The way you spend your time and money can make or break your business. Nowhere is this clearer than making the choice between keeping your…
The way you spend your time and money can make or break your business. Nowhere is this clearer than choosing between keeping software development in-house or outsourcing it. You need software that is simplified, reusable and, above all, that works. But what is the most resource-efficient way to develop it?
Some IT decision makers like to use in-house teams because they have institutional knowledge, while others love the quick access to expertise that comes with outsourcing a project. So what are the pros and cons of each? And is there a better way?
Comparing in-house and outsourced software development
| Internal | Outsourcing | |
|---|---|---|
| Popularity | Common among larger companies or those with specific, unique requirements. | Common among companies of all sizes, especially startups and small and medium-sized companies. |
| Forms | Ideal for projects that require rigorous supervision and control, as well as in-depth knowledge of the business. | Ideal for projects that require specific expertise or when there is a need to reduce costs or speed up delivery. |
| Main advantages |
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| Main disadvantages |
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| Cost benefit | It may not be as cost-effective due to high overheads, but it offers greater control over resources. | Generally more profitable due to lower wages and operating costs in other regions. |
| The infrastructure | Requires existing infrastructure and resources or requires investment in them. | Provided by the outsourced company, reducing the need for investment in infrastructure. |
| Training | It may require staff training, especially if new technologies are involved. | Less training is typically required as outsourcing often involves hiring experts in their field. |
| Communication | Perfect communication due to co-location. | Requires more structured communication; Time zone differences can be a challenge. |
| Flexibility | Limited by the skills and availability of the internal team. | High as there is the ability to scale up or down quickly based on project needs. |
| Security | High; because you have full control over data and information. Explain: Since all work is done in-house, it is easier to control and protect confidential information. | It can be high, but it depends on the outsourcing partner. Explain: You must rely on the partner to maintain security, which must be clearly defined in the agreement. |
| Tools and Processes | Chosen and controlled by your internal team. | Often dictated by the outsourced company, but can be negotiated. |
| Agreements | Long-term commitment to hiring and maintaining an internal team. | It can be short-term or long-term, depending on the project and the terms of the contract. |
To choose between keeping software development in-house or outsourcing it, you'll need to know more about each. In-house development means you must assemble and manage a team yourself. You pay each employee's salary directly and often house them in your IT organization at your headquarters.
Outsourcing software development services, on the other hand, means hiring a third party to do the development for you. The location of your outsourced team will differ depending on the company you work with. For example, offshore software development occurs in foreign countries. Close to the coast, software outsourcing goes through companies located closer to your location. In the case of the United States, nearshore software development often occurs in Latin America.
The Pros and Cons of In-House Software Development vs. Outsourcing
IT decision makers have a lot to consider when determining whether to pursue software outsourcing. For example, statistics show that the virtues of software outsourcing have made it a popular option, as 54% of North American companies use outsourced teams to connect with software development services/software outsourcing/with their customers. But why?
Forty-five percent of companies that use outsourcing do so to control costs, while 46% say it helps them access a broader set of skills than in-house teams can offer alone. So what makes some IT decision makers choose to migrate operations in-house? Here's an overview of the pros and cons of each.
The Pros of In-House Software Development
- You can feel more in control of your project: When development is in-house, your team can be just a hallway away. This makes it easier to hold in-person meetings and provide requirements, feedback, or approvals. And having a local team makes it easier to adopt company culture and standards as the development team becomes part of the company.
- Long-term development can be easier: In-house teams are often suited to long-term projects. These developers learn the details of your project and its history, giving them the right foundation to make changes or fix bugs quickly. However, there is always a risk that a high-ranking employee will leave your company. If this happens, you will have to spend time recruiting a replacement yourself, which could slow down your project's progress.
The cons of in-house software development
- In-house teams are expensive: Hiring talented developers directly is expensive as you must provide all benefits in addition to salaries. You must navigate the overhead costs and find a new project in your organization for your employees after the current project is completed.
- Hiring internal teams takes a lot of time: Before starting work on a new project, you'll have to spend a lot of time recruiting, negotiating salaries, and determining benefits packages with developers to fill gaps in your current team. Not to mention that big companies like Google and Amazon have already hired most of the good developers. This can affect your ability to meet deadlines if you are on a tight schedule. Outsourced development companies have a highly specialized team ready to work at any time.
- You must cultivate your own technical expertise: An in-house development team has no one to turn to when problems arise, which is taxing on existing technical experts and can require extensive training, which consumes hours and resources. Hiring additional senior professionals also puts a strain on your budget, so your team may be faced with complex challenges.
The Pros of Outsourced Software Development
- Reduced operational costs: An outsourced software development team can help you reduce operational costs in several ways. Eliminates recruitment and training costs. You also won't have to pay for equipment or brick-and-mortar overhead.
- Greater development experience: A specialized outsourcing company that focuses solely on software development can achieve greater levels of accuracy than any in-house team. They give you instant access to highly experienced employees, no matter when you need them. Specialized teams create highly accurate, effective and on-time results.
- You are free to focus on your core business model: By outsourcing your software development projects, you put them in the hands of experts. This eliminates all the headaches and complications that could divert resources from your business model and goals. This frees you up to work on your core business model and expansion goals – which is what you should be free to focus on anyway.
The Cons of Outsourced Software Development
- Poor logistics: It can be difficult to coordinate meetings, phone calls, and deadlines when working with an outsourced team. When working with an offshore team, for example, significantly different time zones can mean communications will be scheduled at inconvenient times of the day — or even in the middle of the night.
- Lack of frequent communication: Offshore development companies often hire people who may not speak the same language spoken in your company. Or there may be cultural barriers that make communication difficult. This is why, if you are choosing an outsourcing company, you should look for one that is nearshore and has multilingual experts.
How to transcend the limitations of in-house software development with Nearshore outsourcing
As important as time and money are to your business, there is another equally valuable resource: people. This is what gives outsourcing an advantage over in-house development; offers access to the best talent and diverse skills, at a price that helps control costs.
But not all outsourcing is created equal; Nearshore outsourcing is far superior to offshore outsourcing. Nearshore developers are closer to home, which makes it easier to control their development projects. They often operate within a similar culture, have teams that speak a common language and are located in similar time zones. So not only does this make communication easier and more convenient, but the right nearshore outsourcing company can contract projects in just 72 hours.
Your time and money are precious. So why shoulder the workload of in-house development or waste time on miscommunication with offshore companies? Nearshore development solves these problems – and develops software to your specifications – right in your backyard.
