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Insourcing vs. Outsourcing IT Services: What Is Better?

Insourcing vs Outsourcing Software Development: Pros and Cons

Eventually, all business owners have come to a point where they have to decide to insource or outsource a critical function. For some, software development is the task in question. 

Both insourcing and outsourcing are workable options, so there’s no concrete right or wrong answer. Every business is different, and its needs are not always the same. Before you decide which is best for you, be sure you know what both options entail and the benefits and drawbacks of each. 

Let’s dive all in and go over everything you should know about insourcing and outsourcing software development. 

Difference Between Insource and Outsource

Insource, also called in-house, refers to a business function completed by team members within the company. Typically, employees on payroll work full or part-time who have access to the office, its technology, and supplies to get a task completed. 

Outsourcing refers to hiring a third-party organization to complete one or more business functions. This team gets paid on an hourly or project basis for a flat fee. Some outsourcing companies are within the US, but many are located overseas. 

The IT outsourcing industry continues to grow as an increasing number of businesses are taking advantage of the excellent benefits. 

Pros and Cons of Insourcing and Outsourcing Software Development

There are advantages and disadvantages of both insourcing and outsourcing. You will want to weigh each pro and con to determine which you can work with and which are deal-breakers. 

Pros of Insourcing Software Development

  • Your team is near you or in-house for face-to-face communication to collaborate throughout the project.
  • You have more control over the leadership and day-to-day work completed on the project
  • Your team can solely focus on your project rather than have other clients to serve 
  • There’s typically little to no language barrier
  • Modifications to your project get completed on the spot quickly 
  • Team possibly has extensive knowledge of your business and goals
  • Easy for long-term product development 
  • Since you do the hiring, you can choose developers that fit in with your company culture 

Cons of Insourcing Software Development 

  • Typically it's a lengthy and time-consuming recruitment process to find qualified developers
  • Access to limited technical expertise which may hinder product features 
  • Projects cost more to complete with high salaries, benefits, and additional overhead costs
  • You end the project with a full-time team on salary
  • The reduced focus of other IT projects and needs
  • Risk of developer turn-over and needing to put the project on hold to start the recruitment process again 
  • You are responsible for providing costly updated technology and supplies 

Pros of Outsourcing Software Development 

  • You have affordable access to high-quality expert developers with extensive knowledge 
  • More flexibility with projects  
  • Costs less - pay for only the services you need – when you need it
  • Able to scale quickly with little effort on your part 
  • Short-term commitment
  • Ability to have multiple projects worked on simultaneously with access to a larger talent pool

Cons of Outsourcing Software Development

  • There are possible language barriers 
  • Less quality control on your part
  • Possible logistical challenges
  • Security and confidentiality risks

Should You Choose Insourcing or Outsourcing Your Software Development?

There are many pros and cons for both insourcing and outsourcing software development. So which is right for you? Let’s dive deeper: 

Insource software development 

It typically makes sense to insource software development when you have a long-term or continuous project. When you have a project that will take years to develop and modify, it generally is good to have a full-time team in-house working on it. 

Keep in mind, a long-term team in-house requires you to work with and manage the staff to ensure a smooth process. Your employees can solely focus on your projects which sometimes means it gets completed more quickly. 

If budget isn’t an issue for the project, insourcing may be a great option so you have more control over the day-to-day workflow and can quickly make modifications on the spot with deployment. Without tight budgets, if your team makes a mistake, it’s not a big deal, and you can allow them to learn as they go. 

Outsource software development

If the budget is limited or you’re just not wanting to break the bank to complete projects, outsourcing makes the most sense. If you outsource overseas, their cost of living is typically less than in the US, so their services are not as costly. 

Many overseas outsourcing companies have a pool of highly skilled and experienced developers to complete even the most challenging projects. If you tried to hire the same skill levels in-house, it would be extremely costly to have them on payroll full-time. So you have access to higher expertise for a fraction of the cost. 

If you have multiple projects that need developing simultaneously, outsourcing is best since you can choose a provider that has a team large enough to handle the workload. Outsourcing works great for one-time projects and ones that you need to be deployed quickly and don’t have time to recruit developers to get the job done. 

When you outsource your software development projects, your internal team can stay focused on other tasks and core business functions to maximize productivity and efficiency. You avoid bogging down your human resources by recruiting developers and a team for the project. 

Questions to Ask Before Deciding to Insource or Outsource Software Development

How long will this project last? 

When you know the project’s duration you can make a better call whether to insource or outsource software development. 

Is this project directly adding to a core function? 

If the answer is yes and you want the project done as quickly as possible, outsourcing is the way to go as the developers are already on staff with the third-party company, so they can hit the ground running right away. 

Insourcing is a workable option if a project isn’t urgent, and you don’t mind waiting to get it completed. The recruitment, onboarding, and training process take time, so you must be patient and willing to wait it out. 

What will this project cost me to develop? 

To truly understand your in-house and outsourced software development cost, you’ll want to spend a little time with pencil and paper to jot down all the expenses. 

Remember, you have to figure in salaries, benefits, taxes, technology, supplies, and overhead costs when you insource. You can’t forget the cost of recruitment, onboarding, and training as well. 

The company might charge by the hour or a flat fee per project when you outsource, so it’s easier to understand your total costs. The outsourcing company is responsible for any expenses related to technology, supplies, and training, so you’re off the hook there. 

Do you need the skills on staff? 

Experienced software developers, especially ones with niche skills, are in demand and hard to find. Recruitment may be challenging, and when you find a qualified developer, you can be sure they’re expecting a high salary with benefits. 

You’ll want to ask yourself if you really need this talent level on payroll or if it makes sense to outsource and pay per project. One complex project can sometimes require a team of developers and professionals to complete. 

What skill levels do you need for the project? 

Software development is for sure a technical job that requires a specific skill set. You’ll want to look at every aspect of the project to understand any niche skills levels you need to develop the software to your liking. 

You may need to hire several developers to handle a specific project, so you want to be sure they have what it takes to get the job done successfully. Trial and error can be extremely costly, so be sure the developers have experience in the task at hand. 

What are my risks? 

There is the risk of costly mistakes when you insource software development. Would errors set your project back and cause major issues? Would outsourcing your software development to a third party be a huge security risk or low possibility?

Insourcing doesn’t mean you’re safe and free of security risks, though. There’s still the possibility of employee theft of data or systems failing and causing data breaches. 

How would you handle quality control? 

When you insource software development, you retain control of the project, including the quality and ensuring standards are met. You can collaborate with your internal team daily if needed. 

Outsourcing software development means you give up some control of the project and the quality delivered. You essentially are putting the quality control in the hands of a third-party project manager. Which has proven to be still effective and produce high-quality software, but you want to be sure you hire a reputable, experienced company

Is control or innovation more important to me? 

If you’re a control freak, you may decide to insource software development. If developing innovative software with unique features is a top priority, outsourcing is best since you have access to a higher skill at a lower cost. 

How important are time and money when it comes to this software development project?

Typically insourcing software development takes more time and money than outsourcing. So if your project is on a tight budget with limited time, outsourcing is the way to go. If time and money aren’t an issue, weigh your options for insourcing. 

What skills are needed? 

Before you decide to insource or outsource software development, you’ll first want to check the skill levels you need to get the job done successfully. You may have to consult with developers or a team of knowledgeable individuals to determine what’s needed. 

Then you will want to check to see what skill sets you have on staff currently. That is if you already have a team of IT professionals. That will let you know if you’ll need to go through the lengthy recruiting process or not. 

Would a hybrid solution work best? 

A hybrid approach would include insourcing and outsourcing software development. If you already have some of the skill levels needed to develop software but not specific expertise for parts, you can have your in-house team do what they can and outsource the rest. 

The hybrid approach isn’t always the best solution and sometimes has bumps in the road while one team develops parts of the software and another group on others. Some businesses like this method as their internal team can do a bit of learning and practice. 

Choosing The Right Outsource Software Development Company

When you decide outsourcing software development is the best choice for your project, the next step is to find a company to partner with. It can be intimidating if you’ve never outsourced before, but when you partner with the right company, you’ll see it’s an excellent decision. 

You’ll want first to be sure the outsource software development provider can deliver the product you need with the quality you desire. It’s best to have an in-depth discussion with the outsourcing company to ensure they’re on the same page and completely understand your wants and needs. Getting an estimated completion date will give you an idea if the company can develop your software when you need or want it. 

You will want to get a bid in writing from the company to understand how much the project will cost to complete with them. The company you choose should be excellent communicators to avoid issues due to miscommunication. 

When you are confident the outsourcing provider you interview is the one for you, it’s time to get started. Be sure to give them as much data as possible about your expectations, goals, and any input you have. 

The more info you provide them, the more likely they are to meet your expectations. 

The Takeaway

A company must weigh their options before they choose to insource or outsource software development as there are many advantages and disadvantages to each. Each project is different with distinct needs, so you may decide to insource one and outsource another. 

Software development requires a specific skill set many companies don’t standardly have full-time on staff. If a company chooses to insource, it must take the time to recruit qualified professionals. Insourcing software development is typically more costly and time-consuming than outsourcing. 

Outsourcing software development saves a business time and money and provides access to a higher skill set to get the job done successfully. 

Are you ready to outsource software development to the pros? If so, contact Awesome CXtoday.



IT Services Outsourcing Market Bigger Than Expected | Accenture, IBM, Fujitsu – Business | IPSNews

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