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In-house vs. Outsourced Software Development | Business Perspective

Outsource to a software house or hire an in-house development team – what to choose in 2020? A comparison for app owners from a business standpoint.

Outsourcing software development is a business trend that we strongly believe will keep on expanding in the next few years.

And the motivations for outsourcing are evolving as well. In the past, organizations chose to outsource software development mainly because of the significant cost reduction. Today, this reason is still important, but it’s no longer a priority. The strategy is more about access to top engineering talent and the most innovative technologies.

Consider this: According to a CIO survey carried out by Harvey Nash and KPMG, 46% of CIOs use outsourcing to access skills, with cost savings becoming a lower priority. Moreover, 32% of them plan to increase their spendings on outsourcing.

Still, companies planning to build custom software face this dilemma: Is it better to build an in-house development team or hire an external one?

Read this article to see the most important advantages and drawbacks of each approach, and choose the option that will support your business goals best.

Outsourcing vs. in-house app development – comparison in a nutshell

BenefitsPotential risks
In-house team
  • Engagement and cultural fit
  • Efficient communication
  • Increased agility
  • High costs
  • Difficulty in finding skilled IT experts
  • High staff turnover
  • Time-consuming recruitment and onboarding
Outsourcing
  • Dramatic cost reduction
  • Easy scalability
  • Fast time-to-market
  • Proven workflows and processes
  • Top talent
  • Low-quality code and documentation
  • Business failure
  • Limited control over the development team
  • Communication issues
  • Limited motivation

Please note: You can only avoid the risks of outsourcing mentioned above and fully benefit from this smart strategy by teaming up with an experienced, reliable, and trustworthy company that examines carefully before signing the contract.

Outsourcing software development – pros and cons for app owners

Outsourcing app development is based on delegating the task of building a software product to another company. Such companies are usually advanced consultancies that have top specialists on board and support organizations operating across many different industries.

Software development agencies offer a lot of flexibility in their outsourcing models, providing companies with dedicated development teams, but also team augmentation or body leasing services.

5 key advantages of outsourcing software development

1. Dramatic cost reduction

Sourcing and recruiting talented developers is difficult, expensive, and takes a lot of time. By outsourcing the development of your app, you avoid paying all the costs that come with recruiting and maintaining full-time employees.

📌TIP: Make sure to check whether you won’t have to pay for onboarding new people in your team in case there’s a change in the team’s composition.

2. Easy scalability

Your provider can easily scale outsourced teams up or down to match the changing needs of your product, keep your project lean, and address new business requirements.

Achieving the same level of flexibility with an in-house development team is next to impossible – hiring new team members takes a lot of time, and firing them could ruin your team morale and reputation.

📌TIP: Make sure that the provider is able to set up a dedicated team for your project and that the number of people in the team isn’t fixed, but flexible and can be changed during the development process to match your changing needs.

3. Fast time-to-market

Outsourcing app development means that you can get started on building your product almost right away. Building an internal team of software developers will take you much more time. In our experience, recruiting a skilled specialist takes 2-3 months. Doing that, and then onboarding your team and setting up processes is going to be very time-consuming. Outsourced teams help to accelerate the time-to-market of your app.

4. Proven workflows and processes

Outsourcing providers offer experienced teams that have written many applications for various sectors. They know how to collaborate efficiently, and use well-defined processes and workflows to boost their productivity and deliver excellent quality of code.

Moreover, a software development agency can provide you with all the roles needed for development – not only software developers, but also a Scrum Master/Project Manager, Quality Assurance Engineers, and UX/UI designers. That way, you get a full team that embraces the product holistically. And each of these specialists can draw on the skills and experience of their colleagues with whom they can consult the project.

📌TIP: When talking to a potential provider, ask about their development and QA processes. Check whether the company has well-defined workflows and elements such as tools, meetings, and reports that support transparency and communication between you and the team. 

5. Top talent

Software development agencies are able to hire top IT specialists, offering their outsourcing partners access to unique talent and expertise. You can be sure that the skills of these software developers have been tested in many different projects.

Moreover, people who will work on your project will have access to all know-how of other people in the software development company. They can consult ideas and solutions with them, which is a massive added value that doesn’t even land on your bill. Developers who are part of such agencies can benefit from access to a large community of specialists.

5 potential risks of outsourcing software development

Naturally, outsourcing comes with several risks you should consider before signing the contract with a software development agency.

Before we move on to discuss these risks, here’s a question: How do you avoid them?

The answer is simple.

The best way to avoid the risks below is by teaming up with an experienced, reliable, and trustworthy company.

We wrote an article with detailed tips on how to pick the right software development agency for an outsourcing project, read it here: Choosing a Partner for your Software Product Development

1. Low-quality code and documentation

Sometimes companies decide to switch one development for another or keep on working on their product internally. If an outsourced team fails to develop appropriate code and documentation, transferring the project to another team will become very problematic and involve unforeseen costs (especially if it turns out that you need to rewrite your app from scratch).

2. Business failure

Remember that the software development agency that acts as your outsourcing partner isn’t immune to the common risks businesses face. It can go out of business or be forced to reduce its operation due to staff shortages dramatically. This could pose a risk to your app development project.

3. Limited control over the development team

Outsourcing the critical task of building software that carries a high business value may be risky because you have limited control over the development team. Still, don’t forget that such teams follow project management standards that enable frequent communication, so being left out of the process is highly unlikely.

4. Communication issues

Speaking of communication, another potential risk comes from partnering with an agency located in an entirely different time zone. However, experienced providers know how to deliver optimal services regardless of their location.

5. Limited motivation

It’s easy to monitor the engagement of an in-house development team. Doing the same with an outsourced team is more challenging. That’s why it’s best to partner with a company that provides dedicated teams where each team member works exclusively on your project.

When to outsource your app development?

  • You lack a development team and experience in product development – by outsourcing the process of building your app, you’ll get the benefit from the skills and experience of a software development company that has helped many other business owners to create great products.
  • You lack the necessary specialists – if you’re a mid-sized business with an in-house development team, you might still need specific skills or expertise to make your app successful (for example, roles such as Scrum Master, UX/UI Designer, or QA engineer). Hiring such experts full-time is difficult and costly. That’s why outsourcing makes sense in this case.
  • You want to reduce development costs and speed up time-to-market
    – you don’t have an internal team and you don’t have the time to build, onboard, and maintain one. But you want to build an app quickly and at a reasonable price.
    – you have an internal development team, but don’t want your employees to spend their time on a new app development project. This is where hiring an external team for the job will help you save internal resources for mission-strategic tasks.

In-house software development – pros and cons for app owners

A company that wants to build a software product can also build an internal development team. This entails the process of attracting, sourcing, and recruiting software developers, QA engineers, UX/UI designers, testers, and other professionals required for building a successful product. What’s more, such a team often needs a technical leader who ensures the implementation of best practices and maintains the code quality high.

3 main benefits of building your app in-house

1. Engagement and cultural fit

Software developers who are permanent members of a team are more aware and knowledgeable about the business needs of the company they work for. They’re more engaged and motivated to achieve the best results and deliver value. And if there are any problems, you can see it and react immediately.

2. Efficient communication

Working from the same office within the same hours helps to streamline the communication process, making it clear and comfortable for the entire team. Direct conversations help to save time and avoid misunderstandings, eventually accelerating the development process.

3. Increased agility

An in-house team of software developers can quickly change the project’s features, add new ones, and closely assess their technical background. Internal teams also deal with bugs and errors faster.

3 crucial drawbacks of building your app in-house

1. High costs

In-house development is much more expensive than outsourcing the process to an experienced and reliable vendor. The final price is made of expenses that stretch over a period of time, for example, office rent, taxes, software, hardware, overhead costs, training, sick days, benefits, and more.

2. Difficulty in finding skilled IT experts

The overwhelming demand for tech specialists makes it difficult to find and hire the right professional in some cities or regions of the world. What is more, as a recruiter, you need to be able to source candidates and assess their technical skills accurately (or pay someone who knows how to do it and will do it for you, which generates additional costs).

Nowadays, recruiting competent and skilled employees is challenging. The competition in the IT employer market is strong, so you have to “fight” for the best ones and be able to attract them smartly. Besides, you need to verify their skills thoroughly. Secondly, a fruitful recruitment takes time (and money). In our experience about 2-3 months.

So, if you want to start working on your app as soon as possible, the decision to built your in-house team may be like running into a brick wall.

Thirdly, once you recruit new people, they need time to integrate and acclimate to become an effective team. You don’t have this problem if you decide to cooperate with a software house, because you get team players who used to work together and know how to do that. In this case, you don’t spend your time, money, and resources on staff recruitment and onboarding.

Wojtek Szwajkiewicz
CEO, Droids On Roids

3. High staff turnover

Software developers are aware that their skills are in demand and tend to change their workplace quite often. Finding a new developer for your project can seriously impact your speed and slow down your app development process significantly.

When to develop your app in-house

  • You’re planning a long-term development project – this is where it makes sense to build and maintain an in-house development team that will take care of your product. However, it’s also possible to team up with an outsourcing partner for a long-term, fruitful collaboration.
  • You have lots of money and want to have your team – if costs aren’t a problem, you can allow your team to make mistakes and optimize their process, and don’t need to release your product right away, an internal team is a solution for you.

In-house vs. outsourcing software development – comparison

  • App quality | Outsourcing vs. in-house

Software development companies have battle-tested Quality Assurance processes that guarantee the high quality of the product. Moreover, such outsourcing partners employ many software developers who get to exchange their knowledge and experience with one another. If quality is important to you, it’s best to rely on the expertise and skills of an outsourced team.

  • Time-to-market | Outsourcing vs. in-house

If you’d like to start developing your app as soon as possible, outsourcing is a better option.

By doing that, you won’t have to recruit software developers, deal with the formalities, onboard them, and train them before they get down to developing your app.

Moreover, it will take time for your team to synchronize and optimize their process to become efficient at building software. By outsourcing the development of your app, you’ll get an experienced team of developers who follow battle-tested processes that accelerate the building of your app. You also get to benefit from workshops and consultation sessions that help to clarify your business vision for the app.

  • Cost of outsourcing vs. in-house

Outsourcing comes at a lower cost than building and maintaining an internal development team. When outsourcing software development, you don’t have to worry about any of the costs that come with employing developers full-time such as sick leaves or holidays. You can also benefit from scaling the team up or down efficiently and at a lower cost.

In-house or outsourcing software development – summary

We hope that this article helps you decide which model is the right one for your app development project and business needs.

Choosing between the in-house development team and outsourcing partner isn’t easy because both solutions come with their unique advantages. However, by carefully assessing their drawbacks and considering short- and long-term business needs, we’re confident that you’ll make the right decision.

📌 Read also: Outsource App Development: 16 reasons to do it in Poland + verified companies list

Why outsource your app development to Droids On Roids?

At Droids On Roids, we have been delivering IT skills and expertise for 9+ years to support companies operating across different industries. We have developed 130+ mobile and web applications for clients from all over the world, including the USA, UK, Australia, Norway, and Switzerland.

We have a well-developed 6-steps Quality Assurance process in place to provide our outsourcing partners with high-quality app development services. We follow the Scrum framework and other industry standards that make us an excellent partner for building your app.

Are you looking for an experienced IT outsourcing provider? Get in touch with us; we know how to build an app that supports your business goals.

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