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The Pros and Cons of In-House vs. Outsourced Software Development

Nacho De Marco
Nacho De Marco

Determine how best to develop your software.

When evaluating your software development needs, at some point, you'll need to decide whether to develop in-house or use a software outsourcing partner.

In-house development involves working with the existing skills of your internal team to create your software. Outsourced software development involves working with a third-party team that has specialized skills and expertise.

There are benefits and drawbacks to both options. When considering which route to take, companies should consider a number of factors before making a final decision, including communication, time to market and risks.

There is no "one size fits all" approach to developing software. In most cases, a company's individual needs will clearly define its exact requirements.

With this in mind, here is a list of the pros and cons of each option as a way to offer some clarity to companies making this challenging decision.

The pros of in-house development

Straightforward communication

Communication in software development is key. According to a whitepaper published by cloud application developer OSF Global Services, 70% of all failed outsourcing projects fail because of miscommunication.

In-house teams work together on a daily basis. They share the same drive to achieve goals and have a mutual understanding of their company's vision. Clear communication boosts morale, increases productivity and results in better-quality software.

Furthermore, there usually aren't any language or major cultural barriers to contend with when development is handled in-house.

Unlimited access in real time

Choosing to develop your software in-house gives you the luxury of having a development team on hand whenever you need. In-house development teams can act immediately. They can make updates quickly, fix bugs as they're discovered and carry out emergency work as soon as it's needed.

Having a development team on hand at all times can sometimes give management a little bit more control over a project. They can keep a close eye on its progress and steer it back on course should it take a wrong direction.

Coding to company standards

Ensuring that coding standards are met can be easier with an in-house team. Consistent, quality code is essential for the future life of your product. Every business has its own set of company standards that employees are expected to adhere to. In-house development teams are no different, and all team members must follow best practices and comply with all coding regulations.

With an in-house development team, it's easier to regulate the standard of work and provide feedback when expectations aren't met. Having more control over the quality of work can help you avoid potential issues down the line.

The cons of in-house development

Lack of skills

In-house development teams are only as strong as the skills they collectively possess. According to Deloitte's 2016 Global Outsourcing Survey, 31% of companies outsource their development to enhance service quality.

Before embarking on a software development project, companies need to assess the skills they already have to determine what might be missing. For example, user experience might be a major focus of a project, but the in-house team may not have the relevant knowledge. In such cases, outsourcing could be a better option, as companies can access specific expertise and only pay for what they need.

Budget and resources

Developing software in-house can be tough on a company's budget. If skills gaps are identified, employees either need to be upskilled, which can involve enrolling in training courses, or new staff needs to be hired to fill the gap. Recruiting is an expensive process, and the digital skills gap of today means that in-demand developers expect to be paid premium rates for their work.

In the U.S., for example, a junior Python developer is paid an average salary of $87,000, with senior developers paid almost double on average. And it's not just the cost of hiring that can be expensive. Annual salaries, benefit packages, employee pensions, ongoing training and other overhead costs all come with the territory when a company has a full-time in-house development team.

The pros of outsourcing development

Quick time to market

One of the biggest benefits of software outsourcing is the likelihood of projects being completed and launched within the desired timeframe.

It's not uncommon for companies to underestimate the time it takes to develop a product. Software management company QSM reported that the average development project takes just under 12 months to complete and requires 11,414 hours of work. External development teams are used to working with tight timescales and have robust processes in place to ensure a seamless workflow.

At BairesDev, for example, our workflow is characterized by a "design thinking" mindset. This approach works well for us because it ensures that milestones are reached on time. We have a five-step approach to software development: empathize, define, ideate, prototype and test. This methodology enables us to execute projects quickly, without compromising on quality.

Reduced project risk

Working with a software outsourcing partner can alleviate risks. Although every development project carries a certain level of risk, having an experienced outsourcing team on hand can help in identifying potential pitfalls early on. To keep issues to a minimum, most outsourced development teams will put an efficient risk management system in place.

As part of our outsourcing service, we conduct feasibility studies to validate ideas and their associated technologies. We deliver proof of concept, develop prototypes and ensure that testing is carried out at set periods throughout the development life cycle.

Access to skills and expertise

A core benefit of outsourcing is access to a worldwide pool of development talent. Statista reports that software application development was the most commonly outsourced function by IT leaders worldwide in 2017.

A software outsourcing provider can bridge skills gaps and complement core competencies. External developers offer access to a wide range of expertise that can help turn a specification into reality. Their experience enables them to build products with scalability in mind, and implement key functionality that will serve the product well in the future.

Software outsourcing companies provide access to the best developers in the world. Companies don’t need to compromise on the quality of their product just because they don’t have the skills in-house to build it.

The cons of outsourcing development

Restricted communication

Unlike with in-house development, time differences sometimes mean that outsourced development teams aren't immediately accessible, which may restrict or limit communication. A good outsourcing company will work from convenient time zones and have clear communication guidelines that outline preferred communication methods and office hours.

For companies that choose to outsource their project offshore, time zone compatibility, language barriers and cultural differences can sometimes be challenging to negotiate.

Limited control

Companies often have less control over outsourced projects. Outsourcing development requires a certain level of trust, and it can be difficult for companies to relinquish control to an external team. This is especially true if there's any concern over a partner's capabilities.

Outsourcing can make it more challenging for companies to check if a project is on target to meet its deadlines and to verify that the quality of work is up to standard. A good outsourcing team will keep customers updated regularly throughout the development process and provide them with access to project management tools.

Image Credit: REDPIXEL.PL/Shutterstock
Nacho De Marco
Nacho De Marco Member
I am the Founder and Chief Executive Officer at BairesDev. I am responsible for implementing and ensuring the successful management of the business and setting future strategies aimed at positioning my company as the #1 software company in the region. I hold a Bachelor’s Degree in Systems Engineering as well as a Master of Business Administration. I was born and raised in Argentina and I am an eager traveler who has visited over 50 countries. I speak 4 languages and I'm currently a resident of San Francisco, CA.