Outsourcing vs In-House Software Development: What should I choose?
When should you resort to outsourcing? Learn all the pros and cons to define when to stick to in-house development or use third-party hires.
by Lucía Sánchez León
5 min read · Sep 23, 2022
Many business executives have dealt with the conundrum of whether it’s worth outsourcing software development or completing projects in-house. The quick answer to this question is that it depends on your context.
As time-to-market becomes increasingly competitive and the demand for custom software increases, businesses often find it difficult to build robust software using limited in-house time and resources. And this is only one of the many such reasons that have led to a boom in outsourced development.
Outsourcing software development refers to the practice of delegating the entire or a part of the development process to external, third-party experts who leverage their specialization to develop your product. Conversely, as the name suggests, in-house development refers to using internal talent, tech, and resources for software development. Let me explain the pros and cons of each in the next few paragraphs.
This involves either using available in-house talent or hiring new employees, depending on your requirements. The entire responsibility, including the planning, development, and deployment of the project, falls on your shoulders. As with most business decisions, weighing the pros and cons of in-house development is essential. So here it goes!
Pros and cons
Some benefits of in-house development include:
- Higher incentive for success: Given that the entire team is a part of the company, their success as employees directly correlates with the company’s success. This might mean that employees are more motivated to meet their goals. Additionally, internal teams can focus entirely on the project, whereas outsourcing companies handle multiple clients and projects at the same time.
- Better collaboration: As a business executive, you can attest that software development is a collaborative process. In-house development makes collaboration easier as everyone is on the same page. There are fewer, if any at all, cultural, linguistic, and time-zone barriers. Moreover, having the ability to communicate face-to-face makes collaboration easier.
On the other hand, some disadvantages of in-house development include:
- High costs: According to Glassdoor, the average base pay for software developers in the U.S. is a whopping $97,763 per year, making IT staff augmentation in the US super expensive. In comparison, outsourcing costs much less.
- Staff turnover: Due to the high demand and universal requirement for tech talent, employees in the tech sector tend to change jobs quite often. This can cause a massive disruption to your in-house development process, not to mention the exorbitant cost of hiring and re-training new employees.
- Specialized talent: Completing the entire development process from start to finish is no easy feat. It requires multiple skill sets with various narrow specializations. Given the general difficulty in hiring tech talent, finding the right people for every tech requirement will be difficult and time taking. You may need to start on a project urgently, but may not have the talent readily available.
When to use in-house development?
You should consider in-house development when you have the resources and skills to mitigate its disadvantages. For example, if you don’t have any budget constraints on salaries or have a skillful software engineering team that you trust won’t leave, then in-house development makes sense. This scenario is more likely for older, larger, and more experienced firms. If you’re relatively small or have just started, choosing a software outsourcing company might be more effective.
In this case, it is crucial to hire a software development company that aligns with your goals and requirements and has the know-how to execute your project successfully. While you provide the project requirements, the outsourced company should be ready to take responsibility and go the extra mile to help you. The right outsourcing strategy can unlock numerous benefits for your company.
Pros and cons
Some of the main perks:
- Free up time and resources: Saving time, money, and accessing skill sets that aren’t available in-house are some of the most cited reasons for software development outsourcing.
Outsourcing allows you to deploy limited resources to your core business functions, streamlining business operations. Focusing on core business functions and developing new software simultaneously can be a big risk, as it might spread your resources too thin.
Nearshore outsourcing, which involves outsourcing to companies closer to home, in the same country, or close countries, is also becoming popular due to its myriad benefits:
- Ensures security: Nearshore outsourcing ensures improved security, both technologically and in terms of the supply chain. Given that companies closer to your location will be governed by the same legal and corporate framework, there are fewer chances of data leakages.
- Similar time zone and culture: If an outsourced firm is closer to you geographically, there is an increased sense of collaboration. Due to similar working cultures, time zones, and languages, communication becomes easier and more efficient. You can quickly communicate any changes in your expectations or priorities without worrying about time and language barriers.
- Need to travel urgently: If there is any urgent need that requires travel at short notice, it’s quicker to meet with someone working in a company located close to your location rather than with someone halfway across the world.
To get a more holistic picture of outsourcing, it’s wise to consider some disadvantages:
- Less control: When you outsource the development process, you have less control over the approach and method of the outsourced firm. This is only natural since you are working with another company. However, for this not to be a problem and just a matter of understanding, it's important to find a company that aligns with your ways of working.
- Communication barriers: This is especially true when you outsource internationally. Language, time, and cultural barriers can make communication difficult. Without communication, it is also difficult to establish trust, which is important given that you’ll be trusting an external party with confidential information.
When to use outsource development?
You should consider factors such as the size, age, function, budget, talent, and timeframe of your company. For example, if you’re a relatively new start-up whose core business function isn’t tech, and you have limited time and resources, it makes sense to outsource your software development.
Additionally, nearshore outsourcing considerably mitigates some disadvantages of outsourcing, making it one of the best options for most companies.
How can we help?
At Somnio, we keep agile engineering and design thinking at the heart of our development process. Whether you want to develop a product from scratch or need an addition to your in-house development, we’ve got you covered. From mobile app and web development to UI/UX, Somnio is your one-stop solution to develop top-notch products. Some of the biggest benefits of outsourcing to Uruguay are the large talent pool, the similar timezone to the US, and it’s very cost-effective.
We use Flutter development to create world-class products. Flutter is a software development kit created by Google. It brings together the best of different languages and frameworks to create the future of mobile business development. One of the biggest advantages of Flutter is that it enables cross-platform app development with a single codebase. It also provides fast programming and time-to-market, requires less testing, and offers better compatibility. Check out our recent work and contact us today to leverage our Flutter expertise.
by Lucía Sánchez León
5 min read · Sep 23, 2022
Lucía Sánchez Léon is Marketing Manager at Somnio. She designs the communication and marketing strategies. Lucía is a fun and energetic person, she enjoys dancing whenever she can.