In-house vs Outsourcing: Which Software Development Model To Follow

Imagine that you have a great idea for a software startup. You want to build your product fast, high quality, and keep the budget low. But how to turn the idea into reality? How to choose between in-house vs outsourcing software development? What are the advantages and disadvantages of two approaches? Continue reading to find out more.

You’ll need to find out the right development team. More importantly, you need to decide to hire in-house developers or outsource software development for reducing additional expenses.

In fact, it’s hard to tell in-house development or outsourcing is right for you. Because each projects have it owns requirements and factors to consider. So let’s take a moment to lay out the difference between in-house and outsourcing software development.

In-house Software Development: Pros and Cons

When estimating a software project, the strategy is the most important part. In-house or outsourcing business models, firstly, you should consider all aspects of your future project such as scope, deadline and budget.

At AgileTech, creating a cost-effective and high-quality strategy is the first thing we do before we start any project. We then invite our client to explain the whole process. Once they approve, we kick start the cooperation.

Nguyen Manh Thang, CEO of AgileTech.

Unfortunately, there is no right or wrong answer to the “outsource or hire?” question in software development. If you are looking for long term development, it’s good idea to hire in-house team. Meanwhile, if you lack of time and money, it’s challenging to find out tech experts. Therefore, many companies decide to outsource software development.

In-house team

What is in-house software development definition? When you build a team from your employees, it is in-house. By hiring in-house, the employees will be trained to necessary level. They most likely continue working with the company.

In other way, if you are a pure software company, the in-house team is the core of your company. They will help you take care of a daily basis, an emergency security breach, or a situation needs to be dealt with immediately.

Moreover, insourcing is about fact-to-fact communication. Communication with teammates is also simplified- no difference time zone, fewer language and cultural hurdles.

Why you should hire in-house team

There are many companies such as PayPal, Amazon or Salesforce building their in-house development team to provide the highest quality products all around the world. Specifically, some benefits of in-house approach including:

• Face-to-face communication. What does it mean when building a team from the same country/city as you are, with the same cultural and language? This may lead to more engagement between team members, better understanding as well as faster progress.
• Easier management process. With an in-house team, you know their abilities of team members and assign task directly. Accordingly, they can stick to your projects. If there is any issues, urgent tasks and fixes can always be prioritized.
• Ability to build company culture. Developers who work with you full-time will understand your company culture as well as a work flow and corporate ethics. Hence, these influence how products are created and, consequently, the final result.
• Long-time relationships. Once a company decide to hire in-house developers, they will invest in their employees’ talents, skills. This cooperation is rewarding not only for your team but for you. They spend time and energy into your idea and have a vested interest in the outcome.

However, in-house development also has its downsides.

The downsides of an in-house team

As mentioned above, hiring in-house team means looking for the right person fit for your culture, requirements and work process. You need to consider many factors like:

• Time. The in-house approach allows you to involve in hiring. Finding new people who make a long-term commitment and training again seem like a never-ending process.
• Staff dismissal. In some cases, if your employees invested significant resources, they would go away. Then, you’ll need to invest in new members of the team again.
• Lack of versatility. There are many frameworks such as Flutter, Laravel, React Native,… Thus, if you start a new project with unknown knowledge, it will take time to hire a professional.
• Quality control. Additionally, training never stops. Many technology trends that they need to update everyday. So the question is how to constantly update their knowledge, skills while making sure they fit your team culture.

In short, in-house software development team can give you high-quality talent with full control. But the cost and time of hiring as well as training staffs can be trouble.

If you want to keep up with the market’s need, training employees is a first priority. Because, the sooner your employees master at their skills, the better newcomers can be mentored. In short, you can reduce the cost of training.

When to develop in-house development team

Are you still considering in-house business model fit your need or not? Let’s answer these questions below!

• Do you have budget for taxes, insurance, payroll law changes, etc.?
• Are your product built to influence your company culture and expectations?
• Do you need to keep your product updated?

If you answer is mostly yes, invest in building in-house team and together towards a common goal. But if you don’t have enough budget and time, it might be better to choose another option — Outsourcing.

Outsourcing Software Development: Pros and Cons

How to decide between in-house and outsourcing? With an in-house development team, you have developers who are seamlessly integrated into your company. Now, let’s see how outsourcing activities can help your business!

Outsourcing team

According to Grand Review Research, the global IT services outsourcing market size was valued at USD 520.74 billion in 2019 and is expected to grow at a compound annual growth rate (CAGR) of 7.7% from 2020 to 2027.

More than two-thirds (68 percent) of large U.S. consumer products companies are currently outsourcing some portion of their workforce.

You may see that outsourcing is one of the most cost-effective and efficient ways to get tasks done. But that isn’t only reasons.

More small businesses are outsourcing tasks these days because technology has advanced to the point of professionals being able to work from anywhere in the world.

Laura Lee Sparks, The owner of Legal Marketing Maven said to Entrepreneur.

She also said: “By outsourcing the day to day back-office tasks, the business owner has more time to focus on generating income.”

Successful companies that outsource software development

• Google. Outsourcing allows them to engage workers with expertise they don’t have in-house.
• Slack. Stewart Butterfield, Slack founder brought his rough prototype to user interface specialists MetaLab.
• Microsoft. Outsourcing suppliers are responsible for managing the day-to-day work of Microsoft’s contract workers. In other words, this brings peace of mind to Microsoft employees while reducing their daily load.
• Alibaba. Working with the outsourcer, Jack Ma was able to build sustainable infrastructure, show its promise, and secure funding for continued growth.

What are the benefits of outsourcing?

If you want to outsource, it will take time to find tech experts that fit your requirements. In addition, each project has its own requirements like budget, deadlines, and necessary skills. So, you should know what kind of talent that you are looking for. Next, searching websites such as Clutch, Goodfirm, etc. to find out your trusted offshore software development company.

Cost-efficiency.

Obviously, the cost of hiring outsourcing team oversea is often cheaper than in-house. Why have to pay a local developer with $150/hr while you may get the work done with less money from another country?

The most emerging countries for outsourcing are UK, Ukraine, India, Vietnam. Take a look at infographic below to see average software developer salaries.

As you can see, there are many countries to outsource with competitive rates. For example, if you hire an outsourcing company in Vietnam, the cost will vary from $10-$25/ hour. While hiring developers in UK, it costs from $

However, comparing labor costs isn’t the only thing you should consider. What about their experience, tech stack, and reviews? In many cases, outsourcing IT contracts cost much more than in-house developers. To be the most effective, you have to do it right the way.

A short-term cooperation.

When outsourcing, you have ability to hire experts on a project without committing long term. And you pay your technology partner once. On the top of that, you don’t have to pay additional expenses.

Huge talent pools.

One of the most appealing advantages of outsourcing is to access a huge pool of technical specialists that have both knowledge and experience.

Offshore software development companies are specialists in very targeted fields, such as web app development, product design, UX/UI, and more. Once you define what kind of talent you’re looking for, it’s time to search for one within specific niche.

Over and above, it can take much less time to find talents. Because outsourcing companies have a wide range of experts in various technologies.

Faster time-to-market.

Outsourcing helps you avoid major hiring process like in-house approach. You can also add features as well as adjust the speed of development process. Thus, this definitely shortens the timing of the product launch.

Focus on urgent tasks.

When choosing outsource software, you have more time to plan your budget or build your marketing plan. If any unusual problem arises, there is no need to hire new specialists to your in-house IT team. Leave all the development routine and issues to your outsourced team.

Streamlined processes.

Partnering with a custom software company, all the work process are properly set up. You can join in development processes and application development experience as well.

Cons of outsourcing software development

Collaboration with remote team from other country also involves some downsides.

Communication.

When working with a remote team, you can’t reach the team in person. Due to the geographical and different time zone, a lot of communication issues arise. For instance, it’s hard to gather a meeting in 15 minutes. Because you hire someone from another country with a 10-hour difference.

But if you have a large time gap with your outsourcing team, it means your company can work 24/7. Or if you hire the nearshore software development company, the different time zone won’t be so large.

How to communicate effectively while outsourcing?

Trust is a foundation. You need to realize that managing remote teams will not get completed at the same level as in office. So there is a way to get around this problem — Hiring a Project Manager.

Project managers bridges the gap between clients and development team. In case of outsourced, they will help you schedule a daily meeting, manage specific project requirements, and make sure everything happens in the proper order.

By having weekly sprints, daily status updates and a constant feedback loop, everything is in progress. When outsourcing in Vietnam, you may think that language is a challenge. At AgileTech, we make sure that our team members can communicate in English well.

Nguyen Manh Thang, CEO AgileTech

Security risks.

The lack of direct in-person control and communications can cause a lack of trust in outsourcing. While hiring in-house developers makes it easier to handle any trust factors. Consequently, signing in an NDA document will help you avoid this issue.

Unsupported code.

Collaboration is a huge challenge when outsourcing overseas. Sometimes, you can’t really expect developers overseas to understand what you’re asking because they are coming from a different context.

Make sure you can maintain the code without contractor involvement. Actually, the quality of the code depends on the integrity of the contractor. Therefore, choosing the right partner you can avoid these cons of outsourcing.

Commitment.

What’s more? How do you make sure the code is high quality? You want your project successful. But for the team, it’s just another task they have to fulfill.

A common practice is listing a portfolio of the firm that has done before. Next, prepare your first meeting and share your values and mission. The more your team knows about your company, the more interested they’ll be in your project.

When should you outsource?

For every company, the right time to outsource is different. The right answer for outsourcing or in-house is really depends on the situation.

Are you a technical founder?

If yes, you’ve already know what to do and see the scope of the project. Hence, you can estimate the time and how many people in your team.

If the answer is no, you should consider outsourcing. They will help you define all necessary aspects with competitive price.

Why should users use your services?

Not only technology, companies also need to outline target audience, explain to the users why they should buy the project, how to deliver the product to the public, and many more.

Nevertheless, in case your idea are already implemented in other projects, try outsourcing software development. It saves both time and expenses.

57% of companies outsource to better focus on their core business.

According to Deloitte’s Global Outsourcing Survey

Is your project scalable?

To make sure your idea into scalable project, first you should make a prototype, or build an MVP. When developing an MVP, you can gather some feedback from a prototype with basic functionality.

In case your product meets the market needs, and you need update to match the upgraded software release, the best choice is to hire outsourcing app/website vendor. While your in-house team will communicate with the project management from the side of the client.

How To Decide Between In-house and Outsourcing

To sum up, both in-house and outsourcing software development model have their pros and cons. In order to hire the right person, you should define your budget, time constraints, and other requirements in your project management.

And actually, most companies often use a mix of both approaches at the same time. For example, when you and your current in-house employees are unable to manage daily tasks, it may be time to consider outsourcing. Then, hiring a dedicated team for particular needs or go for outsourcing relatively small projects which they lack.

As the result, if you have any questions about outsourcing services, we will give you consultation. Here, we can help you find the solutions to your issues.

You can contact us at contact@agiletech.vn or (+84) 936 281 059 for more information.