In house vs outsourcing software development – which option will be better for the company’s success?
This question is in the minds of every business owner especially when they have to choose between both. Each strategy has advantages and disadvantages and the selection depends on your business needs.
Current Fortune 500 statistics show that 90% of these companies use both outsourcing and in-house software development.
To help you make an informed decision, we’ve gathered information to help you choose the best one for your business. So if you’re unsure whether in-house or outsourced software development would benefit your business, this blog will help you make the better decision.
So, let’s dive in!
What is In house Software Development?
In-house software development or insourcing means the company uses its resources and employees for software development without involving third-party employees. This approach uses internal employees’ expertise to perform a particular task. This approach is a great option for those who want greater control over their product and the process.
An in-house team is like the backbone of your business.
Developing the internal team requires time and work. The lengthy process of posting a position, reviewing applications, sorting them, setting up and conducting interviews, and selecting qualified applicants are all part of it. However, it will benefit you in the long run.
The survey found that several organizations opted for insourcing to have more control over quality, procedure, and intellectual property.
Moreover, in-house developers are employees of a company, and they don’t have to work in one office. They can work from anywhere, but they are fully dedicated to that company.
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Advantages and Disadvantages of In-House Development
Look at the below table and understand what advantages and disadvantages are offered by in-house software development.
| Advantages | Disadvantages |
| Full Control | Limited Skill Set |
| Ability to manage the development process directly, ensuring alignment with company goals. | A software development house may lack expertise in certain areas, leading to potential knowledge gaps. |
| Customization | Recruitment Part is Tough |
| Tailored solutions that fit specific business needs without the constraints of third-party software. | Hiring skilled developers can be a lengthy and resource-intensive process. Finding candidates with the right expertise and cultural fit often requires extensive interviews and assessments. |
| Confidentiality | Regular Payment Without Any Assignment |
| Sensitive company information and intellectual property remain within the organization. | Regardless of project assignments, you must regularly pay salaries and benefits to in-house staff. This can strain budgets, especially during periods of low workload or project downtime. |
| Immediate Support | Dependency |
| Quick response to issues or changes due to having the team on-site. | When your project relies heavily on a single in-house developer, any absence whether due to illness, vacation, or personal issues can severely impact progress. This dependency can lead to project delays and increased pressure on the team. |
| Team Cohesion | Resource Management |
| The development team can work closely with other departments, building better communication and collaboration. | Managing an in-house team requires additional resources, including training, tools, and infrastructure. This can complicate operations and increase overhead costs. |
| Long-term Investment | Risk of Obsolescence |
| Building internal expertise can lead to better long-term outcomes and innovation. | Technology grows rapidly, and in-house solutions may become outdated without regular updates. |
When to Opt For In-house Development?
An in-house software development can be the right choice for those who:
- Have projects that involve sensitive information
- Have long-term projects with larger budgets
- Want to use existing resources
- Want to develop secure solutions
- Want to have full control over the project
- Want direct communication with team members and avoid any misunderstandings
Examples of In House Software Development
Here are some examples of in-house development that give you a better idea.
Custom CRM Systems
Companies develop tailored customer relationship management (CRM) systems to meet specific business needs, streamline customer interactions, and improve sales processes.
Internal Communication Tools
Organizations may build internal chat applications or collaboration platforms to enhance communication among employees, especially in remote work environments.
Project Management Software
Businesses create custom project management tools to track progress, manage resources, and coordinate team efforts based on their unique workflows.
Inventory Management Systems
Manufacturing and retail companies often build specific inventory management solutions that cater to their operational requirements, offering real-time tracking and reporting.
HR Management Systems
Human resources departments often build tailored solutions for managing employee data, recruitment processes, and performance evaluations.
Financial Management Software
Businesses can develop software to handle accounting, budgeting, and financial reporting in a way that aligns with their specific financial practices.
Training and Development Platforms
Organizations may create e-learning platforms to deliver training programs tailored to their employees’ needs and skill development.
What is Outsourcing Software Development?
Outsourcing software development is the process of hiring a third-party service provider or team to develop a software product on a contract or ongoing basis. In recent years, this approach has become increasingly popular and businesses can find the resources at a fraction of the time and cost.
“The important thing about outsourcing or global sourcing is that it becomes a very powerful tool to leverage talent, improve productivity, and reduce work cycles.” – Azim Premji, Chairman of Wipro Limited
Outsourcing has three models:
IT nearshoring: working with a neighboring country with no time zone differences
IT offshore: working with a company incorporated in an outside/foreign country
Onshoring: companies can work with outsourcing agencies locally
92% of G2000 companies use IT outsourcing, according to ISG.
Moreover, outsourcing IT development is a highly cost-effective strategy that helps companies avoid significant infrastructure costs, including offices, computers, and software licenses.
According to Grandview Research, by 2030 the global outsourcing market is expected to reach $525 billion.
Advantages and Disadvantages of Outsourcing
Here are the outsourcing software development pros and cons.
| Advantages | Disadvantages |
| Cost Savings | Loss of Control |
| One of the main benefits of outsourcing software development is reduced labor costs and operational expenses. | Less direct control of outsourced tasks. |
| Access to Expertise | Communication Challenges |
| Specialized skills and knowledge from external providers. | Potential language barriers and time zone differences. |
| Focus on Core Activities | Quality Risks |
| Frees up resources to concentrate on core business functions. | IT Outsourcing development software faces the risk of lower quality if the provider does not meet standards. |
| Scalability | Security Risks |
| Ability to quickly scale operations up or down based on demand. | Sharing sensitive information with third parties can pose risks. |
| Increased Efficiency | Dependency on Third Parties |
| Streamlined processes and faster turnaround times. | Over-reliance on external vendors may lead to issues. |
| Access to Global Markets | Cultural Differences |
| Opportunities to enter new markets and access global talent. | Different business practices and cultural misunderstandings. |
When to Opt For Outsourced Development?
Hire an outsourced team of software developers is best if you have:
- A complex project needs specialized skills of developers that are not present at the in-house
- To work with exceptional talent at a low pay salary
- To save you time in a lengthy recruitment process
- A project that needs to be completed quickly
Examples of Outsourcing Software Development
Following are examples of outsourcing software development.
UI/UX Design
UI/UX is one of the best examples of outsourcing. By outsourcing the UI/UX and product design needs, companies gain access to top-notch talent and a global network of creative professionals. Using this approach businesses can get success in design projects.
eCommerce Solutions
Outsourcing e-commerce solutions is increasing rapidly due to the world of digital commerce continuing to change. Companies often focus on core business activities while delegating specialized tasks to development teams. They get several benefits such as:
- Flexibility in scaling development resources
- Access to the latest eCommerce technologies
- Enhanced focus on strategic business initiatives
How Much Does It Cost to Outsource Software Development?
Outsourcing software development is a popular business strategy for those who are looking for a cost-effective and efficient solution to their development needs.
According to Statista, the revenue in software development outsourcing is expected to grow to $587.30 bn USD by 2027.
When considering outsourcing for your business, it’s important to understand that cost varies in different regions. The below table shows the estimated cost of outsourcing for various roles in different regions.
| Role | Western Europe | Eastern Europe | Asia | North America |
| Software Developer | $70 – $120 | $30 – $60 | $20 – $50 | $80 – $150 |
| Graphic Designer | $50 – $90 | $20 – $40 | $15 – $30 | $50 – $100 |
| Project Manager | $60 – $100 | $25 – $50 | $15 – $35 | $70 – $120 |
| Customer Support | $40 – $70 | $15 – $30 | $10 – $20 | $40 – $80 |
What Is the Difference Between In-House Development and Outsourcing?
The table below shows the key differences between outsourcing vs in house that help you to make an informed decision based on your project’s needs.
| Factors | In-House Development | Outsourcing |
| Control | High control over the development process | Less control; relies on external teams |
| Cost | Generally higher due to salaries and benefits | Can be lower; costs vary by region |
| Expertise | Direct access to team expertise | Access to a wider pool of specialized skills |
| Communication | Easier and more direct communication | Potential for delays and misunderstandings |
| Flexibility | More adaptable to changes and feedback | This may involve formal processes and delays |
| Time to Market | Can be faster for iterative changes | May be slower due to coordination needs |
| Focus | Focused on company culture and goals | Possible misalignment with company objectives |
| Intellectual Property | Better protection of proprietary information | Risks of IP exposure or misuse |
| Scalability | Limited by internal resources | Easier to scale resources up or down |
| Long-Term Commitment | Requires ongoing investment | Can be project-based with less commitment |
Conclusion
Now, it’s clear that in house vs outsourcing software development has advantages and disadvantages. Budget, team size, project requirements, and deadlines are all important factors to consider when deciding whether to go for in-house or outsourced software development. Choosing the best one increases the chances of achieving project success.
If you’re still unsure which path to take, consulting with experienced professionals can provide the clarity you need. At NinjasCode, our experts are ready to help you with this decision, offering tailored solutions that meet your specific needs. Whether you’re looking to build an MVP, develop a mobile app, or launch a complex software solution, our team is here to support you every step of the way.
Schedule a meeting with us today, and let’s build something great together.
FAQs
- Why would a company choose in-house software development?
Here are some reasons that show why a company chooses in-house software development.
- Protect sensitive data
- Retain internal expertise
- Better control over the project
- Why is in-house development better than outsourcing?
In-house development is better than outsourcing for these reasons:
- Greater control over the business operations
- Direct communication
- Scalability
- Cultural alignment
- Is outsourcing cheaper than in-house?
Outsourcing is cheaper as compared to in-house development. With outsourcing, businesses can reduce expenses such as infrastructure, recruitment, and more.
