Development team for a startup: in-house or outsource – how to make the right decision

If you’re reading this article from here, you’re probably searching for a way to develop a software product. At the beginning of every project, you will probably ask yourself: how do I transform this idea into a lucrative product? Where to find a team that can help me do that in the most cost-effectively way possible? The difficult dilemma between inhouse software development vs outsourcing may confuse some as they don’t know which path to choose.

In this article, we will help you evaluate both pros and cons of these two approaches to software development, and give out our view so that you can make the right choice.

What is in-house software development?

Inhouse software development means to develop an in-house team using company resources to build/ implement/ migrate/… software according to specific business requirements.

With this approach, companies need to invest time, money, human resource,… so that the team is solid enough to develop good quality software. This means they need to be the company’s core competency, have good resources or infrastructure to support their software development goal.

Advantages of In-House Development

Face-to-face communication

Somehow having the same working hours and the proximity to process the work smoothly and conveniently is the best advantage of inhouse software development in comparison to outsourcing. The communication is undoubtedly comfortable and clear as there is no language or work ethnic barriers. With direct conversations or team work at lunch, an inhouse software development team can easily avoid misunderstanding and increase effectiveness.

Company’s culture fit

A team of permanent members from the same company tend to pay much more attention to the company’s specific needs. When being a part of a bigger organization of the same core value, vision, mission and company’s culture, people have more motivation to achieve the best results and bring as much value as possible.

Changes adaptive

It is more convenient and easier for an in-house team to change a project’s features, add new ones, process bugs or discuss their technical background.

Furthermore, companies with in-house teams have full control over the project as they are daily updated about the progress, what employees are working on,. This allows them to react promptly if some stumbling blocks emerge.

Enhanced security

Enhanced security for information and data with in-house software development
The nightmare of any company: information leakage can be wiped out if you choose to build an in-house team. With this approach, your business data and know-how are not shared with any third parties since you keep all knowledge and information of the project inside the company.

Disadvantages of In-House Software Development

High cost

In-House Software Development vs Outsourcing is more costly
This is the main problem of creating an in-house team of IT Talents, as it is much more expensive than cooperating with a third vendor. As stated above, you need to make sure your team is solid enough to develop good quality software, which means the final price will be added up by many expenses namely salary, rent, taxes, software, hardware, infrastructure and many more.

Moreover, you have to pay for other benefits and additional spending to keep your employee happy and committed such as training, sick days and benefits.

Staff turnover

According to a Talent Turnover Rates Report by Linkedin, software had the highest job turnover rate at 13.2% and within this field, user experience designer, data analyst, and embedded software engineer are the titles to have the highest turnover rates

Since Software developers are always in high-demand and rising compensation, they tend to jump ship to a better workplace with higher benefits, salaries, and network. As a result, companies always have to face the challenge with laborers and lose time since finding a new and qualified developer while the process is still running is really time-consuming that it can delay or slow down your project.

Lack of tech talents

Despite the fact that IT is becoming a trendy major in universities around the world, the ever-rising IT market is asking for an overwhelming number for tech specialists. With local companies joining the cut-throat competition for the best candidate, companies have to face the challenges of finding the qualified candidate with proper soft and hard skills, but it needs to fit within the planned budget.

Meanwhile, the number of people you encounter online is probably unlimited, so the opportunity to extend to seeking out employees is really tempting to all recruiters.

What is Outsourcing?

To put it simply, outsourcing is a task delegation. It is an arrangement between a business and a third party software contractor to do any software related work they assign, instead of building an in-house team from scratch.

When comparing between inhouse software development vs outsourcing, this approach saves you more time and cost from hiring in-house employees or infrastructure investment. And for that, many believe that companies whose core competency is not IT is the only client for this service, but it is not true. Famous technology such as IBM, Google, Oracle,.. are among the biggest clients.

Advantages of In-House Development

Cost flexibility

The outsourcing game is more competitive than ever with new players joining everyday, from all over the globe, with all ranges of prices. The most famous countries for outsourcing are those coming from Asia, Western Europe, the Baltics, Eastern Europe, and more. They offer some of the best deals possible with a huge pool of Talents, low taxes, and government support.

Huge talent pools with faster project delivery

When finding the right candidates can cost you weeks or even months, outsourcing companies offer their clients with the best and unlimited hiring opportunities.

Big companies, especially those in Asia have a huge IT Talent Pool of different professionals and skills. Whatever you ask, they offer. This means companies like CMC Global can arrange the interview to find your best engineer within 1 week to start your project as soon as possible. What is more, if you are changing the speed of your development project, you can adjust the number of specialists accordingly.

Moreover, you can choose the right destinations to offer a better price/quality ratio than others (some examples are introduced in here article here:

More technologies to choose from

One software development outsourcing company can offer you a wide range of developers with required skill sets and more. If it’s extremely hard to recruit a Perl developer in your region, vendors from other countries can easily offer you qualified specialists, sometimes at a cheaper cost!

Disadvantages of In-House Software Development

Security risks

This is the main obstacle that makes clients hesitate. Since outsourcing means no face-to-face communication, it is hard to perfectly control the whole development process and thus give out the feeling of insecurity..

Trusted outsourcing companies have the right qualification to persuade their clients, such as NDA Contract, using private networks, remote workplace and so on,… Working with big companies, you are usually guaranteed the protection of all your rights and the project idea

Communication gap

The best strength of inhouse software development team is, of course, the weakest point of outsourcing vendors. Locating in different places may cause several issues that need to be solved despite language barriers, time zone difference, working ethics…

However, IT specialists in emerging outsourcing countries now tend to speak fluent English and have a proper solution for scheduling the meeting using emails and messengers.

Inhouse software development vs outsourcing – which is better?

With all the advantages and disadvantages of In-house software development vs outsourcing, we think you may have the answer to your dilemma. If not, you can count on these three questions to make up your mind:

Does your business benefit from outsourcing?

Traditional business models are facing significant changes across domains. There goes the time when a bank competes with other banks only since now, the new-age Fintech players have joined the game. This means you need to act quick to adjust your company’s digital experiences according to customer insights and digital strategy.

It’s not possible for many SME businesses to get themselves updated in technological trends with the help of internal teams. So for this, ask yourself: can outsourcing prevent me from getting left behind by my competitors? What are my competitors doing and how they are doing it?

What options do I have for outsourced partners?

Not every outsourcing company can offer you the right choice and adapt to the development needs. So for this reason, you should build a criteria list to evaluate potential partners, which can include:

• Do they have the skills you need?
• Can they fit in our company’s work ethic and culture?
• How large and diverse in terms of skills is their team?
• Have they worked with any other customers of our industry or the technology we need?
• Is their pricing policy reasonable?

What are your long-term goals?

You can make the right choice depending on the long-term goals of your business.

If it is just a quick fix, outsourcing is an obvious choice. However, if the problem requires long-term effort, resources, you may need to think about investing in employee training, infrastructure and so on… in the long-term. Many small businesses benefit the most with their policy of upskilling their existing employee or hiring experts in-house. This approach is surprisingly beneficial for long-term goals, allowing small business owners to have perfect control over product’s cost and quality.

Cre: CMC Global