Table of Contents

In-house vs Outsourcing Software Development: Best Choice?

Table of Contents
In-house vs Outsourcing Software Development: Best Choice?

Before starting a new project, companies need to think about many things. One important choice is whether to use their team or hire another company for software development. Using your team means using the skills of people already in your company. Hiring another company means they will find people to work on your project.

Both ways have good points and bad points. The best choice depends on what the project needs and what the company can do. Company leaders need to think about these things before deciding.

What is In-House Development?

In-house software development means making your team from scratch. You choose people with the right skills and experience for making the product. Big companies like Amazon and PayPal use their teams. This gives them full control over the project, but it costs more.

Choosing in-house development is like hiring new, permanent workers for your company. You need to find people, interview them, and help them start working in your IT team. If your startup mainly works on IT products, having your team can be a good idea.

Advantages of In-House Development

  • Having your software team means they understand how your company works. Successful companies do well when their teams share the same values. With your team, you can choose people who fit your startup, which you might not get with a team from another company.
  • Talking directly to your team is a big plus. They work only for your company, often in the same place. This means you can talk to them quickly and easily, without lots of emails. This is helpful when you need to make important decisions about the project.
  • Fast help is another good thing about having your team. When you launch new products and face problems, your team can fix them quickly. With a team from another company, fixing problems might take longer because they have other work.

Disadvantages of In-House Development

  • Cost is a big thing to think about. You have to pay for all the costs of having your team. For example, in the US, an IT developer’s average salary is about $71,508, not counting things like sick days, holidays, insurance, and finding and training new people. You also pay them when there’s no project work.
  • Keeping good staff can be hard. IT experts are in demand, and other companies might try to hire them. You might have to offer more money to keep your staff, which can make your costs go up.
  • You also have to make sure your team keeps learning new things in IT. The IT world has changed a lot with new tech and skills. It’s important to train your team in these, but it can cost a lot.

When is In-House Development Appropriate?

  • Even though it costs more, there are good reasons to have your software team.
  • If you have enough money and your startup isn’t on a tight budget, your team can bring many benefits.
  • Being in full control is important. If you want to make sure you can handle any unexpected problems yourself, your team is best. You can watch over everything in your product’s development and fix issues right away.

What is Software Development Outsourcing?

Outsourcing is different from building your software team. It means giving the job of making a product to another company. This is usually done with a contract, where you tell the other company what you need.

In outsourcing, IT services are a big part. They make up 72% of all the money spent on outsourcing worldwide, as ISG says.

Outsourcing is popular because it can save money and is flexible. It’s different from having your team. More and more companies are using it. In 2019, the money spent on IT outsourcing was $66.5 billion globally. Big companies like Google and Slack have used outsourcing for their IT work.

Advantages of Outsourcing

  • Saving money with outsourcing. Outsourcing is good if hiring people in your area is too expensive. It lets you work with IT companies in places where it costs less to hire people, but they are still very skilled. For example, many companies choose to outsource IT work to Eastern European countries.
  • Reaching more skilled people. Outsourcing lets you find skilled people from all over the world, not just from your local area. This means you have many more choices and don’t have to look at so many resumes to find the best programmer.
  • Being flexible with tech skills. Outsourcing is helpful for projects that need many different tech skills. It can be hard to find one person who knows all these skills. But with outsourcing, you can work with different IT companies that each know different things. This way, you can get all the skills you need for your project.

Disadvantages of Outsourcing

  • Less control. When you use an outsourced team, you don’t get their full attention only on your project. This means you have less control over how the project is going, checking progress, and solving problems. Not talking directly with the team can make you unsure about how the project is doing. Sometimes, they might be slow to answer emails, and they might not fix problems right away.
  • Communication problems. When you outsource to a company in a very different time zone, it’s hard to set up meetings. Also, there might be language issues if the team leader doesn’t fully understand what you need.
  • Worries about trust and keeping information safe. When you outsource, you give important information to another company. This can make you worry about keeping your data safe and if the company might work with your competitors later. It’s important to check the company’s background and have a legal agreement to keep your information private.

When To Use Outsource Development?

  • Budget issues. If you have a small budget, like many new companies, and can’t afford a full-time team, outsourcing can save you money. You don’t have to pay regular salaries.
  • Not enough skilled people nearby. If you can’t find the right skilled people where you live, instead of spending a lot of time training someone, it’s better to hire an IT company to do the work.
  • Tight deadlines. If you don’t know much about software development, you might face unexpected problems. To finish on time and avoid delays, it’s good to work with an experienced IT company.
  • Complex Needs. Making complex IT solutions is hard, even for your team, especially when you have to turn what your business needs into technical details. Outsourced companies often have managers who can help explain your needs to the people who will do the work.

Making the Decision: In-House vs. Outsourcing

Before deciding to hire software developers or to get another company to do the project, business leaders need to do a few things first. They should start by looking at what their company needs. Then, they should think about the good and bad points of each choice and consider using a mix of both.

Understanding What Your Company Needs

It’s important to understand what your company needs, what you want to achieve, and what the project requires. Knowing what the project is all about helps you think about the budget, how long it will take, and how complex it is. This helps leaders make smart choices.

For big projects that need a lot of work for a long time, having your team might be better. But sometimes, you might need more people, and then working with another company could be a good idea. For smaller or simpler projects, outsourcing is often better.

Remember, hiring your developers can cost more than outsourcing. Companies should think about how much money they have and what they need to decide the best way to hire.

Looking at the Good and Bad Points

Each company is different, so the benefits and problems of each choice will be different too. Companies should compare the good and bad points of having their team and outsourcing.

A good decision can lead to great products, getting things done faster, working more efficiently, and doing more. But a bad choice can waste time and money.

Using a Mix of Both Ways

Using both your team and outsourcing can give you the best of both. For example, your team can do the main work, and you can outsource other tasks. This mix can be changed at different stages of the project to get the best results.

Companies should outsource work they are not good at and keep their team for things they do well and that helps them stand out in the market.

Managing Outsourced Software Development Projects

After choosing to work with another company, and thinking about the good and bad points, it’s important to have a plan for managing the project.

This means setting up clear ways to talk to each other, making sure everyone knows what the project is about and what needs to be done, and keeping the work high quality and secure.

Clear Ways to Talk

Having clear ways to talk with the outsourcing company is key to working well together and avoiding misunderstandings. Good outsourcing companies will help set up the best ways to communicate, like video calls, chat, and project software.

Knowing the Project Details

Sometimes, you don’t talk directly to the outsourcing company a lot. So, the outsourced team needs clear, detailed instructions to make sure the project goes well. Companies should prepare documents like a project request, detailed needs, and what they want the final product to be like. Both sides need to talk about these and agree before starting the work.

If you don’t set out what the project is about, it can cause problems between your company and the outsourcing company.

Keeping Quality and Safety

It’s very important to keep the work high quality and safe. This makes sure the client is happy and keeps the outsourcing company’s good name.

Companies should use things like firewalls, encryption, and controls to keep data safe. Outsourcing companies should follow rules for keeping data safe, like GDPR and ISO 27001.

It’s also good to have contracts and agreements to manage what everyone expects and keep everything safe. These often include service agreements and privacy agreements.

Success in outsourcing also depends on keeping the code of good quality and sticking to the timeline. Both sides should check the quality of the work and use project tools to keep track of progress, solve problems, and meet deadlines.

Conclusion

There isn’t a definitive solution to settle the discussion between in-house development and outsourcing. Strategies that are effective for one company might not be suitable for another. It’s essential to assess your specific needs and available resources to make a decision. Sometimes, a blend of both approaches yields the greatest advantages. As noted, selecting the appropriate vendor is crucial.

At Eztek, we have relieved numerous startup founders of the complexities of IT development. We invite you to discuss with us your possibilities in outsourcing development.

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