In-house Software Development vs. Outsourcing: Comparison, Pros, Cons

in-house software development vs outsourcing

When it comes to software development, it’s obvious that every company has two choices: in-house development vs. outsourcing. 

And a quick search on Google can bring us thousands of pieces of information regarding the benefits of outsourcing app development, such as cost cutting, resource optimizing, and easy business scaling.

But there’s no one-size-fits-all solution, right? Either in-house development vs. outsourcing has its own pros and cons and works for different situations. And this article will be about helping you select the right one between these two software development approaches.

Grab a coffee and get ready to go with us!

A quick comparison of In-house Software Development vs. Outsourcing

The table below provides an overall picture of in-house software development vs. outsourcing. Take a look at it before we going into detailed pros and cons of each.

Factor In-house software development Software outsourcing development
Overall cost High Lower
Subject-matter expertise Adequate High
Talent pool Limited access Better access
Flexibility Low High
Project management Close-up Remote
Communication – Direct
– Same cultural background
– Quick follow-up
– Remote
– Cultural gaps
– Language barriers
– Long waiting time
Team Management More time spent on team management Less time spent on team management
Security Lower risks Higher risks

In-house Software Development Pros and Cons

in-house software development pros and cons
In-house software development pros and cons – IMG source: Freepik

 Advantages of In-house software development

Full control of your project

The first obvious advantage of in-house software development is that your company has full control of everything: plan, process, timeline, quality, etc.

You can always observe the progress, early define possible problems and directly navigate the development process to success, instead of seeing a completed product from your vendor without knowing what’s inside.

Also, developing software by yourself means no one, like an IT vendor, will come to you and say “Hey, we need to change this and this because of that!”.

Easy communication

It’s undoubted that face-to-face communication with your in-house software developers team is far more convenient and quicker than remote communication in the case of outsourcing.

For example, it might take 5 minutes to visit your internal software team and discuss the status of the project. But to an offshore IT vendor 12 hours away from your time zone, it’s hard to wake them up at midnight for immediate support.

Have a dedicated software team for short- and long-term vision

A sustainable benefit of in-house software development is you will have a solid internal software development team that is hand-picked and well-trained based on your custom standards. They understand the project vision and goals as well as the company’s culture.

And because an in-house team member is a far greater commitment than the outsiders, high chance that they can “feel” what to do to achieve the project goals that align with the company’s philosophy.

Better confidentiality

In-house software development means no external access to your project, resulting in better information security regarding your project and company.

Disadvantages of In-house software development

High cost

One of the biggest challenges of internal software development is the huge cost of in-house software development. It includes visible costs and hidden costs.

  • Visible costs – Hiring, training, and maintaining employees; Facilities; Operation; Management; Tax;…
  • Hidden costs – Staff turnover; Resources that otherwise can be utilized for other business processes

These costs lead to huge initial investments and result in lower ROI for small and short-term, one-time projects. 

Lack of tech stack diversity

Another con of internal software development is the need for more tech stack diversity, especially for emerging technologies, due to limited available resources. This is also one of the reasons companies choose IT outsourcing, to access industry experts in specific skill sets or new technologies. 

This disadvantage may come from: 

  • The lack of IT talent for recruitment
  • The fast-evolving nature of the technology space

So, When To Choose In-house Software Development?

From the above pros and cons of internal software development, we recommend you choose this approach when:

  • You prioritize control and confidentiality over cost
  • You have strong internal tech ability
  • Your company has a long visionary for technology and digital transformation

Outsourced Software Development Pros and Cons

outsourcing software development pros and cons
Outsourcing software development pros and cons – IMG source: Freepik

Benefits of outsourcing software development

Cost reduction

Perhaps the biggest benefit of software development outsourcing is cost reduction, which is on average 30%, thanks to geographical pricing and the cut-off of other visible and hidden costs that we mentioned previously. 

According to Deloitte’s survey, cost reduction is the most influential factor in outsourcing decisions with 70% of companies indicating that cost reduction is a primary reason for outsourcing.

Increasing agility

Another juicy benefit of IT outsourcing is flexibility in resource scaling up and down. Just look at the following employee training statistics:

  • On average, it takes between 3 and 6 months for a new employee to learn a new job.
  • On average, it takes 3 weeks for a tech employee to learn something simple and 3 months to a year to fully embrace a more complex tech addition.

And thanks to outsourcing, businesses can quickly ramp up human resources, therefore: 

  • Enabling speed to market
  • Scaling business faster

Improved product quality and security

IT outsourcing also helps companies access industry experts for particular tech stacks as well as keep pace with new technologies. 

From that, businesses can apply innovative technologies to enhance the software product quality and security, upgrade customer experience and achieve more competitive advantages.

Disadvantages of outsourcing software development

Now we go to the top 4 challenges when outsourcing software development. And believe us, we have worked with clients in 9 countries and realize that all the below hassles can be avoided with enough clarification, interaction, and collaboration between two parties.

But it’s good that you have aware of them!

Lack of control

The first disadvantage of outsourcing software development is a significant lack of control over the development process, including quality control and timeline control, in case you choose the project-based IT outsourcing model. 

This can result in an unexpected software product if the interaction between you and your IT vendor is not enough to early detect possible issues.

Security risks

Outsourcing means allowing external parties to enter part of your business. Data might be leaked intentionally or unintentionally, like when a developer publishes parts of your source code to public repositories.

This is why it’s vital to choose a trusted IT partner when using offshore software development services and your vendor is so far away from your controllable range.

And a variety of “differences”

Time zone, work cultures, national cultures, and other differences when offshoring can result in barriers to collaboration or even less user-friendly software. The effects increase if your IT vendor is brand new to your country.

In the case of time zone and work culture differences, it’s pretty easy to adjust with proper discussion prior to starting. But if your offshore software development team can’t empathize with your end users, it’s hard for them to build a product that can solve the problem of your end users. 

So, When To Choose Outsourced Software Development?

With the above pros and cons of outsourcing software development, outsourcing will be the right way to go when:

  • The project is short-term and/or one-time
  • You want to utilize geographical pricing to reduce costs
  • You don’t have enough internal resources for software development
  • You want to eliminate all hassles and focus on other business processes
  • Important: you find a trusted IT partner that can guarantee enough clarification, interaction, and collaboration to drive the project to success.

A final note on In-house Software Development vs. Outsourcing

Well done! We’ve finished a comparison of in-house software development vs. outsourcing. 

Now, if you are considering outsourcing but are still too afraid of the challenges, don’t worry! Tell us your story and our experts will get back to you with our solutions real quickly.

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