In-house vs Outsourcing – Pros & Cons for Product Development

Explore key considerations like cost, control, and expertise, empowering you to make informed decisions based on your project's specific needs and goals.

In-house vs outsourcing software development – what is the best option for application development? Defining with whom to work when building an application is not easy. There are a lot of different options on the market, from freelancers to app builders, development agencies, and hiring in-house developers. Before making a decision, you need to consider a series of factors like price, commitment, expertise, level of customization, and others.

To make it easier for you to decide, in this article, we will elaborate on the pros and cons of hiring in-house developers vs outsourcing development services for your digital product.

1. What is inhouse development?

In-house development or insourcing stands for hiring a team of professionals that will work in your company. From recruitment to growth plans, you will coordinate the whole process.

Naturally, assembling a team won’t happen overnight, so you need to make sure that you have a strategy and all the resources needed for this. Getting together the right team of professionals is a long-term journey. You will basically be in charge of forming a team that will ensure your product’s success.

Usually, you can find this business model at businesses that own an already scaled software product and have a user base to ensure the business’s stability. Examples of companies that adopted the hiring in-house model are PayPal, Amazon, and Salesforce.

Image from Undraw

2. What is outsourcing software development?

Outsourcing software development stands for hiring a team of professionals from another company specializing in what you want to deliver. In this business model, you are basically commissioning your business idea to a workforce outside your organization.

A software development company will take care of growing your idea into a minimum viable product (MVP) and further on. By working with a software development provider like Digitalya, you will have access to top talent in multiple areas, from developers to UI/UX designers, project managers, scrum masters, quality assurance specialists, and others. The company will take care of the development process of your business idea, including project management. They will also take care of the recruitment process and the growth of each individual on your team.

Nowadays, more and more companies opt for the outsourcing software development model. Among them, you can find WhatsApp, Slack, Alibaba, and even Google.

Image from Undraw

3. What is the difference between in-house vs outsourcing software development?

There are many factors to take into consideration when thinking about the difference between outsourcing vs in-house development. When comparing these two business models, you need to think about variables like time, budget, project scope, talent accessibility, and others.

The main difference between outsourcing and hiring an in-house team consists of the time and money spent finding and hiring the right talent. While a software development company will provide you with the best development team to suit your needs, in the in-house development model, you will need to invest resources into finding people that will fit your culture and grow them to be up to date with the latest tech advancements. This will take a considerable amount of time and resources involved.

4. What are the advantages and disadvantages of in-house software development (pros and cons)?

Now that we pointed out the main differences between the two business models, we can discuss the main advantages and disadvantages of hiring an in-house team.

Pros of in-house development:

1. Direct communication

The first advantage of having an in-house development team is that you can discuss with them face-to-face more frequently. Being together in the same office will facilitate the communication process by eliminating any misunderstandings. It will also increase the speed of implementing unexpected changes and boost effectiveness.

2. Cultural fit

When you are recruiting your development team, you will most probably pay attention to hire people according to your values and company culture. The team members you will choose will most probably be a cultural fit for your company, and therefore it will be easier to communicate with them. People that work full-time in-house tend to blend together and grow in the same direction.

Image from Undraw

3. Full control

When working with an in-house team, you have complete control of the tools and processes that the development team uses to endure the product’s success. The business operations are entirely on you, and you also have full accountability for the recruitment process.

Cons of in-house development:

1. High expenses

From recruitment and onboarding to professional growth plans, taxes, rent, hardware devices, software programs, and more, the price of hiring an in-house team can get way more expensive than working with a software development provider.

2. Difficult to recruit top talent

The local talent pool might not be sufficient for your business plans and technical needs, hiring might be pricey, and finding the best fit from both soft skills and tech-wise might be difficult. With the expansion of the IT industry, there is high competition in hiring the best developers.

3. Limited options in case of employee turnover

Another consequence of the expansion of the IT industry is employee turnover. Developers tend to change their jobs every one to three years. The possibility of people leaving your company is big, and hiring a developer takes a lot of time, from three to six months. This means that, in case a developer decides to leave the company, your product might be affected since there isn’t another one to jump in immediately, like in a software development company.

5. What are the advantages and disadvantages of outsourcing (pros and cons)?

Searching for an outsourcing partner is challenging, but finding the right one is bliss. Having a dedicated team helping you design and develop your product idea can save you money and increase the quality of your web app or mobile app. There are many benefits of outsourcing, but also disadvantages. Bear with me; we will explore them both.

Pros of outsourcing:

1. Cost-effective

Many factors can help you save time and money when working with a software house. First of all, they will take care of the recruitment process and the team members’ professional growth; therefore, you will benefit from working with top talent and experts in the latest tech stacks and business trends.

Second of all, you will have assigned a project manager to ensure that the development team delivers your product on time and within budget. Third of all, a software development company will ensure everything for the team, from hardware equipment to software programs. We have written a resource about how much does it cost to build an app, if you’re curious.

2. Fast project delivery

In comparison to an in-house team, a software development company has many projects in its portfolio, which means that they are familiar with the process. Therefore they will be able to deliver your web app or mobile app faster while keeping the quality high.

3. Scalability

Another advantage of outsourcing is the possibility to scale your dedicated team according to the product’s needs. If your application is growing fast and you need more team members, a software development company can help you quickly expand your team.

Image from Undraw

4. Start-to-end services

A top app development company will offer you start-to-end services, meaning that they will assist you in the full cycle of product development, from mockups, to UI/UX design, development, launching, and maintenance.

5. Extensive expertise

Software houses gain extensive expertise from working with multiple business owners worldwide in many different industries. Besides the software services, they will offer you consultancy on how to gain a competitive advantage with your product in the market. Working with an experienced team from the start can give a boost to your company and promote internal business growth.

Cons of outsourcing:

1. Cultural differences

If you partner up with a software development company from another country, there might be a difference in culture when working with your outsource team. But since most IT specialists tend to have fluency in English, you can solve it with communication.

2. Security risks

Being afraid that someone can benefit from your business idea is a valid fear. That’s why before working with a software provider, make sure you sign an NDA contract that will state your rights regarding the collaboration and the product idea.

3. Time zone difference

The time zone difference might represent a communication issue if the app development company is not flexible regarding the meeting hours. Vendors usually find solutions to ensure smooth communication, but make sure you discuss this beforehand.

6. How to successfully outsource software development?

Now that you’ve analyzed the pros and cons of in-house hiring and working with a software partner, let’s identify some steps in case you consider outsourcing. There are many app development companies out there, but only one is the right partner for you. How can you identify which is the right one?

How to successfully outsource software development?

Step 1: Identify the type of service you need

You might be in need of MVP development, web app development, mobile app development, or a dedicated team. You should perform some research based on your needs.

Step 2: Write down what are your expectations from a software provider

Here you should consider factors like the level of quality they follow, the methodology they work with, the level of transparency they adopt, and the involvement you will have throughout the process.

Step 3: Decide upon the geographical regions

They are a lot of app development companies out there from many different regions. The most popular regions would be North America, Eastern Europe, Central and Western Europe, and South Asia. The differences between them consist of price, quality, and culture. Usually, you can find the best quality-price ratio in Eastern Europe.

Step 4: Do some research on Clutch and Good firms

Do research on Clutch and Good firms to see the companies’ ratings and what previous feedback they received. This kind of directory can help you check reviews, geographical regions, and prices of software development providers.

Step 5: Do a shortlist

Do a shortlist with three to five app development providers, contact them, and ask for a quote. While discussing with them, identify what your feelings are towards them, if you feel comfortable working with them, and whether you think they’re trustworthy or not. Compare the estimates received and the feelings you had while discussing.

Step 6: Study previous projects

Most of the development agencies have a portfolio of previous projects they developed and their clients. Feel free to check Digitalya’s case studies.

Step 7: Make the final choice

After you discuss with different software providers and study their previous work, you are ready to choose.

Awesome! Now you have a software development partner that will help you build your app idea.

7. Conclusion

Making the right choice in the in-house vs outsourcing dilemma is not easy. We hope that the pros and cons stated in this article will help you evaluate the market and make a good decision based on your needs.

As a software development provider, we are more than happy to discuss your idea and make a technical assessment. If you want to talk to us, leave us a line, and we will get back to you to discuss more details.

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Marketer by day, reader and painter by night, Madalina likes to cast a creativity spell on everything she does. Analytical and results-oriented she brought her alchemy into the world of tech.

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