Outsourcing or in-house: when to choose which approach?

You just had a brilliant idea for a new web or mobile app that will be a perfect fit for your audience. Or maybe, after carrying out some long research, you realized that none of the automation systems on the market has the specific features you need for your company. You need a product built from the ground up, tailored to your company's particular needs. But here comes the question: should you make it with your in-house team or have it outsourced to a software development company?

On the one hand, having a group of talented developers in the vicinity who are focused solely on your project and will create a product exactly when and how you need it sounds tempting. On the other hand, you need to start adding up the costs of researching, hiring, training, paying salaries and benefits, plus a dozen other expenses.

This is where outsourcing comes into play. An increasing number of businesses nowadays are deciding to move their projects or certain tasks to external companies, as doing so is both much cheaper than building an in-house team and faster to find developers who meet the specific needs. But is outsourcing the best solution for all projects? Not always. While it's a good alternative to in-house development, outsourcing has its own share of pros and cons.

If you are wondering whether you should outsource your project to another company or rather focus on building a team in-house, then you've come to the right place. We'll tell you about the pros and cons of each solution and help you decide which option is the most beneficial for your company.

Outsourcing software development

Companies used to be pretty skeptical about handing their project or tasks to external developers, as they worried about the quality of the product or service as well as the safety of their data. Plus, outsourcing was seen as a pretty expensive option. Now though, outsourcing some tasks or projects is a widely used strategy by companies of all sizes and industries. No wonder, since outsourcing has a multitude of benefits.

Pros of outsourcing

▸ Software houses can start working on a project immediately after discussing the requirements and signing a contract, which makes outsourcing a great option if you are pressed for time.

▸ A great deal of flexibility in modifying the team working on your project - you can add, remove, or swap team members as you need.

▸ A large pool of experienced companies and talented developers to pick from.

▸ You only pay for the time when developers work on your project, according to an agreed project plan. You also get a full report on what resources the team used and the project's current progress. This is an excellent way to cut the costs of a given project.

▸ Well-known software houses can guarantee high-quality final products, since they have experience, requisite skill sets, and knowledge about the newest trends and technologies.

Outsourcing projects or specific tasks is an especially good idea for companies that don't have enough time or money to spend on building in-house teams but want to have high-quality software designed quickly and at a reasonable price. Outsourcing is also much more efficient than in-house when handling short, one-off projects for which there's no need to hire people internally. It is also a great way to fill gaps in your current team if you lack people with specific skills or experience. But for all those benefits, there are several drawbacks associated with outsourcing as well.

Cons of outsourcing

• You need to explain your goals and objectives in detail to the development team, as there's a risk of them doing something differently to your expectations due to not being familiar with your company.

• Outsourcing frequently means a lack of daily face-to-face communication, since your team might live in a different city or even a foreign country. A lack of daily communication might also lead to frequent misunderstandings.

• You have less control over a project compared to completing it in-house. Outsourcing outside your location could mean a difference in styles regarding design, engineering, video editing, or content creation. It then becomes vital that you try to pick a designer with experience in your region.

• You need to carefully research the companies you will be cooperating with in order to ensure your project data and all information passed between to the partner will be safe.

Since outsourcing your projects or tasks is a significant decision that might either help or hurt your business, there are many things to research before signing a contract with the chosen external company. They range from legal matters to how and when you will talk with the contractor, as well as how you will deal with any potential misunderstandings or problems. If you have clear action and are confident that outsourcing is the option that will work best, then you’re ready to reap the benefits of outsourcing the job.

In-house software development

An in-house team is a group of developers who work with you in the same building and are dedicated to your company's projects. To find developers for your team, you need to post a job advertisement for a full-time developer and then pick the candidates that best meet your expectations or needs (when it comes to skills or expertise) during the hiring process.

Hiring an in-house team means having a group of people who understand your corporate culture, values, and project objectives and are fully dedicated to developing your app. You will have full control over the progress of the project, and communication between team members is much smoother than with outsourcing as well. Since they are in the same building as you, you can quickly inform them about an issue or change in the project and clarify your expectations if you notice the work isn’t as expected. Hiring people to work in-house also has other advantages.

Pros of in-house hiring

▸ You can easily monitor and control the developers' daily work and quickly intervene if there's a sudden problem or conflict.

▸ Your brand's intellectual property is more likely to remain confidential as signing non-disclosure agreements is standard nowadays, and you can also ask new employees to sign a non-compete contract.

▸ You know your employees' availability, so you can arrange work schedules in a way that is convenient both for you and them.

▸ Since a direct employee is far more familiar with your goals and objectives, you don't need to spend time explaining your vision in detail. With outsourced contractors, you need to discuss every single project detail to avoid doubling up on work efforts.

There are a number of situations when going in-house might be a better idea than outsourcing. First, creating an in-house team is a long-term investment in your company and your brand. If you think you'll have enough projects or tasks for them to justify creating an in-house team, and you want one that will be deeply connected to your company mission, vision, and culture, then in-house hiring might be the best approach.

An in-house team will also give you more control over and flexibility of the project, since employees are focused only on it. This is especially true with long-term projects, for which the scope can suddenly change. Looking for a full-time worker is also a good idea if you know what kind of skills or expertise you currently lack in your company. However, before deciding to create a team from the ground-up, you also need to consider the drawbacks of in-house hiring.

Cons of in-house hiring

• In-house hiring is very costly. Not only do you need to offer new employees a full-time salary and benefits, but you also need to provide them with desk space, equipment and tools, training, office supplies, and any additional materials they need to get the job done that can quickly rack up the costs.

• The recruitment process might be lengthy, costly, and complicated, especially if you’re looking for a niche specialist. And when an employee leaves your company, you will need to start the recruitment process all over again.

• Compared to outsourcing, your hiring options are heavily restricted to specialists who are either living in your city or willing to move, which might make the hiring process much longer or may force you to lower your expectations.

• To guarantee efficient work and high quality, you need to have effective business processes and transparent internal communication between team members in place. Otherwise, conflicts and confusion about who does what might hurt the final product.

• Working with the same people and in the same way might lead to a biased perspective from team members who don't notice or don't want to use newer methods or technologies, as they are used to working with specific tools or in a particular way.

Before deciding on in-house hires, you need to think carefully about what skills and experience you are looking for in your new employees and what tasks you want them to complete. You need to be realistic here - there are only a handful of "jacks of all trades'' in the industry, so you'll have to prioritize the skills you want on your team the most.

You must also take into account that your options are already limited by the fact that in-house workers should live nearby the office or be willing to move. What’s more, it can take from a few months to even a year before an employee becomes fully familiar with the company and starts working to their full productivity, so you can't expect them to contribute much to a new project immediately.

Or maybe a mixed approach to software development?

Focusing solely on either outsourcing or in-house hiring when it comes to your company might be problematic. An in-house team may get overwhelmed and frustrated when, in addition to their current workload, they also have to focus on building a new app, which could result in a low-quality final product. Meanwhile, an outsourced team might do things differently to what you expect, due to communication misunderstandings.

That's why some companies have started to use a hybrid approach by having employees responsible for essential company processes in-house and outsourcing other parts of the business, while ensuring cooperation between those two teams for exchanging ideas. For example, if you have an in-house development team but one that doesn't have enough experience or skills to handle a specific project, you can hire an outsourced developer to bring their knowledge to the table and teach your own employees those skills for the future.

Conclusion

It's pretty clear why outsourcing is so popular nowadays - not only does it allow you to save a good chunk of your budget, but picking a well-known company for the outsourcing of your IT projects or tasks can produce great results in a short amount of time. Outsourcing can also provide you with access to an ocean of skilled and experienced developers that would be entirely out of your reach with an in-house approach. The right partner will also prove to be reliable and committed, acting basically as an extension to your in-house team.

Hiring an in-house development team doesn't give you as much flexibility as the outsourcing model, but it may make communication easier and help you maintain greater control over your project. In the end, it's up to you to weigh up the pros and cons of each approach and decide which direction will work best for your project. Maybe a mixed model will be the optimal way for you?

If you're looking for advice, feel free to drop us a message - we'll be happy to share our expertise both in the matter of building in-house teams, as well as outsourcing software development.

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