October 23, 2020 16 Min Read by Swati Sharma

With an idea in your mind and the future flashing right in front of your eyes, you’re about to make the biggest decision for your digital project. You’ve to choose between building your product in-house or hiring experts outside your company to take on the development. 

Standing at crossroads, you are confused between what to choose. 

Should you expand your infrastructure, team, and manage everything? 

Or should you hire an IT outsourcing company that can provide you with everything - skilled developers, full teams, end-to-end development?

Why don’t we clear this dilemma and check out when’s the right time to outsource software development and when it is apt to keep it in-house?

Let’s get started. 

In-House: What Are The Pros & Cons

This is the old-school way of getting work done. Find the talent around you and put them together in a team to build your product

And why not!

If a company can take on the digital journey, it can build a development team to ride the way. This team would comprise your developers, quality analysts, UI/UX designers, testers, project managers, and many more. Many companies have been running the same way through the decades. So, if that’s worked for so many organizations, it is truly the ‘ideal way to get work done’! Isn’t it?

Let's not come to a conclusion in such haste. It is important to weigh the pros and cons before taking the leap. 

Pros Of In-House Development

Well, it certainly is magical what can unfold when you bring together a team of experts and put them in a brainstorming session. Their minds sync and they build a bond that can easily take over any problem. But is that all? Is that the only reason why companies have been developing their products in-house? 

Certainly not! There are so many other pros of in-house development. Have a look. 

  • Full Control Over Project: Your project is your brainchild and you would want to control how it grows. That’s what in-house development offers. It offers full control. Many companies have shared their experience of losing control over the project in outsourcing. With in-house, you can have direct control over each person involved, steps they take, and make sure things go as planned.   

  • Fit Your Company Culture: Having a team that is a part of your organizational culture means they share the same vision and goals as you. With this, they are bound to have better involvement in the project. An in-house development team that can fit your culture is driven to work dedicatedly and with personal involvement. They can feel motivated with the progress and feel more engaged with the project. 

Also Read: Top 5 Challenges Of Outsourcing
  • Fast Feedback & Increased Agility: There are no two ways that on-desk chat sessions are always more efficient when it comes to feedback and change implementation. You have direct access to your team and can quickly share your thoughts on the spot. In turn, the change can be worked upon with agility. Whether it's a bug, product feature change, design implementation, or anything big or small, feedback can be shared and reciprocated quickly. 

  • Greater Engagement With Face-To-Face Communication: No matter how much technology evolves and communication or remote working tools pop up, nothing can replace the old school face-to-face communication. Being in the same office, the chances of miscommunications or assumptions become minimum. Moreover, you can directly converse with each other with a clearer conversation. 

  • Personally Monitor The Development: Not just the development team, but even the product owners can feel more connected and involved when the development takes place in-house. They can monitor the progress of the development closely by collaborating with the developers face-to-face. 

Cons Of In-House Development

With so many pros, why do we still see companies lagging with their in-house development work? There certainly is some catch to in-house development. Else, why would so many companies be running towards IT outsourcing? Let’s find out. 

  • Increased Costs: One of the biggest setbacks to in-house development is the increased costs. Be it the infrastructural cost, the added benefits, corporate events, or any other paid employee benefits, everything increases the development costs by around 30%. When you hire developers on your payroll, you need to pay them no matter how important or irrelevant the task. Moreover, you also have to retain them which adds to the costs. 

  • Slow Launch: When hiring an in-house team, the entire process may take anywhere between 30 and 40 days. Moreover, with the demand for IT professionals soaring high, it might take forever. And the struggle doesn’t end just there. The developers even need training and time to get familiar with the project to become a part of your team. This adds more days to the launch date. 

  • Limited Expertise Restricted By Geography: The geographical boundaries are always a disadvantage when searching for world-class talent. It is obvious that there cannot be a team with every skill set, technological expertise, and experience required for every project. And making an in-house hire every time a new need arises would expand the team to no extent. And if you think about training the in-house developers with the technical expertise, that will extend the development period. Many companies compromise on product quality and features because of this limitation. 

  • Overworked IT Resources: When it comes to development, there are several cases of work overload on the in-house teams. This happens because companies that are working on a project either bag a new project, start a side project, or need constant maintenance. In such cases of additional work, forcing the in-house team to multitask leads to exhaustion and ultimately less productivity. 

Outsourcing: What Are The Pros & Cons

The IT industry is all set to touch and cross the $96 billion benchmark. No wonder, several companies are already outsourcing and many others that are planning to outsource. 

But how can you know if you should choose outsourcing or in-house without knowing the pros and cons of both? While we have already discussed the pros and cons of in-house development, let’s now find out the pros and cons of outsourcing. 

Pros Of Outsourcing

There have been many blogs written in praise of outsourcing. However, most of them fail to cover some very important benefits that outsourcing can bring to a company. Let’s sum up some of the reasons that compel companies to outsource their development rather than getting an in-house team. 

  • Proven Workflows: Outsourcing vendors are experience-holders when it comes to managing workflows and processes. What might be completely new for you, the company might be a pro at it. They might have already done something similar for another client. Over the years, they develop proven efficiency for workflows. 

    Also Read: 2020 Is The Year When Remote Working and Agile Booms
  • Fewer Management Efforts: Another advantage of outsourcing is that it allows businesses to get work done with little management efforts. The teams are mostly managed by a project manager working for the IT outsourcing company. You are not just saving on the efforts put in to manage the team; you are indirectly also saving on the fee you pay to hire a project manager. 

  • Quicker Delivery: The outsourcing company already has a team of developers, designers, QA, and project managers who have built the spirit of working together. Owing to their experience in the work, they also know how to handle any project from start to finish or even can easily onboard a project in the middle. So, this helps you quickly deliver the project.

  • Shared Risks: Another reason most companies outsource is that it helps them share risks. Especially when we talk about startups, the business risk is enormous in the initial growth days. An outsourcing company can act like your growth partner and share the risks with you. 

  • Round-The-Clock-Work: While many people feel that the time zone difference is a disadvantage of outsourcing, you can always strategize and turn it into your favor. You can have an overlap of one or two hours where you can have a discussion or meeting with the developers. This way, you can ensure that your project is working round-the-clock. 

  • Targeted Efforts: Most efforts go to waste when they are scattered in different directions. With an outsourcing partner their efforts are always targeted. If you’ve asked them to redesign, they’ll focus on that, if you want them to develop a new module, their focus would be on that. With targeted efforts, the results are bound to be better in terms of quality. 

  • Reduced Costs: This has been emphasized many times. Outsourcing reduces costs! For companies that have been looking to lower their development costs, outsourcing can serve as the ultimate solution. It is proven in many studies that companies can save as much as 30% of their development costs in outsourcing. In fact, our outsourcing costs guide also shows an obvious example of how outsourcing saves costs in simple app development. 

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  • Flexibility To Scale Or Cut Down: A disadvantage of in-house is when you hire, you need to keep paying them despite the amount of work. With outsourcing, you have the flexibility to hire a particular team, add more developers, scale down the team, or even change the developers in case the work doesn’t suit you. 

Cons of Outsourcing

Although the benefits and advantages of outsourcing are well known, there are some disadvantages faced by company to company. 

  • Communication Gap: Communication is at the core of any project’s successful execution. While there are many communication and remote working tools available to make discussions seamless with remote teams, nothing can replace face-to-face communication. So, the communication gap might create a barrier in getting things out there. 

    Drafting the outsourcing contract, mentioning everything about communication timings and tools can come in handy to ensure the elimination of any gap. 

    Also Read: Outsourcing Contract: Everything You Need To Know
  • Less Documentation: Another issue that crops up in outsourcing is that documentation takes a hit. There are chances that you might not get all the things in one place regarding the codes. Such issues become more intense when you decide to onboard your developers on the project or try to get a firmer grip on things.

    Any agile development company would know the benefit of documentation and would have everything in place for each sprint. 

  • Limited Control: Another issue faced by companies outsourcing software development is the loss of control. Many companies feel that by outsourcing, they cannot have as much control over the project as they can have in-house. This might be the case for companies that want to have a tab on every single task.

    However, companies working with an agile methodology would never let their clients face such issues. Moreover, they have a project management standard they follow to ensure you are in the loop.

  • Hidden Costs: It has been stressed enough time that outsourcing saves your money in development. But, there are several hidden costs like those of finding the outsourcing company, knowledge transfer, and various other ad-hoc costs. These costs might crop up after the deal is signed.

    The outsourcing contract that you create should have all the costs mentioned clearly to avoid this. 

  • Limited Motivation: This is a disadvantage of outsourcing is that you are working with external teams that do not feel the personal connection with your project. They might be working on other projects simultaneously which might make them feel even more removed from the project.

    However, outsourcing strategy where you get dedicated teams for your project can be the solution as they are solely dedicated to your project. 

Checkout Our Success Stories To See How We Helped Companies In All situations 

Success Story

 

Outsourcing Vs. In-House Development

Now that we know all the pros and cons of outsourcing and in-house, it’s time we see a side by side comparison of the two. This will help you make a better decision around the best strategy for your project. This table comprises all the factors considered to make any business decision. 

 
S. No. Factors When In-House Works When Outsourcing Works
1.  Cost If you have a huge budget that permits you to build a new internal team and expand your infrastructure. If you want to cut your development costs or want excellent products in a limited budget.
2.  Project Control If you want to personally keep a tab on each and every task during the development If you are comfortable with assigning tasks and assessing work after a completed sprint.
3.  Company Culture If company culture matters a lot for your business. If you want an excellent product despite a cultural fit or not
4.  Engagement &   Communication If you want face to face communication If you want virtual communication via calls, chats, emails, or video conferences.
5.  Team Size Flexibility Works only when you can keep the team engaged in work for a long period of time Works in all cases - hiring during sudden demand, scaling down, or even when the team size is constant
6.  Delivery Time If time is not a constraint for your project If you need a product developed fast
7.  Skills Available If your project doesn’t require any specialized skill If your project requires specialized skills or the latest technology stack
8.  Risks If you do not want a partner to share risks with If you want your risks to be shared and minimized
9.  Swift Changes If there are really quick iterations that need to be implemented on the spot If the changes can wait a day when you can get in touch with the remote developer and get the changes done
10.  Development Expertise If you have the time to train your developers and can work with less expertise If you want to eliminate any restrictions of geography and hire the best talent from across borders

 

When Should You Keep it In-House?

Building a new department and hiring niche experts for different chores in a project is something that requires both time and resources. So, after weighing the pros and cons, you also know when’s the right time to keep it in-house rather than outsourcing. If you still have doubts, we’ve got you covered. Keep reading to find out the right time for in-house software development. 

#1 Situation: If You Want To Do It Just To Save Costs

For instance, outsourcing strictly for monetary reasons is a bad idea that will probably fail, according to Rozinskiy. “I wouldn’t do it just because you can get the same people for less money,” he said. “It’s bad for morale and you’ll just end up spending the money on something else. Companies that do that are shooting themselves in the foot.”

#2 Situation: If It’s A Part Of Your Core Business

Any business needs to understand the core business operations to know if they should outsource it or not. You need to be very careful not to outsource the main business application. There are several businesses whose core offering revolves around a single application like Facebook, Whatsapp, etc. In such cases, it is mostly advised to get the development done in-house.

Such businesses require a team of experts working closely with them to resolve any issue as quickly as possible. Security, rapid changes, and deep familiarity with the software are impertinent for efficient development. For these reasons, the core business offering should be done in-house. 

Also Read: Should You Outsource Your Startup Product Development? 
#3 Situation: If Company Culture Plays A Key Role In Your Business

There are several business verticals where company culture or organizational culture is of extreme importance. They are a reflection of the company’s core values, beliefs, and behavior towards its people. If that’s the case with your business, outsourcing is not something you can thrive on. 

While you can find people of your company fit working offshore, it is difficult to maintain the organizational culture in such cases. People’s relationship and involvement impact how your product turns out and in-house can always help you keep your team’s spirit on top. 

#4 Situation: If There Are Frequent Pivots In Your Business

When you are working with remote tech teams, they might have some previous commitments that they need to complete in the sprint. However, in-house teams can be instantly asked to stop any work and work on any issue at hand. If you are just getting started with a business, the initial phases might have a lot of changes. 

For projects where constant changes in technological needs or design or approach are anticipated, in-house teams can be conducive. While offshore teams can also manage such changes easily, it is always more efficient and quick to get these smaller changes implemented when you have a team working in the same physical location. 

When Should You Outsource?

One question that lingers every decision maker’s mind is when to outsource? While there are several telltale signs, situational examples, and other ways to find out, you need to know exactly when the time is right to outsource. Here are some of the cases when outsourcing works instead of keeping the software development in-house. 

Also Read: Factors to Consider When Making The Right Outsourcing Decision
#1 Situation: If A Project Is too Large To Handle

Most of the businesses like to outsource when they have a project in hand that is too big for their team to handle. Even if they decide to add a developer or two in their team, they would still not be able to complete the project within the given time frame. 

With outsourcing, they can not just get a fully dedicated team as an extension to their in-house team, they can even have a managed team to take care of the complete project. This way, they can save both time and effort. 

#2 Situation: If There’s A Technology Gap

Most of the countries either don’t have all the technical skills or if they have them, the costs are pretty high. With outsourcing, you can enrich your team with the latest technology stack. You might need a specific technology for your particular screen or module. This can be plugged by joining hands with a technology expert in remote locations. 

#3 Situation: If You Want A Speedy Development

Be it deadlines, meeting high competition, idea turning obsolete, or any other reason, there can be situations, which call for speedy development. With outsourcing, the efforts are targeted, which leads to faster and quicker completion of any project. So, if you need a completed project within a shorter time frame, find an IT outsourcing company to take care of your software development. 

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#4 Situation: If Your Country Lacks The Technology Expertise

The JS universe and digital ecosystem are quite dynamic. One can see new technology coming up each passing day. And not every country has the expertise that you might need for your project. Inaccessibility to create talent locally should not let you compromise on your product features or functionality. Outsourcing can help you find the best technology from across the world. 

#5 Situation: If You Want Experts At Lower Cost

Outsourcing costs are comparatively very less than getting the same work done in-house. Compared to the United States where developers charge anywhere between $100 per hour and $190 per hour (depending on their seniority and expertise), developers in Asia charge between $20 and $45. And not just the price charged by the developers, there are several other costs that one can save when outsourcing. 

#6 Situation: If You Want A Development Partner For Growth

Especially for startups, finding a company that assists your growth is one of the most effective success mantras. Outsourcing practices have changed and today, most businesses are emphasizing building relationship networks for growth. Entrepreneurs can join hands with outsourcing vendors to experience exponential growth. While hiring developers in your team could help you develop the product or app, a web development company can help you at each step of your business to help it scale. 

 

Making A Decision

With so much on the line, it is one of the most important decisions to outsource or stay in-house. In this blog, we outlined the pros and cons of both outsourcing and in-house development. Along with it, we also showed the best cases when you should do it in your office or delegate the work to the external team. 

It is indeed true that the quality of offerings, flexible engagement models, and cost and time-efficient development has made outsourcing or offshoring a popular choice among companies. It has turned out to be a lucrative business strategy that is being adopted by many companies. 

If you are also a firm that needs faster development in a restricted budget all while having experts work on the project, outsourcing is the way to go.

outsourcing due diligence


Published On: 23rd October 2020

Topics : Outsourcing



Swati Sharma

Written by Swati Sharma

Swati Sharma, a writer by day and an avid reader by night, works with Classic Informatics, a leading web development company in India. Owing to her passion for her profession, she loves to stay updated about the current & emerging trends in the IT industry.

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