In House vs Outsource Software Development: What to Choose

In-house software development refers to the process where all the specialists involved in creating software are employees of your company. So, suppose you don't own an IT services business. In that case, you need to hire all the necessary experts (developers, UI/UX designers, QA engineers, business analysts, and more) before you start building the application or website. But you should be aware of both advantages and disadvantages for this option.

An in-house team is a great way to start developing your own products. Let’s talk about its advantages briefly now to later compare in house development vs outsourcing.

Cultural fit

Developers that work as permanent team members tend to pay much more attention to the specific needs of a company. It means they’re motivated to achieve the best results and bring as much value as possible. It’s easier for in-house developers to integrate with your company’s culture.

Face-to-face communication

Having the same working hours and being in one office makes communication more comfortable and clear. Direct conversations help avoid misunderstanding and increase effectiveness. They also build stronger team relationships, promoting better collaboration and problem-solving. Moreover, the immediacy of in-person discussions can lead to quicker decision-making.

Quick changes

When you have an in-house team of software developers, it’s always faster to change the project's features, add new ones, and discuss their technical background. Also, in-house developers usually process bugs more quickly. This responsiveness can significantly reduce downtime and ensure that your project remains on track. Furthermore, having developers on-site allows for real-time feedback and iterative improvements, enhancing the overall quality of the software.

Talent development and retention

Building an in-house team allows for the development of skilled talent and fosters employee loyalty, leading to a strong competitive advantage. In-house developers gain deep knowledge of the company's products and processes, resulting in more innovative solutions and improved efficiency. Additionally, an in-house team can protect intellectual property and trade secrets more effectively.

Nothing in this world is perfect and in-house software development also has some imperfections. You, as a product owner, should be aware of them so that these disadvantages do not take you by surprise.

High cost

The in-house development is much more expensive than cooperating with a vendor. The final price makes up for many expenses like rent, taxes, software, hardware, and more. In fact, there are some additional spendings like training for employees, sick days and benefits. Infrastructure and maintenance costs.

Setting up and maintaining the necessary infrastructure for an in-house development team can be costly. This includes expenses for office space, utilities, IT equipment, and software licenses. Additionally, ongoing maintenance and upgrades to this infrastructure can further strain your budget. These costs can add up quickly, making it difficult to allocate resources to other critical areas of your business.

Lack of tech talents

The ever-rising IT market brings an overwhelming demand for tech specialists. It's already tough to hire the right person in some regions. Apart from meeting soft and hard skills, the developer should fit into the planned budget, which is often hard because of competition from other companies.

This challenge underscores the dilemma of in-house software development vs. outsourcing, as companies must weigh the difficulty of finding local talent against the benefits of accessing a global talent pool.

Outsourcing software development is the practice of hiring external vendors or third-party service providers to handle the creation, maintenance, and deployment of software applications. This approach allows companies to leverage the expertise and resources of specialized firms, often leading to cost savings and increased efficiency.

According to Statista research, the IT outsourcing market turnover is expected to become approximately $541.10 bn by the end of 2024. So nowadays, many companies use outsourced software development services to cut costs, save time, and find competent staff.

If you choose to outsource software development, you need to find a vendor with solid expertise and positive customer reviews. Then, a team of specialists will create an application that meets your requirements and help you deploy it.

Let’s discuss the pros and cons of hiring a software development vendor.

Outsourcing software development offers undeniable advantages, making it a popular choice for businesses seeking cost-effective and reliable solutions.

Cost flexibility

There are a lot of outsourcing companies all over the world that offer affordable prices. The most popular regions for outsourcing are Central and Eastern Europe, Western Europe, the Baltics, the Balkans, and more. Central and Eastern Europe, especially countries like Estonia with its renowned e-residency program and strong focus on tech education, is becoming increasingly popular due to a bunch of talent, low taxes, and government support of the IT sphere.

When considering in-house vs outsourcing software development, it's important to compare costs across these regions. We’ve done research on software development costs in Europe, and you can see the results in the picture below.

Huge talent pool

The IT outsourcing market provides a huge pool of technical specialists with both knowledge and experience. As a result, the hiring process can take just a few days, not months. Moreover, software development outsourcing provides you with unlimited hiring opportunities. You can consider different professionals from all over the world that have different skills and experience.

However, it's crucial to consider the legal and ethical aspects of outsourcing when partnering with a remote team. Ensure that your chosen vendor adheres to data protection regulations and maintains high ethical standards in their business practices.

Scalability

Another reason to hire a reliable outsourcing IT vendor is an opportunity to scale up and down. You can make your team bigger if you need to speed up the development process or decrease the number of specialists if there are no tasks for them to tackle. It allows you to allocate resources efficiently and respond quickly to changing project requirements. Additionally, it minimizes the risk of overstaffing or understaffing, ensuring optimal operational efficiency.

For instance, we at Cleveroad offer flexible staffing solutions to meet your project needs. Our team of experienced professionals can be easily scaled up or down to match your project's evolving requirements, ensuring you have the right resources at the right time.

Faster product delivery

Outsourcing software development allows for reducing the time spent on recruiting. You can always adjust the speed of your product development, e.g., cooperating with more specialists. As a result, time to market decreases along with expenses (you don’t need to pay if there are no tasks).

Despite significant advantages, outsourcing development to other countries has several small disadvantages you should be aware of.

Security

Outsourcing usually suffers from a lack of face-to-face communication. As a result, you can’t control the whole development process and may not feel well-protected. However, the amount of trust always depends on the vendor. So, be sure to discuss the ways to communicate beforehand.

If you are afraid that your idea and groundworks will be stolen, you should sign an Non-Disclosure Agreement (NDA) contract – for example, our experts offer NDA per your request. This agreement guarantees the protection of all your rights and the project idea.

Communication

While located in different companies, there are several issues that you need to solve. A lot of people worry about the language barrier problem. However, it has become a thing of the past since IT specialists tend to have fluent English. The time zone difference is another communication-related issue you can face choosing outsourced software development.

We in Cleveroad know how to provide stable communication during software development flow through scheduling meetings in advance and utilizing emails and messaging platforms (e.g., Slack, Google Meet, etc.). Furthermore, our Cleveroad’s IT specialists possess fluent English skills, ensuring clear communication and the ability to promptly address any issues that may arise during the project.

Quality control

One of the challenges of outsourcing software development is maintaining consistent quality control. When your development team is not physically present, it can be harder to monitor progress and ensure that the work meets your standards. This can lead to issues such as subpar code quality or deviations from project specifications.

To mitigate this, it is crucial to establish clear quality benchmarks and regular review processes with your vendor. Cleveroad, as a skilled outsourcing IT vendor, ensures rigorous quality control measures are in place, including regular code reviews, comprehensive testing, and transparent progress reporting conducted by our skilled QA engineers.

The main difference between the two hiring strategies is that in-house development involves building and maintaining a team within your organization, offering greater control and cultural alignment, while outsourcing provides access to a global talent pool and can be more cost-effective.

In-house software development will cost you more because of the additional recruitment, resources, and equipment costs. In turn, IT outsourcing is cheaper because you only pay for the team's work. Moreover, you can choose a region with lower hourly rates, which will significantly reduce mobile app development cost.

In-house development may take more time due to the limitation of the team size. In contrast, outsourced IT teams can build software faster due to all the specialists required to deliver your product idea: from planning to development and implementation.

When you work with an in-house software development team, you are limited by the skills and technology of your staff. In contrast, when cooperating with an outsourcing IT vendor, you can ask to involve additional specialists or implement a technology that was not planned initially without wasting time searching for the right expert.

It takes quite a long time to assemble the in-house software building team, so if you need more experts to complete the project faster, you still have to spend a lot of time searching for them. On the other hand, IT outsourcing involves expanding the team on demand, so you can easily scale it up and down depending on your needs.

It is easier to manage your staff with personal communication, so if you employ in-house developers, you can control the process more efficiently. On the other hand, cooperating with the outsourcing team, you may face time zones or language barriers.

The experienced IT providers like Cleveroad make personal communication plans with clients to hold meetings in a time that's convenient for the customer. Moreover, our specialists are fluent in English so you may be assured that our team will understand exactly what's expected of them.

You can always control the company's data protection by working with an in-house team. Outsourcing providers, on the other hand, are more challenging to manage. However, you can choose software development vendors that work under Non-Disclosure Agreements (NDAs) to ensure safety. For example, the Cleveroad team always signs NDAs per the client’s request.

Now, let’s sum up all the information you’ve got, and define the critical factors for your in-house vs. outsourcing software development decision-making process.

Now you know all the differences between in-house software development vs. outsourcing and their pros and cons. But how to decide which option is best for your case? Let’s think about which cooperation model is the most suitable for your business.

Delegating the creation of software will be a better choice if:

Budget constraints. If your budget is limited and you cannot afford the additional expenses of maintaining an in-house team, outsourcing is a cost-effective alternative. By hiring a team of developers from various global locations, you can ensure high-quality products at competitive hourly rates.

Tight timeframes. If you need to launch a project quickly, you may not have time to find specialists and assemble a team. In this case, an experienced vendor can help you launch the product as quickly as possible. They will provide you with MVP development services, enabling you to receive a basic version of your software product and introduce the solution to the market swiftly, test your product idea, and gather customer feedback with minimal investment.

Lack of local talent. If your region lacks the necessary skilled professionals, outsourcing allows you to access a broader talent pool from around the world. This expanded access to diverse skill sets can accelerate project timelines and enhance the overall quality of your software development initiatives.

Need for a clear product development plan. If you have an idea for software but are unsure how to implement it, an outsourced software provider can help you transform unclear requirements into a clear implementation roadmap. For example, our Cleveroad team always provides clients with Discovery phase services, which involve an in-depth analysis of your business and project requirements, laying the foundation for creating software tailored to your needs.

Staffing your in-house team may be a good option for you if:

No budget constraints. If your company can afford the time and financial cost of hiring and working with in-house experts, you can get the most out of the benefits of this option and minimize the downsides. But keep in mind that this type of cooperation is related to additional costs (purchasing software and hardware, leasing premises, payment of wages, taxes, sick leave, etc.).

Complete control over the project. You will be more comfortable working with an in-house team if you want to control all development stages and each employee's work. However, if you're pressed on time, you'll have to hire project managers to guide and control the projects.

Company-specific knowledge. If your project requires a deep understanding of your company's unique processes, culture, and proprietary information, having an in-house team ensures that this knowledge is fully integrated into the development process. This can lead to more customized and relevant solutions.

Quicker adaptability. While an in-house team offers swift responses to project changes, building a new team or scaling an existing one to accommodate shifts can be time-consuming and costly. Additionally, acquiring specialized skill sets might require significant training investments.

Conversely, in an “outsourcing vs inhouse software development” pairing, outsourcing provides flexibility to quickly adjust resources based on project needs, often at a lower cost.

The hybrid approach, which combines an in-house team with staff augmentation or a dedicated team for specific projects, provides a flexible strategy for software development. By strategically blending these models, organizations can optimize resource allocation, mitigate risks, and enhance overall project outcomes.

Scaling with agility. When project requirements fluctuate unpredictably, a hybrid approach proves invaluable. A dedicated core team can handle the project's foundation while staff augmentation fills skill gaps or provides additional resources during peak periods. This dynamic scaling ensures optimal resource utilization without compromising project quality.

Access to specialized expertise. Even robust in-house teams may lack specific skill sets required for certain project phases or features. Augmenting the team with specialized external experts can accelerate development, improve outcomes, and prevent delays caused by skill shortages.

Risk mitigation. Distributing development efforts between internal and external teams can mitigate project risks. If challenges arise within one team, the other can provide support and backup, ensuring project continuity. This shared responsibility enhances your product resilience and reduces the impact of unforeseen obstacles.

Knowledge transfer and innovation. Collaborating with external experts introduces fresh perspectives and innovative ideas to the project. Staff augmentation can facilitate knowledge transfer between internal and external teams, fostering a culture of continuous learning and improvement. This synergy can lead to groundbreaking solutions and enhanced product quality.

Having your software development outsourced requires some preparation. That’s why after finding out the key differences between in-house vs outsourced software development, we’ve decided to prepare several useful hints to make the outsourcing process more comfortable and profitable.

When outsourcing IT projects, it’s crucial to balance the project budget with the vendor’s value proposition. While cost is a primary consideration for many companies, evaluating the vendor’s value offering is equally important.

This value can include the level of responsibility they take, their involvement in the process, their ability to provide insightful advice, and the quality of communication. A vendor who goes the extra mile without demanding additional compensation can significantly enhance the project's success and deliver better overall results.

When considering an outsourcing company, it’s essential to delve into client feedback and assess their project experience. Start by examining the types of projects the vendor has handled and the challenges they have addressed. Look for detailed client reviews and testimonials to understand their experiences and satisfaction with the company’s services.

This will provide insights into how the vendor manages client relationships, their responsiveness, and overall effectiveness. Platforms like Clutch and GoodFirms are valuable resources for reading these reviews and comparing global service providers.

We’ve already mentioned an NDA agreement that has to be signed to protect your project idea as well as any development processes. Moreover, the contract should contain a piece of information about the procedure of data collection, transfer, access, and more. Software development companies should follow the EU General Data Protection Regulation (GDPR).

To follow the development process and be up to date, you need to opt for project management tools. Utilizing track web apps, you can see how the software builders work and how much time they spend. The most popular tools for tracking are:

• Jira
• Trello
• Kantree

As a result, you are completely involved in your transparent project creation. Vendors constantly work on their reputation and trustful relationship with their clients, so it shouldn’t be a problem for them to give you access.

At Cleveroad, we tend to be as transparent as possible with our clients. Our software development team prefers using Jira. So, we can provide you with access to this tool, and you can track the tasks and spend time. When considering software in-house vs outsourcing, our approach ensures you have full visibility and control over the project progress, regardless of the model you choose.

Cleveroad is a professional software and mobile app development vendor with over 12 years of experience in the market. We have extensive experience in providing a wide range of services, from developing custom solutions to supporting and upgrading legacy software, and you can look at Cleveroad’s Linkedin to know more. We offer reasonable hourly rates along with highly qualified developers.

Cleveroad in numbers:

• Since 2011 on the IT market
• 250+ in-house engineers
• 220+ successful projects
• 8+ expertise industries

There are the following reasons to outsource your software development to our company:

• Our software developers leveraging cutting-edge technologies for your projects: web: (React, Angular, .Net, JS, TypeScript, etc.) and mobile (Flutter, Swift, Kotlin, etc.).
• Robust project management office aligning with your schedule to provide regular updates regardless of timezone difference through accurate reports and regular calls in a pre-defined time.
• Working with a dependable technology partner in software engineering services and IT consulting, accredited with ISO 9001 and ISO 27001 certifications. These certifications ensure an effective quality management and software security.
• Free Solution Workshop stage for you to connect your software idea with its perfect technical implementation in response to your budget and quality expectations
• Extensive full outsourcing and staff augmentation cooperation models to streamline your operations, optimize resource allocation, and achieve your development goals efficiently.
• Comprehensive guarantees for the security of your business information from our team by signing an NDA upon your request.

We possess an extensive portfolio built through successful collaborations with businesses worldwide. Our clients consistently express satisfaction with our work, as evidenced by their testimonials on our Clutch page.