There is constant pressure for businesses to make one big decision: Build their software solutions using an internal development team or hire an outside company to help develop them? Both options have their pros and cons, and ultimately it will come down to your desired outcome and cost factors, as well as your future vision for your company.
What Is In-House Development?
When companies have their internal development, they create and supervise their own team of developers, designers, and engineers within the company. The people who make up this team only develop for the company, and they work in an environment that thoroughly embeds them in the company’s culture and processes.
Pros of In-House Development
- Total Control – You directly oversee (manage) everyone on your team, how things get done (methods), and how decisions are made (decision-making). This means you can make quick adjustments (change) to keep everyone’s goals aligned with the business.
- Very Good Communication – Working together closely helps with collaboration, which means less miscommunication (misunderstandings).
- Knowledge of Your Products – Because you work together (very) closely, you develop a very deep understanding of your product(s), their users, and the organisation’s internal systems; therefore, you will create better long-term innovative solutions for your customers.
- Data Security – Sensitive (confidential) data is housed completely inside your company, which substantially decreases your risk associated with people (a third party or outside your company) that have access to it.
Cons of In-House Development
- High Cost
The cost associated with hiring, training, paying salary, providing benefits, and providing infrastructure can be substantial for both new ventures and small businesses.
- Limited Ability/Specialist Knowledge
Your team may not have enough knowledge or experience to adequately implement a particular technology, which will require additional new staff hires or training.
- Time required to add Staff
In order to increase the number of members in your team will take longer than it will take to bring your team on board, therefore delaying the completion of your project.
What Is Outsourcing?
Outsourcing refers to the practice of hiring external agents or contractors (freelancers) to perform some part of your development work. Outsourced development can be done by teams from within the same country or other countries, and their engagements typically last for a specific period of time (contract).
Pros of Outsourcing
- Cost-Effective
Using outsourcing as an option for your business is a great way to save money on labour costs…especially when you are working with teams that are located in areas that have lower salary rates than your area.
- Ability to use Global Talent
By working with an outsourcing partner you are now able to tap into a wider range of specialists who have different skill sets and experiences than you.
- Ability to Get to Market Quickly
When working with established outsourcing firms, they typically have much more developed processes that can help you finish your projects faster.
- Flexibility and Scalability
Outsourcing solutions can help you find the right amount of resources at any given time without having to commit to using them long-term.
Cons of Outsourcing
- Reduced Control
Managing outside teams can be difficult due to geography, time zones and location.
- Communication Barriers
Language and cultural differences can create issues when communicating with potential partners, leading to misunderstandings between the companies.
- Higher Risk of Security Breaches
When you share sensitive information with another party, it’s important to have a solid contract in place and a level of trust between both parties.
- Vendor Dependency
Be cautious of building a long-term relationship with one company, as you may develop a dependency on that vendor over time.
Key Factors to Consider
Here are several factors to consider as you weigh the pros and cons of outsourcing vs. in-house development:
Your Budget: What do you have access to for staffing? Should you hire full-time employees?
Project Complexity: Is there an extensive additional development feature for your product? Will it require ongoing iterations after launch?
Is there a to-do list of critical tasks after the project has started?
Your Timeline: How urgently do you need results from your project?
Your Core Business Focus: Is development fundamental to your advantage or disadvantage over your competition?
Scalability Needs: Are your resource needs likely to change over time?
Hybrid Approach: The Best of Both Worlds?
A lot of businesses have begun to follow a hybrid approach in their operations: keep a small, internal group of workers for some functions and use third-parties for others.
Advantages to this model include:
- Strategic control at the company through an in-house team.
- Specialised skill sets and quicker turn-around time through third parties.
- Increased flexibility and improved cost control.
Summary
There isn’t necessarily one right answer here. An in-house development team typically brings with it greater control, better stability, and more potential long-term value. By contrast, an outsourced development team typically offers greater flexibility, shorter delivery timelines, and lower overall costs.
Generally speaking, if you have a core business function that needs continual improvement and innovation, then you may want to create an in-house development team (company). On the other hand, if you need speed in launching new products or services, need to reduce program costs, need access to specific (very niche) talent, then outsourcing will likely be a viable alternative.
Ultimately, the choice you make should reflect your business strategy, resources available to you, and the course you wish to take to grow your business.
