Software Development Outsourcing vs Insourcing – How to Decide?

Most entrepreneurs and CEOs go through this challenge. They understand that they need to create a new app or product but aren’t sure how to go about it.

Should they hire their own development team or should they outsource?

Both options have some advantages and some drawbacks. The best answer will be one that is tailored to your unique needs and resources. Software development is like an iceberg. Above the waterline is the coder sitting at a screen and coding away.

Most people see only that. Design, specifications, management, testing, and a million other jobs are things that many people don’t see or understand. Those elements are the fine line between the success or failure of a project.

Pros and Cons

Before we get into the needs of your business, let’s talk about some differences between working in-house and outsourcing. There are big benefits to having an in-house team.

For one thing, they will have immediate access to you and other aspects of your business. This makes them better for working on tasks that are very specific to your business. They are also there if you will need them for other tasks, nor just what you’re working on now.

There are also downsides to hiring an in-house team. For one thing, they may be more expensive or require benefits that outsourced teams don’t. An in-house team will also require you to provide physical infrastructure like space and hardware. These aspects aren’t a concern with outsourced teams. Further, it’s more of a hassle to hire and fire in-house teams.

If you don’t always have work for them, you might be paying them more than they’re worth to you. There are also key benefits to working with outsourced teams They are easier to work with on a temporary or recurring basis. They don’t require you to provide space or hardware. However, those who pay more for power or for expensive prescription services may pass those expenses on to you.

They also may come cheaper and won’t ask for benefits. Naturally, there are downsides to working with outsourced teams. It can be harder for everyone to stay on the same page when the development team isn’t on site. This can slow them down. It also means that if something goes wrong, it might take you longer to find out. Pay can also be more complicated with outsourced teams because they are paid differently than your other employees.

Core Competency

If the product is related to your core competency, do it in-house. If you are doing it in-house, you need more than developers. You cannot expect to hire a couple of developers and be surprised why they cannot create what you need.

You need people who can do product management, software architecture, UI/UX, development, testing and project management. Some of these roles might merge. Still, you might need a small team to be efficient. Your business has a specialty; that’s why you exist. That specialty isn’t coding; that’s why you need a coder.

Similarly, a coder’s specialty is just that: coding. They aren’t likely to also be subject matter experts in whatever core service your company provides. As a result, they will need a lot of guidance. A lot of these complications may go away depending on your needs. If your idea is complex and sophisticated like event management or an online banking site, you need a dedicated team.

If your idea is simple, like a blog or newsletter, you might not need an in-house team. Chances are, no one factor discussed here will be enough to make your decision, and that includes this one. It is easiest for coders to create your product if they have constant access to you and your team.

However, if other needs outweigh this one, it is possible to have sufficient communication with outsourced coders.

Outsource Your Weakness

If no one in your management team has strong tech skills, it will be hard to do the development in-house. Even if you hire a few developers, they will need direction to give you the product that you want. If you’re not entirely sure what that is, you might not just need a developer.

Because freelance coders and tech companies work with different people and businesses, they might know your needs better than you.
Obviously, this doesn’t mean that you need to have a coder on the team to hire a coder. All it means is that someone on your team should know how they want your project to look and work.

Availability of Resources

One big factor in whether you should do development in-house or out-of-house is the talent that you can attract. Suppose that you are a startup looking to build an initial product or MVP if you can hire your own development team, more power to you.

In many cases, it would be hard to attract talented developers in the current stage. There are two big reasons for this. One is that talented developers looking for secure jobs may not want to work with a startup. The other is that few startups have the money to pay or give benefits to a team of in-house developers. It is common for startups to start development with an outsourced and hire an in-house team later on or gradually.

Availability can also be a problem if your business is located away from large cities. You might have a website or app idea for your business as the largest potato farm in central Idaho. That doesn't mean that you will be able to find good developers close enough to work directly for you. In situations like this, having an outsourced team might be the only option regardless of other factors.

If you find yourself in a rural area, be sure not to underestimate the value of universities. These often allow for pockets of the tech industry in otherwise rural regions. It is best to look around the university rather than in it. Student labor may be cheap and eager, but it is short term and not always the best.

Rather than looking for talent from universities, look for talent around universities from institutions like business incubators. Resources aren't just talent and money. If you work with an in-house team, you will also be expected to provide hardware and software. You will also be expected to provide workspace.

Of course, outsourced teams charge you for many of these things as well, but it's all one rate. When working with an in-house team, you will need to add these expenses to their pay and possible benefits.

Cost Benefits

The availability of resources is important but so is maximizing resources. Sometimes the cost of hiring in-house versus outsourcing is drastically different. For this reason, it is worthwhile to look into your options.

Determine what the budget would be like to hire an in-house team. Compare that to quotes from contractors for the same work. Your decision may be made for you if your funds are limited or you underestimated costs.

If you have the money to afford either option, now you have a choice to make.

It may be tempting to go with the cheapest option, and it may be worth it despite other indicators. For example, it is possible to work with an outsourced team for a long-term project.

Taking time to work with a less-experienced in-house developer might be more cost-effective than working with a development team. Besides, some people who are willing to work for less are new to the trade, not bad at it.

There's something to be said for hiring top-notch developers. There's also something to be said for not blowing all of your cash if you don't have to.

Size of the Project

If your project is short term, it might be ineffective to hire internally. Suppose that you want a basic website. It won't have a blog or any fancy interaction - just a way for people to find you online.

Any decent coder should be able to put something like that together pretty quickly. Now, think of all of the hassle that comes with hiring a new employee. You need to be sure that that hassle will be justified by the length of the project. This is where outsourcing shines.

Find some freelance coder, develop a relationship for a month, they give you a website, you pay them, that's it. If you ever need the website updated, find them again or find another freelancer. Alternatively, suppose that you have a long project, like an ambitious app or a website that will demand continual upkeep.

Now, think of all of the hassle that comes with outsourcing. You might not want to put up with that for the whole length of the project. That's where an in-house coder or team comes in. Post a job, read some résumés, hold some interviews, and make a hire that might work with you for years.

If you come up with more ideas or want more services, you don't have to start the whole process again.

Clearly, the question of outsourcing versus hiring is not always a simple one. It might come down to cost. It might be more impacted by less obvious factors like location or status.

No matter what you think going in, think long and hard about which option is right for you. If you are considering software development outsourcing, you should read the due diligence checklist