Outsourcing vs. In-House Development: What Works Best for Your Project?

Lyudmila Kucher
Lyudmila Kucher

I specialize in outstaffing and staff augmentation, and I have extensive experti...

40 posts

in-house vs outsourcing software development

Are you going to start a new project, create a mobile app, or launch a website? It can open up new opportunities for your business. But there’s a condition. Think about delegating all the development tasks to professionals to get the best result possible.

The most important question to answer is about in-house vs outsourcing software development. Of course, you want to choose the more suitable option. That’s why we are going to explore both approaches in detail, highlight the pros and cons of each, and give you some tips on how to make the right decision. Are you ready? Let’s dive deeper!

In-House Development: Key Benefits and Drawbacks

As you can get with a title, in-house development is about creating software within the organization’s infrastructure. To implement this approach, you should have developers, designers, quality assistants, project managers, and other specialists in your internal team. Actually, they are responsible for bringing the software product to life.

To better understand in-house development vs. outsourcing approaches, we will explore the key advantages and disadvantages of in-house development first. Let’s start with the benefits.

You get total control over the development process. That’s the main one. Choosing an in-house team gives you an opportunity to set priorities and make adjustments on the fly. Also, you have a great understanding of the progress. You can quickly identify current challenges and successfully solve them.

Direct communication is always better. With an in-house team, you have face-to-face interactions without any additional channels. What does that mean for your new project? The decision-making process is as smooth as possible. Everyone in your team clearly understands all the project requirements. You and your team are on the same page.

Make changes as you go. An in-house team can quickly catch any issues or bugs. If problems are found and resolved promptly, downtime is minimized. With your own developers, you can quickly troubleshoot and implement fixes.

Protect your business from security and confidentiality issues. Your sensitive data and proprietary information remain secure. All the important data stays within your organization. It reduces the risk of data breaches and leaks. You can be sure that your intellectual property is protected.

Is everything so simple with an in-house team? Of course not. You have to see the entire picture to make the right decision. We propose to analyze the shortcomings and pitfalls of this approach as well:

 

  • Higher costs. If you pick up this option, be ready to invest in recruitment, onboarding, training, salary payments, etc.
  • Limited expertise. You have to admit that your team might lack the diverse expertise required for certain projects.
  • Scalability issues. Don’t forget that your internal team has other jobs to do. Expanding the staff demands additional money and time.

 

Choosing between these two options — in-house vs. outsourcing software development — consider all the nuances and specifics of your business. That’s the only way to avoid crying over split milk afterwards.

in house development vs outsourcing

 

Real-Life Examples of Implementing In-House Development

Now, let’s look at real examples. Many tech giants organize development work within their companies. Of course, we are talking about large corporations you probably heard about before. So here are these businesses and their projects created by internal teams:

 

  • PayPal – fraud detection systems.
  • Amazon – web services (AWS).
  • Salesforce – cloud-based customer relationship management (CRM).
  • Netflix – content delivery network (CDN).
  • Google – search algorithms and infrastructure.

 

We believe that PayPal deserves special attention. This online payment platform has always prioritized the security and reliability of its services. One of the most important areas they focused on was fraud detection. PayPal invested a lot of money in building its in-house fraud detection systems. Advanced technology is based on machine learning algorithms and real-time data analysis. It can quickly identify and prevent fraudulent transactions.

It’s hard to argue with the fact that an in-house team has a profound impact on a company’s success. If you prefer this option, you should calculate the associated costs. However, in many cases, the game is worth the candle.

Software Development Outsourcing: Benefits and Disadvantages

In-house software development vs outsourcing are two main approaches you have to choose from. As we covered all the benefits and disadvantages of the first one, let’s move on to the second. The key thing to understand here is that you should hire an external organization to handle software-related tasks.

Key benefits of outsourcing:

 

  • Spend your money efficiently. You can collaborate with agencies from different regions worldwide which probably has lower rates than US-based companies. Additionally, you have no need to maintain a full-time in-house team. It results in savings on salaries, benefits, and infrastructure costs.
  • Get access to advanced technologies. Usually, outsourcing companies invest in the latest technologies to stay competitive. If you choose in-house, you should think about providing your team with the necessary tools to implement the project.
  • Cooperate with professionals. With outsourcing you gain access to a global talent pool with specialized skills and extensive experience. Implementing the latest technologies and best practices your partner can ensure high-quality outcomes.
  • Scale the development team up or down. Manage varying workloads efficiently without the long-term commitment of hiring permanent staff. It’s as simple as it gets. You can order the development of one project or several at once.
  • Get your project done faster. The development process can progress around the clock, thanks to different time zones. In addition, you miss the training and onboarding stages. Outsourced agencies value reputation, so they strictly adhere to deadlines.

 

Disadvantages you need to know about when choosing between in-house development vs outsourcing:

 

  • Security risks. Data breaches and intellectual property theft are the most common. Therefore, if you are about to share sensitive information with an external team, carefully select partners to mitigate potential vulnerabilities.
  • Communication challenges. Be ready to work with teams in different time zones and cultural backgrounds. Sometimes it may lead to communication barriers.
  • Loss of control. Working with an outsourced team can cause you to lose control over the development process. Thus, you may get a completed project that is far from what you expected.

 

As you can see, outsourcing can offer great opportunities for your business. But be careful. This approach also has its drawbacks and pitfalls, which you should assess before seeking an agency. Both software solutions in house vs outsourcing are worth considering. Which option does fit better? It depends on the project’s particularities as well as on your requirements and expectations.

in-house development vs outsourcing

 

Real-Life Examples of Implementing Software Development Outsourcing

Outsourcing opens up new opportunities for various companies. Small businesses and well-known large corporations use this approach for their project’s implementation. We are going to talk about the most popular ones:

 

  • Expensify – mobile app.
  • Slack – core product.
  • Google – Project Fi and Voice.
  • Alibaba – e-commerce platform.
  • WhatsApp – early development phases.

 

Do you want to get a quality product at a reasonable price? Be sure to consider outsourcing as a good choice here. Even famous large corporations often turn to external agencies for software development services.

The advantages of outsourcing are obvious. The main one is, of course, cost savings. Moreover, you’ll get a short period from signing the contract to launching the product. Entrust all the development tasks to the contractor. Your in-house team will be able to focus on more important strategic assignments.

In-House Development vs. Outsourcing: Key Differences

Aren’t you sure yet what to choose: in-house vs. outsource software development? Why actually should you understand the difference? The explanation is simple. Each approach has its unique advantages and weaknesses. Consequently, these specific features can significantly impact the project’s success, cost, and timeline. We will create a table for you to make the information more sorted and understandable.

Type of development

In-House

Outsourcing

Control Level

Full control over the entire development process and outcomes. You can make immediate adjustments and be sure that the project meets all the requirements.

Limited control, with reliance on external partners. You rely on the external partner to follow your vision and standards. It can lead to misalignment and less direct influence.

Expertise

Deep domain knowledge and alignment with company culture. Your team understands the company's strategic goals.

Access to specialized skills and expertise. This solution is great particularly for niche technologies and complex projects.

Cost

Higher costs due to salaries, benefits, and infrastructure. The costs of maintaining an in-house team are usually quite high.

Generally lower costs by leveraging cheaper labor markets. You only pay for the work when it was done. The amount is written down in the agreement.

Time to Market

Can be slower due to recruitment and training processes. However, once the team is set, they can quickly adapt to changes.

Often faster due to access to a larger pool of developers. They are ready to begin work immediately. Accordingly, you will get the project finished earlier.

Quality Control

Easier to maintain consistent quality and standards. You can quickly address any issues that arise during the development process.

Quality may vary depending on the outsourcing partner. Continuous monitoring and quality checks are essential in this case.

Scalability

Scaling the team can be time-consuming and costly. Be ready to spend time for hiring and onboarding new employees.

Easy to scale up or down based on project needs. You can make quick adjustments to team size without long-term commitments.

Security

Better control over data security. You can be sure that sensitive information and intellectual property are protected.

Higher risk of data breaches and IP theft if not managed properly. It can be the case if your partner does not have robust security measures in place.

Flexibility

High flexibility to make quick changes and adaptations. You can timely response to new requirements or market conditions.

Changes may require renegotiation and can be slower to implement. It depends on the outsourcing partner's processes and responsiveness.

Communication

Easier communication and collaboration. Your internal staff is accessible for meetings, discussions, and instant feedback.

Potential communication barriers due to time zones and language differences. Sometimes it can lead to delays and misunderstandings.

In-House vs Outsourced Software Development: Make the Right Choice

Don’t underestimate the importance of choosing the right one between in-house development vs outsourcing. Sometimes, businesses choose the wrong approach. Then, managers face various troubles. The most common one is the loss of time and money. Always remember that even if in-house is perfect for one scenario, choosing such an option can lead to losses in another. It works for outsourcing as well. Analyze, explore, compare, and pick up the best solution for your project.

When Outsourced Development is the Best Choice

Sure, we can understand that choosing between software development in house vs outsourcing is quite difficult. That’s why here you have the most common case scenarios where outsourcing can be a great solution:

 

  • Your company has budget constraints.
  • Projects require skills or technologies not available in-house.
  • The project needs to be completed quickly.
  • Tasks are separate from the business’s core operations.
  • Projects require rapid scaling up or down.
  • You are going to launch large, complex projects.
  • Short-term projects or one-off tasks.

 

Let’s consider a hypothetical example. Imagine you run a small startup and want to develop a mobile app to offer personalized fitness training programs. You have a tight budget. It means you cannot afford the high costs associated with hiring an in-house development team. By choosing outsourcing, you can access skilled developers and bring your product to market.

When In-House Development is the Greatest Solution

If you have specialists with the necessary experience and qualifications on staff, then there is no problem involving them in developing your new project. Applying an in-house team can be beneficial for your business in a variety of situations:

 

  • Projects are integral to the company’s primary operations.
  • Projects require deep customization and frequent adjustments.
  • Projects involve sensitive data or intellectual property.
  • Long-term initiatives that require ongoing updates.
  • Projects demand rapid prototyping and frequent iterations.
  • Projects involve complex integrations with existing systems or technologies.

 

Let’s take a look at the example. Imagine you run a retail corporation with a large staff of qualified specialists. At the current stage, you decided to create a custom inventory management system. The most suitable option in your case is assigning this task to your development team.

Frequently Asked Questions

Looking to hire remote software developers but have a few questions unanswered? We are sharing our list of frequently asked questions by our clients when hiring software developers.

view all

In-house development is when your internal teams is working on software development project. Outsourcing involves hiring external organizations for this purpose.

In-house development is more expensive than outsourcing. It can also be time-consuming and limited by internal expertise and resources.

Outsourcing is an excellent idea for startups and companies with limited resources.

view all

Read also

More Arrow right
More

Calculate the costs of hiring top developers with our free estimate.

No obligation to hire. No commitment from you.

Photo manager
George Fironov
Co-founder & CEO
  • Skype
  • Linkedin

This 20-Minute Call Will Change How You Hire Developers

Discover how Talmatic can help you solve your hiring headaches. In this personalized call, learn how we match you with developers that fit your technology and team needs.

In a short call, we would like to:

  • Learn about your development needs
  • Explain our process to match you with qualified, vetted developers from our network
  • Share next steps to finding the right match, often within a few days

Not sure where to start?
Let’s have a chat