Outsourcing vs In-house Software Development: Which Option Makes More Business Sense and When?

May 11, 2018

Reading time about 4 minutes

Be it a startup or enterprise, companies are often in dilemma of choosing outsourcing or in-house software development team. However, you can never come down to one option as both the approaches have its own advantages and snags. Before making any business-critical decision, you must carefully evaluate all the factors to escape the software development failures.

“When deciding which avenue to venture down, I often advise clients to consider project’s scope, cost, and deadline”. – David Semerad, CEO of STRV.
So, to make it simpler for you, we have focused on main factors that will help you in figuring out which option works the best for you.

Let’s take a walk through the considerations:

Development Teams

“Outsourcing can increase productivity by 10 to 100-fold” Source: Marketing & Growth Hacking”
Every software development project has its unique requirements. So, you need dedicated resources for every project with the right skills and experience. Outsourcing gives you the chance to tap into a large talent pool that has different specialties and able to work on complex requirements. Working on diverse projects, their resources have gained business insights to various verticals thus able to bring out-of-the-box solutions. All you need to look for a reliable company to get in touch with dedicated resources that makes development scalable.

With in-house development team, you need to hire the right resources who are dedicated to invest full-time and energy into the project. Also, being in the same company for a longer duration they become domain experts thus take minimum time to implement new features and fixing the current issues in your software. However, it requires a lot of time and effort to find the right and loyal candidate for any company.

Work Flow Factors

From the beginning of a project to delivery, everything is carried out differently in outsource and in-house software development team.

Smart Allocation and Effective Collaboration
If you have an in-house team, you are aware of their skillset thus can allocate the right work to the right person. However, it is not possible with outsourcing, as you have to rely on the agency to allocate the work to software developers accordingly. Moreover, it is much easier to communicate with your own team thus removes all communication and cultural barriers. With outsourcing it is bit sketchy thus may decrease quality and effectiveness of communication.

Quality Assurance and Guaranteed Results
Outsourcing excels in this space. Mostly, development agencies have devoted Quality Assurance departments thus monitor the progress time after time. Following the rigorous approach of testing approach, the project undergoes various phases including assessment of code, functional testing, usability testing, and more. Neither inhouse nor outsourcing guarantees the project will be completed 100% according to the requirements. But if outsource development company fails to figure out what exactly the client needs, you can withstand their payment. Thus, you only pay for the results, not the errors.


Cost is always the prime factor to decide what you want and what you can afford. According to Statista, 12% of total budget is now being spent on IT outsourcing. A brief breakdown of the cost of in-house versus outsource software development.

Hiring to Personal Development Cost
Hiring a full-time software developer is quite expensive. Also, it requires a lot of time and resources to find the right candidate. Selecting outsourcing company is comparatively an easy task. All you need to shortlist them, get proposals, finalize after going through reading reviews and online ratings and then contracting. Also, you don’t need to incur HR costs, personnel management cost, and training cost.

Experience Developers and Performance-Based Expense
“According to a Survey by Deloitte, Outsourcing is used a cost-cutting tool 59% of the time which enhances quality by 31% and solve issues by 47%.”
On an average, an experienced developer can cost you around $60,000 but outsourcing allows you to avail all the services at much lower cost. The in-house developer gets paid even if his performance is not up to the mark but if you are not satisfied with the work of offshore IT company, you don’t have to bear any such expenses. Once the project is over, you don’t need to maintain the overhead cost of resources.

Takeaway Point:

As we know, both the approaches have pros and cons, however, choosing a reliable outsource company can be a smart decision as it is a one stop IT solution provider. It is a competent option when you want to save your money, time and get all the desired services at one place. They are readily available at your beck and call and would deliver best-in-class results in promised deadlines.


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