In-House vs. Outsourcing: Which Software Development Practice to Follow

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12 Jun 2019
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Vitaly K.
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Having decided to build software or application there is a need to determine how to organize the development process. So the question arises: what team of software developers to hire — in-house or outsourced.

It’s challenging to find talented tech specialists, especially if you are limited in time and money. That's why more and more companies decide to outsource software development for reducing administrative expenses (e.g. rent, equipment, software licenses), taxes and lower the cost of product development itself. Not talking about access to rich talent pools of various countries.

It's also possible to hire a local team of developers if you’re looking for long-term cooperation. This variant usually requires more time and money due to time-consuming interviews, on-boarding processes, and training.

Choosing In-House Development: Advantages and Disadvantages

Unfortunately, there is no sure way to tell whether you need to choose the path of outsourcing or in-house development. Everything depends on project requirements and your objectives.

Advantages of In-House Development

Cultural fit

Developers that work as permanent members of the team tend to pay much more attention to the specific needs of 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.

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Face-to-face communication

Having the same working hours and being in the one office allows making the communication process much more comfortable and clear. Direct conversations help avoid misunderstanding and increase effectiveness.

Quick changes

When you have an in-house team of software developers, it’s always faster to change project's features, add new ones, and discuss their technical background. Also, in-house developers usually process bugs quicker.

Advantages of in house developed software

Advantages of in-house development

Disadvantages of In-House Software Development

High cost

The price is an issue that can change everything. It’s obvious that in-house development is much more expensive than cooperating with a vendor. The final price makes up of many expenses like rent, taxes, software, hardware, and more. In fact, there are some additional spendings like training for employees, sick days and benefits.

Staff turnover

Software developers have a tendency to change the working place quite often. It happens because the demand for talented developers is high and other companies tend to offer better working conditions. As a result, you may face some challenges with labors and lose time. Finding a new developer is always time-consuming, so your project development can be stopped or slowed down for some time.

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.

Cons of in-house development

Disadvantages of in-house development

Companies with In-House Teams

So, we’ve already found out the advantages and disadvantages of in-house software development. There are several examples of companies that have formed in-house teams of employees.

  • Amazon
  • Salesforce
  • PayPal

Wrapping up this part, in-house development may require more time due to difficulties with hiring the right employees. For many regions, this variant is also an expensive one because of all the unexpected additional expenses, e.g. training, sick days, benefits. However, you may prefer hiring an in-house team for long-time cooperation.

Choosing Outsourcing Software Development: Pros and Cons

According to Statista , in 2021 the turnover in the IT outsourcing market is expected to become approximately $96.7 billion. So nowadays a lot of companies make use of outsourced software development services to cut costs, save time, and find competent staff.

Let’s discuss the advantages and disadvantages of hiring a software development vendor.

Advantages of Outsourcing Software Development

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 Western Europe, the Baltics, Eastern Europe, the Balkans, and more. Eastern Europe becomes more and more popular due to a bunch of talents, low taxes, and government support of the IT sphere. We’ve done the research on software development cost in Europe and you can see the results on the picture below.

Software development cost in Europe on a map

Software development rates in different parts of Europe

Huge talent pools

As it was mentioned above, the market of IT outsourcing provides a huge pool of technical specialists that have both knowledge and experience. As a result, the hiring process can take just a few days, not months. Outsourcing provides you with unlimited hiring opportunities. You can consider different professionals from all over the world that have different skills and experience and choose the best engineer.

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Scalability

One more reason to hire a reliable vendor is an opportunity to scale up and down. What does it mean? 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.

Faster project delivery

Outsourcing software development allows reducing the time spent on recruiting. You can always adjust the speed of your project 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’re no tasks).

More technologies to choose from

A vendor can offer you to hire a software developer with a required skill set. For example, it’s extremely hard to hire a Perl developer in your region. But there are a lot of regions all over the world, so you can find a qualified specialist in some region.

Pros of outsourced software development

Benefits of outsourcing software development

Disadvantages of Outsourcing Software Development

Security risks

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 NDA contract. This agreement guarantees the protection of all your rights and the project idea.

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Discover how to protect your project idea with an NDA agreement

Communication gap

Locating 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. But vendors typically have a comfortable solution for both sides like scheduling the meeting beforehand or using emails and messengers.

Negative sides of outsourced software development

Disadvantages of outsourcing software development

Companies that Outsource Software Development

There are several examples of companies that have outsourced their software development and got substantial benefits.

  • Google. This IT giant tends to outsource parts of their projects in order to reduce costs.
  • Slack. It’s a popular tool among companies for internal communication. The development of Slack was outsourced to the software development company that created both web and mobile application.
  • Expensify. This platform assists users in collecting expenses and keeping track of transactions. This software was developed by an outsourcing company that takes care of back-end development.

Outsourcing software development is a great solution if you want to create a high-quality product at a reasonable price. Outsourcing can be profitable for both variants — if you aren’t familiar with software development and if you are an IT company.

Considering the first option, you don’t need to manage tasks and plan the developers’ work. As for the second one, you can outsource parts of your projects as Google does.

How to Outsource and Not to Fail?

Having your software development outsourced requires some preparation. That’s why we’ve decided to prepare several useful hints that can make the outsourcing process more comfortable and profitable.

Be Careful with Low Hourly Rates

As it was mentioned the developers in Eastern Europe and Asia are quite cheap but the quality of their services are different. For example, Ukrainian developers have a reputation of well-educated specialists that tend to offer reasonable prices. However, there is an opinion that Indian engineers have lower hourly rates but they are not well-qualified.

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Study Previous Projects

When you want to hire an outsourcing company, start with checking the references along with their reputation. Each reliable vendor tends to show the released projects, e.g. you’re welcome to look through Cleveroad’s portfolio .

Such services as Clutch and GoodFirms can help you learn the prices of companies across the globe and read reviews from their previous clients.

Protect Your Data

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).

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Note! Cleveroad has already developed the system to comply with GDPR.

Check the Transparency

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

As a result, you are completely involved in your project creation that is transparent. 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 spent time.

Why Hire Software Developers at Cleveroad?

Cleveroad is located in Eastern Europe (Ukraine) and offers reasonable hourly rates along with highly qualified developers.

There are three main reasons to outsource your project development to our company:

  • Our developers and project managers have fluent English, so the communication process is easy and comfortable.
  • If we are located in different time zones, our PMs will follow your schedule to keep you updated.
  • The developers use modern technologies to build applications and websites. They tend to visit various workshops, conferences, and more to expand their knowledge.

Wrapping up this article, of course, it’s up to you to decide what kind of developers you want to hire — in-house or outsourced. But if you want to know more about our technical staff or have any other questions, fill in this short contact form and we’ll get back to you within 24 hours.

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