In-House Development vs. Outsourcing: A Comparison of the Advantages and Disadvantages

Development in-house

Expanding your in-house software development team provides you with increased control over development and a high level of team engagement. You assemble a team of trusted individuals who have a thorough understanding of your corporate culture and business details. However, certain conditions must be met for it to work:

You have ample time, budget, and management resources available to you.
Sufficient post-delivery work or other projects in the pipeline to justify the team's continued employment.

Pros at in-house development

Complete control of the project. You have visibility into daily operations, know what your employees are working on, and react quickly if any roadblocks arise.

1. Communication flows smoothly. Consistent working hours, face-to-face meetings, and the ability to respond quickly to business feedback contribute to a shared software vision and a faster reaction time for the development team when implementing changes.
2. Increased security. Your business data and know-how are not shared with third parties, and you retain all knowledge acquired during the project internally, minimizing the risk of information leakage.
3. Support is provided indefinitely following delivery. After delivery, your in-house team remains committed to your project and is always available for additional maintenance, bug fixes, and updates at your request.

Cons of in-house development

1. Slow start. It takes an average of 30-35 days to hire one developer, and the high demand for them complicates the task. To attract top talent, you must compete with other companies and offer excellent working conditions. And you must consider not only obtaining qualified specialists but also ensuring that their skills and personalities complement one another to work effectively as a team. Additionally, they will require time to become acquainted with one another's working styles before reaching high productivity levels.
2. Costs associated with maintaining an in-house team and the risk of turnover. Payroll, taxes, insurance, training, and IT infrastructure maintenance are all costly. As a result, you cannot guarantee that your employees will remain on-site throughout the project's duration.
3. Inadequate expertise. Naturally, you cannot assemble a team with all of the necessary skills and roles. Nonetheless, as the project progresses, you may require additional competencies, for example, to resolve unforeseen issues or complex technical tasks. It will take longer to control them using existing resources (and possibly other training) and slow development.

Outsourced development

Today, outsourcing software development is motivated by more than cost savings. According to the requests Relia Software receives as an outsourced development provider, an increasing number of businesses are looking to outsource complex development needs. This is all about optimization: rather than investing vast resources in developing necessary competencies in-house, they can acquire them quickly and at a lower cost.

Outsourcing is a good fit for startups without established development teams and non-IT enterprises undergoing digital transformation, where time and budget constraints prevent the IT department from expanding with a full-scale development team. Additionally, outsourcing enables product companies to accelerate time to market and scale their operations through increased development output.

Pros of outsourcing

Access to the best talent. You are not bound by geography and can access the global talent pool to acquire the skills you require, including those in emerging technologies and niche domains. Additionally, you can choose destinations that offer a better price/quality ratio than others (some examples are provided in the article by Relia Software's Chief Technology Officer Le Truong).

1. Cost savings. There are no costs associated with in-house development, such as recruitment, salaries, and retention.
2. Rapid project initiation. You get an assembled team whose members are likely to be familiar with one another from previous projects, which means you avoid internal collaboration issues and save time by not having to hand-pick each employee.
3. Management efforts are reduced. You receive a self-managed team, which frees up your resources to focus on more strategic business activities.
4. Flexibility. It's easier to scale an outsourced team up or down in response to changing business needs. When a project expands and requires additional resources, a vendor will add the appropriate specialists to the team.

Streamlined development and problem-solving effectiveness. You integrate into established processes, many of which are already automated and refined according to best practices (e.g., DevOps, continuous integration/continuous delivery). Generally, a vendor's teams have extensive experience resolving development challenges due to the variety of projects in which they have been involved. Additionally, they have access to the knowledge that has been accumulated within their organization, which is invaluable if problems or non-standard tasks arise.

Cons of outsourcing

Control over the project is diminished. The development process is not as transparent as in-house development, raising questions about a vendor's performance.

There is a possibility of communication breakdowns. Time zone differences, cultural differences, and insufficient English proficiency may impede effective collaboration.

Possibility of a breach of confidentiality. Sharing business information carries some inherent risks due to the human element and insecure communication channels.

The existence or absence of outsourcing-related risks is vendor-dependent. I recommend avoiding vendors with the lowest prices – this is a very short-term savings strategy that is likely to result in the above-mentioned negative consequences. It's better to prioritize value for money: by selecting a more established vendor, you may pay more initially (though still significantly less than hiring an in-house team) but will save money in the long run due to the high quality of their work.

To learn how to find a reputable vendor, read another article written by Relia Software's Chief Technology Officer Le Truong.

So, how do you choose?

When deciding between in-house and outsourced development, the primary considerations are the amount of time and money available and the complexity of the software to be developed.

However, if you want to take advantage of the benefits of both approaches, you can employ one of the following hybrid strategies:

Develop an MVP with the assistance of an outsourced team and then gradually expand your in-house team for further evolution and maintenance.

If your organization already has a development team or an IT department, you can explore alternatives to full outsourcing, such as a dedicated team or staff augmentation. These models enable you to retain control of core development activities while outsourcing routine or, conversely, narrow areas of development.

If you choose to leverage the benefits of outsourcing, whether through complete outsourcing or a hybrid strategy, our team at Relia Software is ready to assist you; contact us.