Should You Outsource or Keep Software Development In-House?

As the global workforce becomes increasingly interconnected, the trend towards outsourcing software development continues to rise. Many companies are reaping the benefits of this approach, while others remain cautious. Where do you stand?

This article will guide you through the key factors to consider, comparing the benefits and challenges of each approach so you can choose the best path for your company.

What Is In-House Software Development?

In-house software development is exactly what it sounds like: A dedicated team within your own company handles your software development projects.

Say you have a project to create a new app. With an in-house team, you’d hire developers, designers, testers, and other necessary roles to work directly for your company. This team works together, usually under one roof, allowing for constant communication and collaboration.

Advantages of In-House Development

Now, let’s talk about why some companies choose to keep their development in-house. One major advantage is control. When your development team is right there with you, it’s much easier to manage projects, pivot quickly if something isn’t working, and ensure that everyone is on the same page. Communication is seamless because you’re all part of the same team, often in the same location.

Another benefit is immediate access to your team. If there’s a problem or a last-minute change, you don’t have to go through layers of communication to get it addressed. Your team is there, ready to handle it.

Disadvantages of In-House Development

However, there are also significant downsides to in-house development. The most obvious one is cost. Hiring skilled developers is expensive. On top of salaries, you have to consider benefits, office space, equipment, and other overhead costs. For a small or medium-sized business, these costs can add up quickly.

For example, if your marketing team needs a tool to automate outbound email sequences across your customers’ lifecycle, and your present IT department doesn’t have the necessary bandwidth to implement the project, hiring a whole new in-house team for this one project doesn’t make sense. It’s not just the increased employee headcount you need to consider, but also the time and resources needed to recruit, train, and manage these employees.

In-house teams may also have limited skill sets. Your team might be great at what they do, but they might lack the specialized skills needed for a particular project. For instance, if you suddenly need a developer who specializes in machine learning, finding and hiring that talent can be challenging and time-consuming.

Scalability can also be a major issue as well. If your project needs expand rapidly, you might find yourself understaffed and struggling to keep up. On the other hand, as the project winds down, you could be left with a team that’s too large for your current needs, leading to layoffs or wasted resources.

What Is Outsourced Software Development?

Outsourced software development is when a company delegates its software projects to an external team or organization.

Instead of hiring developers and other IT professionals as full-time employees, you contract an outside firm to handle all or part of your development needs. This can be likened to hiring a specialized task force to come in, complete the job, and then move on.

There are three primary models of outsourcing: offshore, nearshore, and onshore.

• Offshore Outsourcing involves partnering with a company in a distant country, often in a different time zone. For example, a US-based company might outsource its software development to a firm in India or the Philippines. This model often provides significant cost savings due to lower labor costs in these countries.
• Nearshore Outsourcing is when you outsource to a neighboring country or one that is relatively close geographically and in the same or a similar time zone. A company in the US might nearshore its projects to Mexico or Canada. This model can offer a balance between cost savings and easier communication due to fewer time zone differences.
• Onshore Outsourcing means hiring an external company within your own country. While typically more expensive than offshore or nearshore options, onshore outsourcing can offer the advantage of communication and cultural similarities, making collaboration smoother.

Advantages of Outsourcing

One of the biggest advantages of outsourcing is cost savings. Companies can significantly reduce their expenses by outsourcing to countries with lower labor costs. For example, a US company might outsource its development work to a team in India or Eastern Europe, where the cost of living is lower and, consequently, so are the salaries.

Another major benefit is access to a global talent pool. By outsourcing, you’re not limited to the skill sets available locally. Instead, you can tap into a vast pool of experts from around the world.

It also allows you to quickly scale or reduce your team based on the demands of your project.

This can be particularly useful if your company lands a large contract requiring rapid development of a new app. With outsourcing, you can quickly bring on additional resources to meet the deadline without the long process of hiring and training new employees.

Moreover, outsourcing often leads to faster time-to-market. External teams, particularly those that specialize in specific types of projects, bring a level of expertise and efficiency that can significantly speed up development. A specialized outsourcing firm might already have frameworks and processes in place, reducing the time needed to start and complete a project.

Disadvantages of Outsourcing

Despite these advantages, outsourcing does come with its own set of challenges. One potential issue is communication barriers. When working with teams in different parts of the world, time zone differences and language barriers can lead to delays and misunderstandings. If your company is based in the US and you’re working with a team in Asia, the overlapping work hours might be limited, making real-time collaboration more difficult.

There are also risks related to data security and confidentiality. Sharing sensitive information with an external team can be risky if proper security measures are not in place. For instance, a financial services company outsourcing its software development needs to ensure that its partner has stringent security protocols to protect sensitive customer data.

Quality control can be another concern. While outsourcing firms may promise high-quality work, there can be discrepancies in the final output due to different standards and practices. It’s essential to thoroughly vet potential outsourcing partners and establish clear expectations and metrics for quality from the outset.

When to Choose In-House Development and When to Choose Outsourcing

Choosing between in-house development and outsourcing depends on several factors and specific scenarios.

Let’s first consider when it makes sense to go with in-house development. If you’re working on a highly sensitive project involving proprietary technology or sensitive customer data, in-house development allows for tighter control over your data security and intellectual property.

Another scenario favoring in-house development is when the project requires constant iteration and close collaboration with other internal departments. Having an in-house team means immediate access to developers who understand the product inside and out and can quickly make necessary changes.

When deciding on in-house development, key factors include control and team culture. Control over the development process allows for quick adjustments and close monitoring of progress. Additionally, an in-house team can be more aligned with your company’s culture and values, leading to better teamwork and communication.

On the other hand, there are scenarios where outsourcing is the better choice. If your company has a limited budget, outsourcing can provide access to high-quality development services at a lower cost. For example, a startup might not have the resources to hire a full-time, experienced development team but can afford to outsource to a specialized firm that offers the same level of expertise at a fraction of the cost.

Outsourcing is also ideal when you need to scale quickly. Imagine your company has just landed a major contract that requires rapid development of a new application. Building an in-house team from scratch would take too long. By outsourcing, you can quickly bring in the necessary resources to meet the project’s demands. This flexibility allows you to scale up or down based on project needs without the long-term commitment of hiring permanent staff.

Key factors to consider when outsourcing include cost efficiency and access to talent. Outsourcing can save money on salaries, benefits, and infrastructure, allowing you to allocate resources more effectively. You also gain access to a global talent pool, ensuring that you have the right expertise for your project.

Achieve More with Taazaa

Taazaa is a reliable outsourcing partner with a proven track record of delivering exceptional results. For instance, one of our clients, who is focused on early detection and disease prevention, needed a web-based custom healthcare ERP for their network of mobile health clinics. Taazaa delivered dependable, end-to-end ERP and business automation software that streamlined their operations and enhanced patient care.

Another client specializing in concussion management and orthopedic rehabilitation required a custom software application to capture and analyze a patient’s physical and psychological performance. Taazaa developed a robust application that provides standardized and actionable data to healthcare providers. This solution helps patients return to full function after an injury and make informed injury prevention decisions. The client appreciated the quality and performance of our solution, which addressed the shortcomings of existing medical programs and offered advanced solutions for performance enhancements, neuromechanical health, senior health, and orthopedic care.

In another instance, Taazaa built an application for a leading tenant management software company. Using a no-code platform, our junior developers created a simple yet powerful web app in just two weeks. This app now handles 200 tickets per month, reducing the administrative burden and improving efficiency with automated rent reminders and lease renewals.

Choosing Taazaa means having a partner who listens to your needs and provides practical solutions. We offer flexibility, cost-effective services, and a commitment to your success.

Searching for a reliable outsourcing partner? Schedule a free consultation today!