Why is software development outsourcing better than in-house for most businesses?


Gosia Korzeniewska



What is outsourcing?

Outsourcing means employing outside staff, be it a consultant, freelancer or company. While some businesses choose to outsource onshore, i.e. employing people from the same country, others prefer to hire staff from more distant locations, which is often referred to as offshoring. Although slightly different in terms of the benefits and risks, both options are gaining popularity, as awareness is growing that outsourcing has many advantages which can’t be achieved through building an in-house team.

Software development outsourcing

Outsourcing is now widely used to hire staff for a variety of positions. With software development having become an integral part of most businesses, employing outsourced software developers also isn’t uncommon.

With technology becoming increasingly popular, both customers and businesses expect technological support for virtually every activity they perform. In order to meet these demands, companies are investing more money in software-based solutions. With large sums at stake, it’s extremely important to choose the best method of software development for your projects.

Software development - outsourcing vs in-house

Software development outsourcing – best choice for most projects

Despite its constantly growing popularity, some people are still wary about choosing software development outsourcing. However, the truth is that unless you are working on a long-term project which will ensure substantial sustainable cash flow as well as provide enough work for the developers in the long run, you’ll be much better off with software development outsourcing than with building your own in-house team.

You will benefit from software development outsourcing if your project:

  • is long-term but will have periods of break or less activity
  • is short-term
  • is seasonal
  • will require maintenance after launching but there won’t be enough work for a full-time, in-house team
  • requires a variety of skills and specialisations from programmers
  • isn’t directly related to your core business, i.e. your core business isn’t software development
  • you have an in-house software development team but you need to be able to scale up quickly for a limited period of time to meet peaks in seasonal work
  • you don’t as yet have a sufficient income from operations to commit to hiring a long term in-house development team
  • In other words, having an in-house team of developers is generally a must for companies whose core business is dependent on software development, for example Facebook or Google. Such a company sells and makes a sustainable profit from products made in a large part by its developers. For most other businesses, however, software development outsourcing is by far the most convenient option.

Outsourcing vs in-house development – which is easier to manage?

At first glance it may seem that managing an in-house development team is much less of a hassle than working with developers who aren’t based onsite. It is true that communicating with an in-house team is generally easier and you do get complete freedom to manage the team and their tasks, as well as the opportunity to thoroughly supervise their work.

However, in order to manage an in-house team of developers, you either need to have substantial knowledge of software development yourself and invest time in co-ordinating the team, or you will need to hire a qualified specialist to do so, which means spending more money on another regular salary.

When outsourcing software development to an outside company, the management of the team of developers is left to the firm’s own project manager or CTO. Although this removes the possibility of overseeing all the work of the developers, at the same time it removes the strain of management from you. What’s more, hiring in-house requires development and maintenance of an internal recruitment process, which may take some time to become efficient. When outsourcing, talent recruitment, training, motivation and management of the developers is handed over to a specialised service provider.

IT outsourcing – lower cost without giving up high quality

Hiring developers in-house involves paying a regular salary, regardless of whether there is valuable work for the programmers to do. Since many websites, mobile apps or software products require more than one developer to construct, you may need to hire more staff, at the same time having to invest in more salaries.

Employing in-house also often means having to spend time and money on training your developers prior to starting work on the project, as well as paying for their further self-development, holidays and sick leaves. Then again, if your project is long-term (lasting at least a couple of years) and what you create is part of your core business, investing in your team does seem to be a good idea. But beware: you may come across difficulties in providing task versatility and challenges to keep your developers motivated in the long run, which may lead to a decrease in overall work efficiency.

However, it quite often turns out that after launching an app, website or software, there isn’t enough valuable maintenance work for a full-time developer, let alone a whole team of them. In such situations, which are quite likely to occur, paying one or more regular salaries throughout the year is nothing but a waste of money. This is where the cost asset of software development outsourcing comes in. You simply pay for the development of the product and any necessary maintenance afterwards, instead of first investing in a team of developers and then paying regular salaries all year round.

On top of that, the competitive nature of IT firms means competitive prices, as well as a high quality of services. Software development companies are very likely to try to satisfy and serve you beyond your needs and expectations, so that if you need software development or maintenance of your projects in the future, you will want to work with the same company again.  

Software development outsourcing – more flexibility

Software development outsourcing to an IT company guarantees more technological flexibility, as well as the help and guidance of experts. A versatile software development company can provide you with programmers experienced and specialised in various technologies, enabling you to choose the technology that best fits your needs. If you don’t have sufficient knowledge of programming to reach a decision yourself, you can count on guidance and advice from the company’s professionals.

If you hire developers in-house, you need to have an idea which technology your project will require prior to employing, in order to know what sort of developer to look for. If you happen to need more versatility, you may have to hire a team of developers, since finding one person who is specialised in many programming languages at once may be quite difficult. This means raising the overall cost of the project for the sake of flexibility, which could be gained for a similar or lower price simply by choosing software development outsourcing.

IT outsourcing risks - communication

It’s no great discovery to say that communication is easier when you have your team on-site. Probably the biggest risk of IT outsourcing is the higher possibility of problems with efficient communication, especially in the beginning of co-operation.

The scale of the possible difficulties with communication generally depends on where you outsource to. While outsourcing onshore doesn’t create any language or cultural barriers and still makes it possible to communicate easily during working hours, the same can’t always be said for offshoring. If you outsource to a distant location, for example Asia, it may well be that your team of developers will already be on its way home when you are about start work for the day, which will definitely not help in making co-operation smooth and productive.

Somewhere in between the two options is nearshoring - outsourcing to a nearby country. Nearshoring still allows for efficient communication during working hours and usually doesn’t create such great language and cultural barriers, while being more cost efficient than outsourcing in the UK.

Software development outsourcing - the best choice for most businesses

Choosing the optimal method of software development for a project is definitely not a walk in the park. However, hiring developers in-house seems like a good option mainly in the case of long-term projects which will produce valuable work for the developers in the long run and at the same time will make a sustainable profit. It appears then that the majority of businesses could benefit more from software development outsourcing.

Software development outsourcing guarantees greater versatility in terms of technologies and programming languages, as well as more flexibility in carrying out the project. If funds run out or the project temporarily doesn’t generate a profit, you can always temporarily halt the engagement of your outsourced developers, which isn’t as easy if you have your own in-house team of full-time developers to support.

By outsourcing software development to a company you also gain the support and guidance of skilled professionals, which may turn out to be indispensable if you’re not an IT expert yourself. What’s more, management of the developers is handed over to a specialist, taking the additional workload off your shoulders. And if this wasn’t enough, in most cases software development outsourcing enables you to cut the overall cost without sacrificing the final quality of your project. Could it really get any better?