Comparison of in-house software development vs. outsourcing, featuring pros and cons of each option

If you're looking to develop your new software solution, one of the biggest questions you must ask is In-House Software Development VS. Outsourcing, which is better for you? 

Like most things in life, this is more complex than we might love, but you can jumpstart your project correctly with the right information and guidance.

It would be best to consider several factors, such as the timeframe, budget, available expertise, and communication. Feel discouraged? Fear not – in this article, we will detail the pros and cons for each option so you will have the right tools to make the perfect decision for your business.

What is in-house software development?

In-house software development means having your internal team handle the development process. With that in mind, you must consider certain critical aspects of creating and managing your team, such as recruitment of staff, interviews, and onboarding.

In-house software development is a highly popular option, especially for companies with extensive and constant work – it comes with some opportunities and risks – more on that further down.

What is outsourcing software development?

Outsourcing software development means handing the ropes to an external development team – no need for recruitment and handling your team. Worldwide companies of any size use this option to develop, launch, and scale software solutions.

Similar to in-house software development, there are opportunities and risks you must consider, so in the following rows, we will have a detailed look at the pros and cons of each.

What are the pros and cons of in-house software development?

In-house software development pros


  • Better overall communication 


Managing your team makes communication more accessible, faster, and more precise. You can expect status updates as often as you like, and communication blockers are less frequent and much easier to handle. 


  • Better quality assurance


Having direct control over the ropes of the project means your team will know the ins and outs, and you will have an easier time ensuring the best quality assurance possible.

Of course, that's easier said than done, as you need professional Q.A. processes and knowledgeable staff to make it happen.


  • Better cultural fit


An integral part of the recruitment process is ensuring your hiring fits your company culture well.

While this sounds hard to quantify, if your company has a well-developed culture, it will be much easier for your H.R. department to find the right match.

Culture is important because it speaks to the overall ambiance and feel of your working environment – having people with the same vision and values can skyrocket your company's efficiency and creative capacity.


  • Faster – more flexible processes


Any project, no matter how flawlessly executed, will have its downs. That means that problems will arise, and fast problem-solving is required.

Having your in-house team means that you can tackle challenges immediately rather than waiting for an outsourced team to respond.


In-house software development cons


  • It's usually more costly


Having an in-house development team has its perks, but also comes with a price. According to Payscale, the average I.T. developer salary in the U.S. is $71,508.

When you add indirect costs such as vacation, sick leaves, insurance, social security, employee benefits, office rent, administrative fees, and the cost of the recruitment process and onboarding, only then can you get the complete picture. 


  • Less return on investment


If you look at it only from a business perspective, having high staff costs means you need to keep them busy to make it all worthwhile.

Many companies struggle with providing consistent work to their internal development teams. If your team is idle, you must accommodate their salaries no matter what.


  • A lack of know-how and expertise


Bringing on board highly skilled staff is costly, and can take months to find the right match.

Outsourcing Software Development teams usually have diverse skills and know-how because they must adapt to various industries, projects, and requirements. 


  • Slow time-to-market


If speed is critical to your project, there might be better options than in-house software development.

While it has its advantages, it's usually difficult to predict the workload, and you might find yourself in a position where you will need to prioritize tasks and projects, thus sacrificing the initial deadline.


  • High turnover can be your enemy



Imagine having most of your software solution done and planning for the official launch when suddenly you cannot keep your initial deadline because some of your best team members are leaving the company. While this situation might seem overly pessimistic, it's not unheard of – this will probably push your launch to a further date and increase your costs as you will be required to restart the recruitment process.

What are the pros and cons of outsourcing software development?

Outsourcing software development advantages


  • Access to a global pool of talent


When outsourcing software development, you're not limited by your staff's skill set and expertise.

No matter the project complexity, technology stack, or industry know-how required, you can access virtually an unlimited pool of talent to suit your project needs.


  • More cost efficient


Outsourcing software development can be more cost-efficient because you don't handle recruitment, salaries, administrative fees, etc.

Furthermore, you can hire a team on a project-based contract – so there is no need to struggle with downtimes and idle staff.


  • Faster time-to-market


You can be straightforward with the project requirements and deadline, and the right software development outsourcing team will comply to meet those expectations.

They will do whatever it takes regarding extra staffing, assigning the right experts, and managing priorities to meet the agreed launch term.


  • Shared responsibility across the board


When you outsource, you also share the responsibility with another team. Because they will be bound by contract and care about their market image, you can rest assured they will express a high commitment to the entire project.


Outsourcing software development disadvantages


  • Communication challenges


While this is an obvious con, it can be resolved if you make it a critical consideration when 

choosing the right outsourcing software development partner. Language barriers can harm your project development, so if you're a U.S. or U.K.-based company, you must ensure that the outsourced team has a high level of English proficiency. 


  • Culture fit considerations


Similar to the communication challenges, culture fit is equally important. You need to ensure that the hired outsourcing team has similar values to your company and a similar work ethic.

This, again, can be overturned if you make this a priority when choosing your new partner.


  • Security and confidentiality concerns


Because you're handling the driver's seat to another team, you will need to provide them with information that might be confidential.

We encourage you to sign an NDA and check what safeguards they have in place to ensure your data security.


  • Management and logistics considerations


Managing a team that is not your own is undoubtedly more challenging. The level of control is lower, and logistics might become a real issue if you're not thoughtful.

When conducting the interview, ensure they have clear procedures to ensure excellent project transparency and ask about logistics such as common platforms, I.T. infrastructure, management, and communication applications to ensure a frictionless collaboration.

What is more expensive, outsourcing or in-house development?

Based on our experience and the above overview, in-house software development is more expensive in most scenarios than outsourcing software development.

Of course, that's only sometimes the case because each project, internal, and outsourcing team is different, so context is king.

If you need to hire your internal team for one precise project, it will be more expensive. If you don't have a constant flow of projects and work for your internal team, it will become more costly because you will need to accommodate their costs no matter what.

If you outsource your software development, it's likely more cost-efficient, but please consider the country-specific fee differences and the level of quality you get for your buck. 

Why would one outsource software development rather than in-house development?

Outsourcing software development offers more flexibility. You have complete control over costs, you gain access to know-how that would be otherwise difficult to obtain, and you can more easily reach the agreed time-to-market.

In certain situations, you could get the best of both worlds using both in-house and outsourcing simultaneously. One practical scenario is to use your available in-house team as a baseline and extend its capabilities, know-how, and available resources through an outsourced software development team.

No matter your decision, we encourage you to balance the advantages and disadvantages of both options.

Let's chat if you're looking for a senior outsourcing software development team to complement your exciting in-house team or want someone to pilot your project successfully.

Article written by Andreea Florescu, Recruitment Specialist

Andreea is an experienced recruitment specialist located in New York (US) who help organizations find the right person for a particular role. For the past years she was part of scaling teams for top companies in the tech world.