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Outsourcing Software Engineering Teams VS. In-House Development: Cost and Other Perspectives



Consider you have a requirement of creating a web application for enhancing the design of your website. While starting on the development of this project, the executive management of your company is faced with the question: how do we transform this concept into reality and how will we put the team together which

would deliver? In this blog, we aim to help you make an educated decision as to what makes the most sense for this project: in-house development or exploring whether the managed team outsourcing model might help you achieve the company objectives. We will break down the strengths and weaknesses of both outsourcing and in-house development in detail, which can help you further understand the unique benefits of both.


In-House Software Development

What is in-house software development? When we say “in-house software development,” we’re referring to direct hires that were recruited by your internal team. Having an in-house software development team has many advantages. For example, by managing the entire recruitment process you have the highest level of control over who you’re bringing into your organization. Let’s look at some of the other advantages of in-house software development, starting with culture fit.


Advantages of In-House Software Development


Culture fit

An external agency can easily screen candidates based on technical expertise but addressing the issue of culture fit could be a bit more tricky. By carefully overseeing every step of the recruitment process yourself, you know you're bringing in the talent for your organization which is in line with the culture of the organization.


Allows you to build internal expertise

Experience and expertise is one of the most important factors for companies when evaluating candidates for a software development role, and with good reason: software developers build up expertise and become more efficient over time. Hiring developers directly and on long term contracts allows you to benefit from the experience they gain through the completion of each new project.


Reliable communication

In-house developers generally have a better understanding of your company’s expectations and internal processes, leading to better communication and allowing teams to get more done with less back and forth.


Disadvantages of In-House Software Development


While having an in-house team offers plenty of advantages it also has its fair share of challenges which the organization would need to keep in mind. Let’s explore some of the most significant disadvantages and limitations of in-house development, starting with high cost.


High cost

The cost of maintaining in-house development team is higher than with outsourcing. Maintaining internal technology development teams, the organization would be responsible for the benefits, training, insurance, bonus among other incentives mandated by the government.


With the outsourcing alternative, all of the additional benefits are included in the contractual price. Another important factor is the cost of recruitment, something which could be unpredictable and difficult to quantify with an in-house team. Keep in mind that, when working with a firm, there may be a margin on top of what you might expect to pay an outsourced freelancer – but it will still likely add up to less than an in-house employee all things considered.


The organization loses valuable time

Having your in-house team develop a process for recruiting software development talent from scratch is probably an inefficient use of time and resources. Managing the process internally with an inexperienced team often leads to inconsistent results.


Even small teams with experience hiring software developers might choose to outsource the process to save time and allow their in-house team to focus on other initiatives which might add value to the core business. Without access to a reliable and diverse talent pool, it’s easy to drain lots of time and resources on the recruitment process, which might add little or no value to the business growth objectives of the organizations.


Limited talent pool

Shortage of skilled talent is a huge issue which companies are often grappling with specially in developed economies. Add it, issues around the quality of talent pool available at the disposal of a company could pose significant hiring challenges. By limiting your search to people who live in your immediate area or are willing to relocate, you are only scratching the surface of the available talent pool. Keep in mind that the cities with the most developers are usually the most competitive.


Available of good quality tech talent would be an issue while considering to go with the option of in-house software development.


Lack of versatility

Most in-house software development teams specialize in one area more than others. Bringing developers in-house that specialize in the niches that are most relevant to your business makes sense from an operational perspective, but also presents a challenge when launching a new product powered by an unfamiliar technology.


This blog is an excerpt from our ebook entitled The Ultimate Guide to Building a Virtual Software Product Engineering Team.



Know more about the difference of outsourcing software engineering teams and in-house development. Download a copy of the ebook for free HERE.