According to a survey conducted at the end of 2020 by The Boston Group, 96% of companies examined will accelerate their digital transformation initiatives.
Lowering costs and reducing time-to-market are the driving forces for companies to outsource their software development. Software development outsourcing or homegrown increased capabilities? The answer is never black or white.
Next, you’ll see a list of the pros and cons of software development outsourcing vs. in-house outsourcing. Go through all listed arguments and decide which one works better for you.
Five pros of software development outsourcing.
- A fast approach to hiring high-quality developers.
The hiring process takes time and takes over the bandwidth of HR teams, especially if your core business is not directly related to software development. A specialized recruiter will allow you to build teams much faster and also, given that the costs of hiring nearshore are around 30 and 45 percent less than hiring on-shore, you’ll have access to a larger pool of developers with diverse capabilities and tech stacks.
Outsourcing enables you to hire a team of professionals only for the amount of time required by a specific project or the demands of your business operations. Partnering with a nearshore IT Services provider can also allow for quick changes on your team’s assembly if the project calls for it without affecting budget, time-to-market, or performance.
Every project is specific and needs a team composed according to the specific requirements. As a result, with outsourcing, you can scale up the team of professionals specialized exactly for that specific project.
- Short term commitment
While you need an expert in a field for a specific project, you probably don’t need him or her permanently. Outsourcing IT experts on a project basis enable you to get the best only when you need it the most.
- Reduced costs
A top-level professional that can’t be productive all the time costs a lot of money. In this case, outsourcing can get you a high level of productivity at reduced costs. For example, studies show that with outsourcing the savings on overhead costs can be up to 60%.
Five cons of Software Development Outsourcing.
- Quality control
It is much easier to control the level of quality produced when you can physically approach and speak to your software engineers than to put the vital phases of your project in the hands of someone you’ve never seen, and then hope for the best.
Software development is a collaborative process. So, hiring freelancers from different cultural backgrounds can be a huge challenge for mutual understanding of specific requirements. Possible problems appear also from the language barriers, which might hinder a fluent collaboration.
- Logistical challenges
Working with a developer from a different time zone is challenging for both sides. Especially when picking the time for a conference call, and the deadlines are adapted to a one-time zone, but not to another.
- Commitment to the project
Although it sounds great to have a freelancer developer available only when you need him or her, this developer very likely won’t just sit still and wait for your call. Likewise, he/she will work on other projects as well. Independent software development companies also work with more clients at a time. Meaning that your project won’t receive 100% of their commitment.
- Security and confidentiality
Companies face security and confidentiality risks even in-house. A project shared with outsourced resources becomes risky, taking into account the project’s confidentiality.
5 main pros for having in-house software development
- Long-term product development
If you’re developing a product or a solution that will require a long-term commitment, then it’s better to build a team of developers in-house. Since, they can be fully committed to this product, know it inside out, and easily and quickly make changes or fixes when needed.
- Aligned interests
If a company is thriving, all employees have aligned interests and share the same vision. It means that they will give their best to meet the company’s goals. Such a commitment is hardly possible with freelancers who are not fully involved in your business.
- Company‘s culture fit
It’s important to collaborate with people who fit your company’s culture. Having in-house developers who are nothing more than capable to do the job, but who get along with you and your team is usually more productive than trying to work with the best specialists who are a poor culture fit.
- Shorter turnaround time
Developing a product in-house enables you to monitor all the steps in the process. If something goes wrong, you can spot it immediately. Therefore, turnaround time in fixing the problem is shorter than it would be in the case of outsourcing.
- Alignment with the company‘s standards
Control over the company’s coding standards is crucial for the future life of the product. With the in-house software development, you can decide what’s best for the future maintenance processes of the product.
5 main cons for hiring in-house developers
- Time-consuming process
It takes time to find the right developers and negotiate with them to join your team. And even then there is a possibility that they won’t be able to join right away. If the clock for your project is ticking, you need the right persons now, which you can get with an outsourced freelancer or specialized vendor.
- Technical expertise
Unless your company has a large IT department or an unlimited budget to hire a wide range of IT professionals, most probably you won’t be able to cover all your specific needs with dedicated experts.
- Limited funds to hire a talent
Hiring a talent costs a lot of money. Do you need an expert in a certain field on a full-time basis? Will he or she payout in the future, after your project is finished?
- Side costs
Annual salaries, benefits packages, overhead costs – it all comes with a full-time in-house team.
- Overload of in-house IT resources
If the project for which you need developers is not the core business of the company, such a project could be a huge burden on your IT resources. And an overload usually results in unsatisfied employees and non-optimal products.
Trends in outsourcing
According to Deloitte’s 2016 Global Outsourcing Survey, outsourcing is expected to grow, particularly in Finance, HR, and IT.
The same survey reveals that the primary reasons for outsourcing are cost-cutting (59%), focusing on core business (57%), and solving capacity issues (47%).
One of the survey’s key findings points that outsourcing is becoming more important in enabling mergers and acquisitions deals.
Did you know that Skype, Github, MYSQL, and Slack were built with outsourced development?
Which side of your scale outweighs in the dilemma: in-house or outsourcing? Leave a comment below.