Software Development – Insourcing Vs. Outsourcing

Sandeep Raheja

January 18, 2021

Software Development - Insourcing Vs. Outsourcing

Perhaps the central issue when beginning a software development project is deciding to insource or to outsource. This decision factors in questions of cost, time, and quality of work. It is often the difference between a successful project and a waste of time and resources.

Insourcing is what is traditionally known as in-house recruitment. When a company decides to insource their software development, it requires that they hire a team of employees to build their project. With this approach, the company directly manages the team of developers, rather than it being a third-party organization.

Outsourcing, on the other hand, is when a company uses an outside software firm to develop its project. In recent years, we’ve seen more and more companies choose to outsource their development projects in an attempt to cut down on in-house numbers and save time and money. According to Stratistics MRC, the global IT outsourcing market is expected to reach $481.37 billion by 2022. It’s a big business.

So how do you choose? Below, we compare issues of cost, time, and quality for insourcing and outsourcing. We also discuss the common pitfalls associated with choosing the wrong software development option. To expand on this, we consider use cases of both options, offering a better understanding of both development approaches. Finally, we break down the decision-making process of choosing between insourcing and outsourcing, as well as consider a hybrid option. By the end, you will be fully equipped to make the best decision for your software development project.

Primary Considerations of Insourcing vs. Outsourcing

When deciding to insource or to outsource, there are a few primary issues to consider. Namely, how much will it cost, how much time will it take, and what quality of work will be provided. These considerations will likely be the deciding factors when choosing a development approach.

Cost

At the end of the day, you’re only able to do what your budget allows. As such, the cost of software development will determine how you approach your project.

Because insourcing requires that you hire employees, you will have to pay them accordingly. This means a gross salary, benefits, pension contributions, and taxes. You will also have to consider the expense of office space and equipment, as well as additional IT costs. Additionally, there may be recruiting and training costs for new employees.

When you outsource your development project, you and the contracted team will agree on a fixed hourly or team rate for the duration of the contract. The firm or individuals that you work with will be responsible for the office space, software, and other financial requirements needed for the project. They also handle all of the recruitment and training costs necessary to build out a successful development team.

Bottom Line

The question of which will be the more cost-efficient option is typically dependent on the timeline of the project. If it will be an on-going project that will take years to build and maintain, it could be cheaper to take on all of the costs associated with insourcing. If it’s a short-term project that is mostly a one-and-done deal, then it will likely be cheaper to outsource the work.

Time

Insourcing tends to be a time-consuming process. When you decide to hire a new team of employees, you have to market the positions, interview applicants, decide on team members, get them acclimated to the office, and train them for the work you need to be completed. After all of that, you can finally begin the project.

All in all, the insourcing process can take months. What’s more, recruiting software developers is quite competitive. It’s difficult to find experienced and talented developers who are available within your local market. Recruiting high-quality developers often demands competitive wages and limits you geographically.

Outsourcing software development grants you access to the global market. Because geography is no longer an issue, outsourcing allows you to tap into talent from anywhere in the world. As a result, you have exponentially more options when it comes to available development teams. And because you don’t have to assemble and train the team yourself, all you have to do is find a team that fits your needs and can work with your budget. In the end, it can take as little as two weeks to begin your project.

Bottom Line

The added time associated with insourcing can be worth it for long-term projects. Investing the extra time to create your internal team can be beneficial if your project demands years of work. For shorter projects, however, it just doesn’t make sense to waste so much time starting your project. Outsourcing is your friend when it comes to short-term software development.

Quality

The last thing you want is to put time and money into a project just for it to leave you wanting more. Unfortunately, the question of quality of work with insourcing vs. outsourcing isn’t as cut and dry as the issues of cost and time.

With insourcing, the quality of work you receive will be entirely dependent on the team you assemble. Because you’re more limited on the developers you’ll be able to recruit, you may not have access to the same levels of talent and experience that you would have with outsourcing.

On the other hand, insourcing gives you more control over your team of developers. This makes it less likely that you’ll run into unexpected problems once the work is delivered. And if issues do arise, they can be addressed immediately. You’re able to groom your team to meet the needs of your project as they evolve

Because outsourcing grants you access to more developers with diverse abilities, there is a greater chance that you will be able to find niche developers with experience doing the work that your project demands. With developers who already have the knowledge and training that your project needs, there isn’t as much of a need for grooming and direction. Outside teams are often elastic and capable of expanding in short bursts when additional skills or expertise is required. With a good development team, outsourcing can produce quality work with few hiccups.

Bottom Line

At the end of the day, the quality of your software depends on the quality of the team building it. If you’re able to hire a team of developers who have the skills that your project requires, insourcing will likely produce higher quality work. The advanced collaboration that is facilitated by insourcing software development just can’t be beaten. If your project demands more niche developers, however, outsourcing could be the better option because it grants you access to a wider range of experienced developers.

Common Pitfalls

The biggest problem associated with choosing the wrong software development approach is typically the result of companies inaccurately assessing the needs of their project. We’ll elaborate on the decision-making process below, but you’ve probably been able to conclude that insourcing is better for long-term projects and outsourcing works best for short-term projects. When a company believes their project will need months or years of building and maintenance, but it only needs a month or two of work, they will likely find that they’ve wasted time, money, and resources insourcing their team of developers.

More issues arise when companies try to force their project through, even though their development team — insourced or outsourced — lacks the knowledge necessary to complete the project. All too often, companies are eager to get started, so they just hold out hope that whatever skills the team lacks will resolve themselves in the end. Unfortunately, this doesn’t usually work out. Companies are then forced to either hire more team members or send the project to be completed by yet another third-party development firm.

What it comes down to is assessing your needs and taking the time to find a team of developers that has the skill and training to complete your project. Trends in software development move quickly, so it’s understandable to want to start as quickly as possible. Nevertheless, rushing into a project will almost always take more time in the end. It’s better to invest more time in the beginning to find or assemble a team that will be able to meet your needs than to pay for it later when your project cannot be completed.

Use Cases of Insourcing

As we’ve discussed, insourcing works best for long-term projects. But how do you know whether or not your project is long-term? Well typically, long-term projects are ones that will require consistent updates and changes to maintain. These are ongoing projects that take three or more years of work and building.

Long-term projects are usually strategic or aimed at providing services. Strategic software development projects affect a company’s organizational structure and offer qualitative results — think coverage, integration, and image. Software projects that result in usable services tend to be user-defined. These can be quantitative — create value for the company — or qualitative — increase the quality of the services provided by the company.

Insourcing can also be a good option if the project does not require niche skills. Because onboarding development employees limits you geographically, you may not be able to find developers with the niche skills required for more unique projects. If you’re building a big project, but one that is relatively run of the mill, insourcing can be a successful development approach.

Use Cases of Outsourcing

Outsourcing works best for short- and mid-term projects. Short-term projects are ones that can be completed in less than a year, and mid-term projects are ones that can be completed in one to three years. Projects like these are generally smaller in scope and are aimed at offering quantitative benefits for the company — think cost, schedule, and performance.

Alternatively, outsourcing can be a successful option for unique projects, regardless of the timeline. If your project demands niche skills and training, outsourcing can be the easiest way to find developers that know how to build it.

How to Decide Between Insourcing vs. Outsourcing?

Deciding to insource or to outsource comes down to assessing your needs. You must first layout all of the necessary components required to complete your project. These include:

  • An end-product conception
  • How much the project will cost
  • The timeline of the project
  • The software needed for the project
  • The hardware needed for the project
  • The number of developers required to complete the project

Once you have a developed understanding of the needs of your project, you can then determine your development approach. If your project has a long-term timeline and is relatively common, insourcing could be a successful development option. If your project is short-term or requires a niche skill-set, outsourcing is likely your best development option.

A Hybrid Solution

A scenario that we have yet to consider is the hybrid solution. Sometimes, the worlds of insourcing and outsourcing fuse together to make a development project work. It’s a little unconventional, but sometimes that’s what it takes to get a project up and running.

Say your insourced team has been working great. They’ve made lots of progress and you can see your idea coming to life. But then they hit a snag in the thread. All of a sudden, progress stops and the project comes to a halt. In this case, outsourcing a portion of your project might just be the thing that gets your project moving again. Typically, software development firms are more than happy to work on part of your project, just to get you from point A to point B, and then hand it back off to your team of insourced developers.

As we said, the hybrid solution is a little less common, but it can be a successful way of developing a software project. There’s no reason to limit yourself — or your project — to the false dichotomy of insourcing vs. outsourcing. Why not have both?

Conclusion

Hopefully, we have provided you with a better grasp of the question of insourcing vs. outsourcing. With a fleshed-out plan and an understanding of your needs, you should now be able to make an informed decision when choosing to insource or to outsource your software development project. And don’t forget — a hybrid solution could be the approach that works best for your project.