Every software development company experiences distress when the critical technical requirements of its projects exceed the expertise and workloads of its existing team. In such a situation, it is hard to decide where to go for help without adding an unnecessary spike to your budget. This is why, in recent years, many businesses have shifted towards outsourcing their IT projects with the promise of cost-efficiency and high quality.
Some of the factors that have made outsourcing a more viable option are such as a shorter time to market, a price-quality ratio, and fewer hiring hassles.
The other option is building an in-house team that requires time and investment, but this could be a more suited option in some cases. So which option to consider between in-house vs. outsourcing?
In this blog post, we will discuss the difference between in-house and outsourcing, explain their pros and cons, and help you make the right choice.
Pros and Cons of Managing Projects In-house
There are so many good reasons to leverage the talent that you already have. But your team might not be a perfect fit for everything. Consider these pros and cons of in-house project development.
1. Talent Development
If you need some domain expertise, you can easily upgrade their skills according to their needs whenever required without going outside and searching for new talent. It is difficult when you are outsourcing a team from outside.
Even if you do, you will have to invest more money than what you are already paying to the in-house team to upgrade their skills. A lack of skill set reflects in the product quality later.
2. On-site Availability
Being able to connect helps to work effectively and reduce any misunderstandings. As the team works together within the same office and time zone, it’s easy to get the changes done more quickly. With an in-house team, one can leverage several benefits, such as;
- Long term association
- 100% visibility of work
- IP and Data protection
- Same work timezone
- Better communication
If you are considering setting up an in-house team to develop your software product, be ready to deal with any of these possible challenges.
The cost to hire developers in-house is significantly higher than offshore developers. It’s simply because this cost includes the infrastructure, overhead salaries, other employee benefits, training costs, etc.
2. Lack of Necessary Skills
It is impossible to have an in-house team with all the skillsets and experience. Different individuals have distinct areas of expertise. So as per your project requirements, you will have to hire someone with expertise in your domain.
And this is where hiring outsourced developers come in, as they have an elaborate team with specialists across the technology stack who can be hired on a need basis.
3. Low Retention Rate
Due to the higher demand and luring packages offered by other companies, programmers in western and European countries keep switching jobs more frequently. Thus, there’s always a risk that your lead developer may switch jobs during the crucial phase of the project. Additionally, long hiring cycles are another concern that can create unnecessary delays in project development
Pros and Cons of Outsourcing
You have an in-house team to get things done. If you already have an experienced team of engineers, why would you choose to outsource software development?
There are several benefits of building an in-house team of developers, but your team might not be suited for every project. This is where the role of outsourcing comes into play. Let’s discover its pros and cons.
Let’s look at what you gain with the outsourcing team:
1. It’s Cost-Effective
One of the most significant advantages of hiring a dedicated outsourcing team is saving a considerable amount of money. Hiring an outsourcing partner lets you cut hiring costs, onboard specialists at competitive pricing, save big on infrastructure or invest in large workspaces and resources.
You pay the pre-defined rate per hour or total amount for the entire project as per the mutual agreement. Further, you do not need to pay salaries when the project has been completed and the team is idle. It is the responsibility of the outsourced company to cover all the engineer expenses, such as the offshore development center and work resources.
2. Short-term Commitment
It is the most underrated benefit of outsourcing. Bringing an expert on board without long-term commitments is a great advantage.
As mentioned earlier, outsourcing allows you to hire developers based on three engagement models:
Just to give you a heads-up, here are the resources you might need to build a software, website, or mobile app.
- Team of designers and developers
- Quality Assurance Testers
- Project Manager
- Infrastructure (Hardware and Software)
With outsourcing, you can hire these resources separately or build an offshore development center and make it an extension of your in-house team or company.
3. Core Competencies
According to Deloitte’s 2021 global outsourcing survey report, outsourcing allows businesses to focus on their core competencies and business growth. When you hire an offshore development team, you allow your internal team to focus on other project requirements entirely.
Leveraging outsourcing development services enable you to reassign time-consuming tasks to the external team. Your team can also receive a third-party opinion of your software by outsourcing. As a result, you will be able to make more robust decisions for your core business initiatives.
4. Risk Mitigation
Leveraging offshore development services enables businesses to mitigate risks involved in a software development lifecycle, such as operational risk, schedule risk, and technical.
Partnering with an outsourcing partner means you can efficiently decrease the risk percentage since they are experienced in handling complex projects.
Outsourcing is always bound by a legal contract. It includes the scope of work, NDA (Non-Disclosure Agreement), and other vital aspects like payment, time, performance, and confidentiality.
5. Quick Team Change
If you are not satisfied with the dedicated teamwork, you will quickly get an immediate resource replacement. Many offshore providers offer a replacement within a week from the existing resource pool. However, if the client wants to hire a new developer, your outsource IT services partner will fill in occupancy at the earliest but within a pre-defined period.
With in-house specialists, it’s quite complicated.
Cons of Outsourcing
While having a team offshore software development team that offers several benefits, it also has its downsides. Most of these problems are caused by distance or communication.
1. Lack of Control
It is the most reported concern, where companies lose the project’s traction. This may happen due to the lack of project understanding by the offshore team. In the comparison of in-house vs. outsourcing, this particular point will always be in favor of the former.
While you can always guide your offshore engineers, if your team is not a good listener and competitive, there’s a chance that you will lose control of the project.
But you can avoid this issue by documenting all your requirements, creating milestones, and project charter. This way, you can keep track of the work. In case things go wrong, it will help you to find out the whereabouts of the same quickly. Further, offshore development centers provide you with a team that will work directly under your supervision, providing you with 100% visibility of ongoing operations at all times.
2. Lack of Communication
No matter what the deal, it is always recommended to keep a single point of contact for all your communications. Communicating with an on-site team is far easier than the offshore team.
In the case of offshore development, communication becomes a bit complicated. The issues may arise if your team is in an entirely different time zone. Plus, reliable internet connection and quality are a few more concerns. If you are not getting the expected quality, then what’s the benefit of outsourcing.
But again, it’s easy to avoid these issues by collaborating with a reliable outsourcing partner and finalizing the right communication channels along with meeting times.
3. Data Security
Data security means protecting confidential and sensitive data and infrastructure from malware attacks. Failure to put data security in place leads to data vulnerability resulting in a breach of information, leakage, or deletion of critical data.
- Establish direct communication channels
- Keep track of reporting and documentation
- Be aware of cultural differences
- Consistently execute comprehensive research before deciding on a vendor
- Clearly describe the duration, requirements, and costs of the project
- Make sure you understand the risks and find the company that you trust.
- Place resilient security protocols in place to eliminate data leaks and security breaches.
Originally Published at: In-House vs Outsourcing
Also read: Software Developer Hourly Rate Comparison