In-house vs Outsourcing Software Development: The Pros and Cons

In-house vs Outsourcing Software Development: The Pros and Cons

September 15, 2022
LUAN CAMPOS
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If you're wondering if outsourcing is the best path forward for your company, we'll discuss the pros and cons of both in-house and outsourced software development in this article.

Tech job posts nearly doubled in 2021, while the number of applicants has decreased by about 25%. Coupled with the digital-first transformation and the demand for data-driven business strategy, this market shortage has left many companies struggling to find the talent they need to fill their software development teams.

Increasingly, businesses clamoring to find the manpower to develop software applications are turning to outsourcing. How does this shift affect the quality of software? If you're wondering if outsourcing is the best path forward for your company, we'll discuss the pros and cons of both in-house and outsourced software development in this article. As is usually the case, the best option for you will depend on your particular circumstances. There are benefits and drawbacks to each choice.

What Is In-House Software Development?

Developing a software application either can be handled by a team employed by your company, or you can hire outside developers to do it. In-house software development involves using your own internal team to create your software. If you already have a large DevOps team, this can be a great option. However, if your company doesn't have a software team in place, or your software team is already stretched, it can be expensive and time-consuming to hire and train new employees.

One of the biggest obstacles to in-house software development is the shortage of skilled tech talent. While this shortage isn't new — in 2009, over 50% of CEOs were already worried about the shortage of tech workers — the accelerated digital transformation spurred by the pandemic has widened the gap.

Advantages of In-House Software Development

There are many advantages to having your software developed in-house.

Better collaboration

Agile software development is a collaborative and iterative process that requires a lot of internal team communication. Your team is used to working together every day. They're already accustomed to your workplace culture and procedures.

As current employees, they're also already familiar with the problems you're trying to solve with your software build. Whether you're developing software as a product or to make your internal workflow more efficient, an in-house team understands what you need from your software.

More control

Using an in-house team gives you more control over the development process. You know what all of your team members are working on at all times. Developing in-house makes it easier to ensure your QA standards are met, including compliance with data security.

You can stay updated on the progress and all iterative changes along the way. Your internal team can make as many changes as you want, and you'll have more input into the features and design of the software.

Subject-matter expertise

When you outsource your software development, you'll (hopefully) be working with a team of programming experts. However, you won't be working with people who are experts in your field. When you use your own team, they'll have access to subject-matter experts who can bring quality and authenticity to the project. Additionally, your team will be experts on the software they build. They'll be more likely to identify vulnerabilities and flaws as well as have the expertise to support the software indefinitely.

Hand-picked development team

Your team is made up of people you've picked yourself. You're able to choose people for each position based on their skills and qualifications. Software development teams need a senior software engineer, several programmers, a designer, a project manager, a product manager, and a testing specialist. When you've picked people for those roles, you know they're qualified and can handle the job. When you outsource development, you have no idea who is on the team or what their qualifications are.

Commitment and focus

A development firm or freelance developer will probably have many clients. They won't be solely focused on your project. An internal team will only be working on your company's software, so their focus and commitment will be 100%.

Increased security and confidentiality

With an in-house team, you won't have to worry about your IP rights or the security or confidentiality of your project. Your employees are trusted members of your team and are bound by confidentiality agreements. Additionally, you have all rights to the work products of your team.

Agility and flexibility

Your team will be working on your project full time, so they'll have more agility to iterate and the flexibility to respond to issues immediately. With this flexibility, your project may be completed earlier and deployed to market faster.  

Long-term commitment

If you're using an in-house team, you don't have to worry about follow-through. If your project needs extended support, your team can provide it indefinitely. An internal team can also continue to improve, troubleshoot, and update your software. When you work with firms or freelancers, you have no idea if they'll still be available if you have problems or want to add features to your project. You may need to switch developers, adding to the time and expense of the project.

Disadvantages to Developing Software In-House

Although there are a lot of benefits to developing your own software internally, there are some significant disadvantages that make it prohibitive for many companies.

Expense

Software developers aren't cheap. The competitive market has only increased salaries and benefits for developers. The average pay for a software developer is $73,000, not including benefits and bonuses. Senior developers and those with specialized skills make even more. The cost of hiring your own team is often much higher than the cost of outsourcing your software development.

Talent shortage

You may not have a choice about outsourcing if you can't fill the roles you need to round out your software development team. The digital-first transformation is driving a tremendous demand for skilled tech workers. This demand comes at a time when there was already a shortage of tech workers. In the United States, there were almost one million unfilled tech positions at the end of 2019, a shortage that only increased during the pandemic.

Almost 60% of companies are planning to invest in emerging tech, but many are coming up short on filling the positions needed to implement these changes. For many companies, staffing an internal development team traditionally may simply not be an option.

Lack of specialized skills

Tech skills are rapidly evolving. One-third of the skills needed for tech jobs in 2017 are now obsolete, and the average tech position requires workers to increase their skills 10% each year. Even if you have a fully staffed development team, they may not have the specialized skills they need to keep pace with the newest technologies.

In-house vs Outsourcing Software Development

Delayed start

Unless your team is fully staffed and ready to go, you may have to delay starting on your project. Hiring tech talent can be a long, expensive process, and your project may sit around stagnating while you're sifting through applications and conducting fruitless interviews.

Staff churn

According to a survey by TalentLMS, as many as 72% of US-based software developers plan to leave their job in the next 12 months for reasons such as a lack of opportunities for career advancement, an inflexible working environment, and a toxic workplace. Even if you manage to put together a perfect team, there's a good chance one or more of them will leave during the project.

If part of your team leaves in the middle of a project, progress may come to a screeching halt while you scramble to replace them. This urgent hiring process is even more expensive than traditional hiring, and it will add to the cost and time it takes to complete your project.

Strain on your IT team

Adding a big project to your existing team may overload them. Since most companies have open tech positions, adding to the workload of an already strained team can lead to a negative working environment and unhappy employees.

Tips for Hiring Your Own Software Development Team

If your company has the budget and is up for the challenge, here are some ways you can grow your own internal team:

Implement an efficient vetting strategy

One of the most time-consuming aspects of hiring tech talent is making sure they have the skills to get the job done. You can learn a lot by sorting through applications and looking over past experience, but resumes and even degrees are notoriously unreliable as an indicator of hard skills. It's also extremely time-consuming to sort through hundreds of applicants, many of whom are woefully underqualified.

A more efficient method is to outsource the vetting process so that you only have to interview qualified applicants. There are many platforms available to offer pre-employment testing. Some will even allow you to post a link with your job ad, so that applicants have to pass a qualifying test before they can apply for a position.

Make the most of the interview

Once you've narrowed down the pool of applicants to those who have the hard skills you need, plan to make the most of your interview time. Ask the type of probing questions that will let you measure their soft skills and their fit. No matter how talented a developer is, if they can't communicate or collaborate as part of a team, they won't bring value to your company.

Upskill or reskill your current workforce

You may find that the talent you need is already working for you. If you have smart, ambitious workers, upskilling or reskilling can be a great solution. It will take some time, but continuous talent development is an important business strategy for businesses that want to maintain a competitive edge. With the rapid development of technology, even if you hire skilled workers, their skills will soon become outdated.

A talent development program is the only way you'll be able to keep your team qualified for the changing landscape of technology. An added bonus is that employees are more likely to stay with a company that invests in their career growth.

Work with a talent partner

For companies that want to grow their team immediately without investing months into finding and onboarding talent, working with a talent development partner could be the answer. Revelo lets you source and hire prescreened, talented developers who are located in US time zones. You can grow your remote team without the delay or hassle of testing and vetting candidates.

Revelo offers a 14-day free trial, so you can see if a candidate is a good fit with no risk. The process is also a great option when you want to get your team up and running without delay. The first hire is usually completed within 30 days,  compared to the months it takes to hire traditionally.

Advantages of Outsourcing Software Development

There are also pros and cons of outsourcing software development. Some of the main advantages are:

Cost-effectiveness

Because you're only paying for the service and you don't have to hire employees and pay benefits, outsourcing is usually much cheaper. You're not on the hook for payroll taxes, insurance, or benefits. If you're working with a software development firm, they'll bear the costs for their employees, and if you're working with a freelancer, they cover their own costs. The lower cost is probably the biggest benefit of outsourcing for most companies.

Faster turnaround time

Software development firms or freelancers do this for a living, so they're ready to start on day one. You won't lose time assembling a team and training them to work within your company guidelines. Professional developer services will have established workflows that they're accustomed to using to finish jobs quickly. Although an internal team may have a faster turnaround time if they are an established DevOps team, outsourcing is usually quicker, especially if this is your first project.

Efficient processes

There's no need to reinvent the wheel when you outsource. You'll need to provide a brief and explain exactly what you're looking for, as well as any compliance issues that need to be addressed, but a professional firm has probably dealt with these issues while working on other projects and likely has established procedures in place.

Scalability

If you plan to get several different projects deployed quickly, you can easily scale by outsourcing. You can hire 100 different firms to get 100 projects going simultaneously, as long as your budget allows it. While you may not need to scale that drastically, outsourcing allows you to have many dramatically different and specialized projects going at once.

No long-term commitment

When you hire your own team, you're making a big investment in onboarding and training them. This investment may not be feasible if you just need a small application or you won't need perpetual development and support. When you outsource, your commitment is limited in scope and time. For speculative projects, a long-term commitment may not be warranted, or you may want to see how your software is received on a trial basis before you fully commit.

Learn More: Software Engineering vs Software Development: What Does Your Team Need

Disadvantages of Outsourcing Software Development

The drawbacks to outsourcing can include:

Logistical challenges

Trying to schedule meetings with developers in different time zones can be a nightmare. In addition, if you have a bug or security issue that needs to be fixed immediately, you may not be able to reach your developers if it's 3:00 a.m. in their time zone.

Less control

When you outsource your development, you'll have less control over how the final product turns out and less input along the way. You can schedule check-ins and ask for iterations, but ultimately, you won't have the same amount of say in the process as you would if you were using an internal team.

Lack of confidentiality

Using an outside developer means exposing your confidential plans and designs to people who aren't directly answerable to you. Although you hope it won't happen, an unscrupulous developer could steal your project or parts of your code for personal gain or use them elsewhere.

Possibility of bad code

Open-source code is used in almost all applications. It saves time and money, and it's a very common practice. Although parts of your code may be bespoke, much of it will probably be open source. There's nothing wrong with using open-source code, but there are some issues that have to be navigated effectively. The most important issues to address are security vulnerabilities and licensing restrictions.

Some projects are a combination of two or more different open-source projects. Each open-source project may have a different type of license, but you have to comply with all of them. If you're not aware of the open-source code that's used in your software, you may not be aware that you have to comply with the licensing agreements.

The biggest issue with open-source code is the security risk. One of the biggest security breaches in recent history, the Equifax breach, happened because an open-source code vulnerability wasn't patched. If you outsource your software development, you may not be aware of the security risks and vulnerabilities that need to be addressed.

Problems with communication and collaboration

One of the main reasons companies outsource is to save money. Often the biggest savings is obtained by using software developers from other countries, where it costs less to hire them. However, this often leads to problems with communication and collaboration. If your software team is working while the rest of your company is sleeping, you'll miss out on the opportunity for real-time collaboration, which can significantly slow the progress of your project.

Another obstacle to effective communication with a software team in another country is the language difference. You may be hampered not only by not speaking the same language but also by different cultural norms that can cause confusion.

How to Outsource Software Development

Outsourcing software development is a growing trend, driven largely by the lack of skilled tech workers in the US. You have several different options when it comes to outsourcing.

Hiring freelance software developers

You can use platforms such as Upwork to hire freelance software developers. This option will work better if your project is small. Trying to assemble a team comprised of different individual freelance developers would be a gargantuan task. The difficulties associated with collaboration and communication would be much worse with freelancers who aren't used to working with each other.

Local software development outsourcing

If you live in a large city, you may be able to find a software development company that's local to you. This will probably be the most expensive option, but you'll be able to communicate effectively and likely feel more included in the process.

Nearshore software development outsourcing

Companies looking to save money but still minimize language and cultural barriers often choose to outsource to nearby countries. You'll save money with this option, and often be able to collaborate in real time, since the time difference is minimal.

Offshore software development outsourcing

Offshore outsourcing involves working with companies that are far away from you, often Asian countries. This may be your cheapest option, but it's also usually the most problematic in terms of communication and logistical issues.

Alternatives to Outsourcing Software Development

For companies that would rather avoid the hassles of outsourcing but are having trouble filling their open positions, working with a talent marketplace like Revelo offers the best of both worlds. You can benefit from the reduced cost of working with developers from nearby countries and still have the advantages of working with your own internal team.

We work with you to understand exactly what you need. We help you find, hire, and manage your remote team of developers from Latin America. You'll still be able to conduct interviews and find the right candidate for your company's culture, but you'll know that everyone you're considering is qualified, so the process will be much quicker and more efficient.

Revelo prescreens developers for you, ensuring they're qualified in both hard and soft skills and fluent in English. Our end-to-end remote talent solution lets you focus on growing your team while we handle onboarding, payroll, benefits, and local compliance. You can start hiring remote developers today or contact us to discuss your specific situation and find out how we can help your business achieve its goals.

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