processes.
Your house, your rules. Internal teams let you set the standards for code quality, data protections and more. By establishing these areas yourself, you can guarantee the highest project quality.
In fact, 88% of companies choose in-house IT teams to improve quality. Doing so is especially important if your business considers software a “core competence.” In this case, you’ll want to demonstrate top quality and compliance through an internal team.
When something goes amiss with your software, you’ll want immediate resolution.
When your in-house team is charged with handling bugs and issues, you’ll get instant support. Often this is a step up from an IT partner who may not give you full visibility into the problem. In addition, they may not communicate updates as transparently.
Of course, creating an internal IT team for your business may incur certain risks. Here are some downsides of in-house software development to factor into your decision.
There’s a reason why 61% of HR managers report that their #1 challenge in coming years is hiring IT professionals. The competition for top talent is fierce, leading to record-high turnover and salaries. Unless your company is an attractive employer for IT talent, you may struggle to fill open roles.
Hiring in-house staff can be a hefty investment up to 2.7x the base salary. Not only do you have to pay salaries and benefits, you’re also on the hook for:
Keep in mind that these costs also lock you in long-term. In this case, you can’t easily pivot your IT team’s focus or expertise if you need to.
A recent study suggests that hiring for tech roles can take an average of 7 weeks. For many companies, this delay can be critical when developing a product for the market.
What’s more, this doesn’t factor in the time to build up an entire team. It can take even longer to set up processes and domain knowledge when everybody’s new.
Since you’re in charge of in-house teams, you’ll also have to establish management practices. It’s important to get skilled managers to head your teams. You'll also require plans to train and upskill your employees over time.
As you can imagine, these demands are much more involved with internal teams. Ultimately, you’re responsible for monitoring and honing staff skills.
Turnover is a huge challenge when you have internal teams. What’s more, the tech industry has one of the highest turnover rates at 21.3%.
With in-house teams, you’re responsible for handling recruitment and turnover. This isn’t just costly for companies, who spend an average of $30,000 to fill top tech positions. It also puts the onus on you to handle knowledge loss and undergo ongoing recruitment.
Finally, your in-house team may not be able to achieve a competitive time-to-market. That’s because ramping up a software project involves lots of manpower. With in-house teams, you typically don’t have that level of on-demand talent.
It can also take time to set up your team’s processes and attain the desired productivity. Unless you expand teams significantly, it may be difficult to get rapid development.
Outsourcing your software development is another powerful option for your business. In this case, you’ll work with a third-party IT provider to take charge of your product.
When comparing in-house development vs. outsourcing, it's worth noting the latter is fast-growing. Experts estimate that IT outsourcing will attain 25% of the total IT services market by 2025.
Let’s be honest: there are dozens of advantages of choosing outsourcing in today’s market. We’ll go through some of the most compelling reasons below. (For even more, don’t skip our in-depth guide about the benefits of outsourcing!).
46% of companies choose outsourcing to access talent they can’t get in-house. The competitive IT landscape makes it tough to get specialized developers.
Outsourcing opens doors to these professionals. IT partners focus on attracting the very best talent in a range of technologies.
Outsourcing can also provide your business with cost opportunities. Even so, you may still spend top dollar on IT.
For example, outsourcing lets you take advantage of lower regionally competitive salaries. Average rates for an offshore developer hover between $41-81/hour, which is half the cost of a U.S. developer.
In addition, your partner’s processes, efficiencies and expertise may reduce expenses. According to some calculations, cost savings can get as high as 53%.
You retain flexible control over your outsourcing services. This means you can scale up or down efforts depending on your product, market or budget.
It’s no wonder that 50% of businesses name scalability as one of the top reasons to choose outsourcing. In turn, having on-demand talent allows you to boost teams for a faster time-to-market.
Building a permanent in-house team can limit your breadth of expertise.
With outsourcing, you have no such restriction. You can hire an outsourcing talent with a wide range of technology specializations. And if you’re not certain what your tech stack should look like, the right partner can help you navigate options.
Outsourcing partners are experts in efficiently carrying out projects with the agile method. They use the latest trends, tools and management practices to maximize results.
Given their domain knowledge, your partner is well-suited to build high-quality solutions.
Shed your management burden by opting for outsourcing. You won’t have to worry about logistics such as recruitment, onboarding, training, etc.
Instead, you can free up your internal team to concentrate on your company expertise. 57% of companies use outsourcing in this way to focus on core competencies.
Outsourcing lets you share the liability of your project with a partner. This can be strategic, especially if you’re not equipped to protect your data and security on your own.
Luckily, even big-name businesses trust outsourcing to handle risks. A whopping 92% of G2000 companies are using IT outsourcing today. Guarantee technical threats are managed by leaning on an outsourcing partner.
Outsourcing has long left behind its reputation for “dirt cheap” talent. Instead, outsourcing providers today are keen on building long-lasting partnerships. This is clear by the 78% success rate in outsourcing relationships. Even so, you should be aware of pitfalls you may face if you choose outsourcing.
Though you can hand off your project load, this inevitably means you’ll have less control over it. In turn, this can complicate transparency, quality control and more.
That’s why it’s vital to choose the right outsourcing partner. The best provider will keep you in the loop and communicate any issues, updates and needs.
Outsourcing partners often leverage top talent in other regions of the world. This can result in some tricky logistics, such as:
Again, these challenges will vary from partner to partner. Top providers know how to minimize them and equip teams for seamless collaboration.
Keep in mind that 57% of outsourcing relationships fail due to miscommunication. Ensure communication practices are well-established with your partner, especially within remote work settings.
Opt for a partner with top English skills and define protocols in your contract to lower your risk here.
Last but not least, hiring an expert partner also entails sharing IP and data with a third party.
These areas should be clearly set out in your scope of work. In addition, you should do your due diligence to protect your business. Make sure your IP, data compliance and security protocols are implemented from day 1.
The decision of in-house software development vs. outsourcing is never clear-cut. Now that you have a better sense of your options, let’s discuss the ideal scenarios for choosing one over the other.
As you evaluate your project requirements and resources, consider these best use cases. Some clear indications that you should build an internal team include:
In contrast, your project may be best handled by hiring an outsourcing partner. Here are top clues that outsourcing would be the right choice:
Of course, this is just the tip of the iceberg for why companies choose to outsource. Dive deeper into outsourcing’s advantages in our guide here.
Of course, you don’t have to choose between 100% in-house development vs. outsourcing.
Depending on your needs, you might come up with a hybrid solution with some level of outsourcing. The most popular of these mix-and-match options include:
For more info on hybrid models, check out our article on top outsourcing strategies.
In-House Development
Outsourcing
Pros
Cons
Who wins the battle between in-house software development vs. outsourcing? It depends. In-house teams give you full, long-term control of your IT demands. In contrast, an outsourcing partner is cost-effective and flexible for evolving needs.
Either way, lean on a high-caliber partner like Netcorp to navigate your options. Reach out to our experts to determine which services may be right for you. We’ll help you pinpoint the best solution for your business and ramp up your project in record time.
In the meantime, get next steps for your software development project, including:
Paavo Pauklin is a renowned consultant and thought leader in software development outsourcing with a decade of experience. Authoring dozens of insightful blog posts and the guidebook "How to Succeed with Software Development Outsourcing," he is a frequent speaker at industry conferences. Paavo hosts two influential video podcasts: “Everybody needs developers” and “Tech explained to managers in 3 minutes.” Through his extensive training sessions with organizations such as the Finnish Association of Software Companies and Estonian IT Companies Association, he's helped numerous businesses strategize, train internal teams, and find dependable outsourcing partners. His expertise offers a reliable compass for anyone navigating the world of software outsourcing.
Download the free copy of our "Software Development Outsourcing" e-book now to learn the best strategies for succeeding in outsourcing!
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