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Outsourced Development Team vs. In-house Developers: What’s the Best Choice for You?

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11 min read

In recent years, the IT outsourcing market has grown rapidly; in fact, it’s expected to reach $133.3 billion in 2025. This is happening because more and more companies are choosing to outsource development when they need to build a new software solution. 

Another option, of course, is to hire an in-house development team. When a business intends to develop a software project, one of the most challenging decisions is the choice of in-house vs. outsourcing software development.

The decision will be influenced by many factors that we will discuss in this article, which can help you decide which type of development team is best for your company.

Table of contents:

Factors to consider while choosing the type of development team

Hiring an outsourcing team: pros and cons

Hiring an in-house team: pros and cons

When to choose an outsourcing or in-house development team

Factors to Consider while Choosing the Type of Development Team

Let’s begin with understanding the differences between in-house and outsourcing development teams.

In-house developers are hired by a company directly and work as typical staff members. Under this model, a company takes full responsibility for the project, from  choice of technologies to managing the work of developers. An in-house development model involves various costs related to selection of developers, provision of working space and benefits, vacation time, and so on.

The alternative is to outsource the project. In this case, the business takes the role of customer and hires a third-party organization to develop a solution. An outsourcing vendor takes responsibility for building and managing a software development team. This allows the customer to focus on primary business operations instead of becoming immersed in the details of development.

Outsourcing VS In-house definitions
Definitions of outsourcing and in-house models

The most effective option for the outsourcing model is to hire a dedicated development team. Interaction with a dedicated team resembles working with an in-house team. A customer gets the software development professionals required for a specific project for long-term collaboration. Such a team is fully dedicated to the customer’s project and works only with it.

There’s no easy way to determine the winner in the in-house app development vs. outsourcing competition. Which is best depends on a variety of factors that companies need to consider before choosing what type of development team they will use. Below are some of the most significant:

  • Project goals and requirements. First of all, a company should determine the scope of the project, which will set the direction of the whole development process and help identify which specialists are needed. The company should consider not only developers, but also a Project Manager, Business Analyst, QA engineers, and so on.
  • Project type and complicity. This factor will help decide the technology stack needed and determine how many specialists should be on a development team.
  • Developers’ skill level. What skills are required for the project will affect the time it takes to find the appropriate specialists and their hourly rates. A more  narrowly focused specialist with rich experience will ask for a higher salary than a specialist with a basic skillset. Moreover, required specialists may not be available in the company’s region, which will entail additional efforts to find them.
  • Project budget. A company should understand whether it has the time and budget to do a search for the right candidates and to support an in-house team. The outsourcing model, on the other hand, can be cheaper than an in-house team because it eliminates HR costs.
  • Location of specialists. Outsourcing offers opportunities to hire developers from all over the world, which may involve different time zones and languages. 
  • Industry. The industry in which your company works will also affect what expertise is required of your developers. Some projects may involve specific knowledge of a particular industry, such as features of tax policy for fintech projects or the physical and mental characteristics of patients who are the target group of a healthcare project. In such cases, it may be necessary to have developers with a relevant background or an experienced mentor who will control the work of IT-engineers. 
  • Start of the development process and time-to-market. The company should consider whether it has the time to spend finding appropriate personnel or needs to start development as soon as possible. An outsourcing company usually creates a development team quickly, and developers finish the project faster than in-house ones. 

But what are the features of each type of development team? Let’s start with in-house vs. outsourcing pros and cons.

Hiring an Outsourcing Team: Pros and Cons

According to statistics, around 60% of companies outsource at least part of their software development tasks.  Such popularity is explained by all the features and benefits the outsourcing model provides.

Advantages of outsourcing software development

Here are some of the numerous advantages of outsourcing development.

Outsourcing development: advantages
Advantages of outsourcing development

Cost flexibility

This is one of the main benefits that guided 70% of companies choosing in-house vs. outsourcing website development. The outsourcing model, based on a fixed hourly fee, usually results in lower development costs compared to an in-house team. In this way, a company can better predict the total project cost based on its duration.

Typically, hourly rates depend on the regions where developers are physically located. For example, developers from Eastern Europe have lower rates than developers from the US.

Talent pool access

An outsourcing team can solve the problem of lack of necessary personnel in the company’s region by providing access to a talent pool of technical specialists.

In this way, a company can find developers with different experience and skill sets from all over the world. This is especially necessary when a project requires professionals who work with rare technologies.

Eliminating staff turnover

Choosing outsourced development means an organization doesn’t have to worry about staff retention or finding a replacement if a developer quits, because this is the responsibility of the outsourcing vendor. This allows the company to remain confident that there are always specialists working on a project.

Scalability and flexibility

The terms of the dedicated team model allow a company to reconfigure a team structure at any stage of the project. Several specialists can be added to a development team during the project or removed from it when they have finished their work.

Also, the outsourcing model allows a company to mix working conditions and hire several specialists on a part-time basis while others will work full-time.

Fast project delivery

Outsourcing companies have a wide range of specialists with various skills, so they can create a team and start the development process very quickly, reducing time for recruitment and other HR activities.

In addition, the coordinated work of professionals with proven workflows speeds up time-to-market.

Seasoned outsourcing development team at your service

HQSoftware has a team of skilled professionals ready to tackle the project. Let’s talk!

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Head of Sales
at HQSoftware

But despite all these advantages, outsourcing development also has several disadvantages.

Disadvantages of outsourcing software development

Communication issues

Outsourcing teams are usually remote and distributed across several countries. So, there is a high chance that a company will hire specialists who don’t understand the cultural specifics or work ethos of the customer’s country. Also, difficulties may arise because of a difference in time zones and language of a company and the outsourcing team. However, in such cases, the outsourcing team takes on the responsibility of adapting to the customer, so the answer to the question of how to outsource overseas developers is not as complicated as it seems.

Limited control

Lack of face-to-face communication makes it harder for a customer to control the outsourcing team than if it was right in the office. But outsourcing vendors now provide clients with a lot of opportunities for remote control, such as access to Jira, regular calls with team members, and timely project status updates. Also, a project manager provides the customer with comprehensive reports regularly, describing the progress of the development process.

Low-quality code

Unfortunately, a customer can’t influence code quality directly. The only solution is to choose an outsourcing provider carefully, examining their portfolio, reviews, and previous experience.

Security issues

Limited control over the development team increases the chance of disclosure of important customer data. To ensure data safety, it’s necessary to sign a non-disclosure agreement that guarantees the security of project code, IP, credentials, and other data. Moreover, many outsourcing companies work carefully to build a reputation as a trusted provider, so they create a safe environment for clients’ private information.

Most of the mentioned disadvantages can be eliminated if a company selects a reliable and trustworthy outsourcing partner, which guarantees smooth collaboration and high-quality team performance.

After figuring out the pros and cons of outsourcing development, let’s see how an in-house development team compares.

Hiring an In-House Team: Pros and Cons

Of course, an in-house team also has its advantages and disadvantages. 

Advantages of in-house software development

Compared to outsourcing development, the benefits of the in-house model are closely associated with team interaction. 

In-house team: advantages
Advantages of in-house development

Team management

In-house software development allows a company to easily manage the development team. But it needs a strong management system or additional specialists who will control all development processes; otherwise, the work of the team won’t be efficient, possibly generating extra costs in time and money.

Working environment

In-house specialists have a working environment that’s directly related to the company. It helps them better understand the specifics of a business and be more involved in the development process. This is especially important when developers have to work with specific equipment or systems that are used or produced by a company.

Security

Strong control over the development team and working environment will allow a company to ensure that confidential information won’t be shared with third parties.

Communication

Usually, in-house developers are located in the same area or at least in the same country as a company. That makes them more attuned to the local culture and work practices. Also, face-to-face communication helps to avoid misunderstandings and encourages more analytics while project tasks are being completed.

Long-run effectiveness

An in-house team is cost-effective if a company needs developers not just for a particular task or project but also for long-term development. The company can train specialists in relation to its business needs, which will allow them to meet new challenges more quickly.

Disadvantages of in-house software development

High costs

Hiring in-house developers usually means spending a lot of time and money on a project. Monetary costs include salaries, which vary from region to region, taxes, office rent, hardware, coverage for sick days, and other benefits. Time costs are associated with finding the right personnel, which can take up to several months, and onboarding. This will also lead to additional payment to the HR specialists who carry out these tasks. 

Lack of developers

There is a risk that developers with the necessary skills or experience will not be available in a company’s region. So, a company may have to make an effort to search for the right specialists, which will postpone the start of the development process for an indefinite time.

Staff retention efforts

Since experienced developers are in demand on the market, IT engineers may change jobs quite often. If a developer quits in the middle of a project, the company will need to spend a lot of time finding another specialist. The new developer will have to understand the existing codebase before continuing. All this leads to downtime, which delays completion of the project.

Moreover, if a company doesn’t plan any future software projects, it will have to cut the entire team after it finishes working on the ongoing solution. This may have a negative impact on the company’s reputation.

To sum up, here’s a brief comparison of in-house development vs. outsourcing in the table below.

 

Outsourcing development

In-house development

Money costs

Flexible and cost-effective

Cost-effective only in the long run

Time costs

Low

High

Access to top talent

Not limited

Limited

Staff turnover

Low

High

Scalability

High

Low

Security

Medium risk

Low risk

Team management

Lack of team management by the company, but strong control by an outsourcing vendor

Strong team management by the company if it has a Project Manager or a Product Owner

Communication

Lack of face-to-face communication

Lots of face-to-face communication

When to Choose an Outsourcing or In-House Development Team

When deciding this question, businesses should rely on several markers.

A company might choose outsourcing in the following cases:

Outsourcing VS In-house when to choose each model
When to choose outsourcing development
  • Large and complex projects. Such projects will probably require a large development team of experienced professionals. Hiring such a team in-house will take several months and entail significant costs. It will be faster and cheaper to turn to an outsourcing vendor who will build a required team quickly, guide them through the development process, and provide backup with support and education if they face any issues. For such projects, a dedicated team model is a suitable option. 
  • Budget and time constraints. As we’ve already mentioned, an outsourcing team is more cost-effective than an in-house team and is suitable when a company has cost limits. Moreover, an outsourcing model allows a company to better predict overall payments and manage costs more effectively. Also, working with an experienced team that probably has similar projects will help eliminate time delays.
  • The project isn’t a core product of the company. In this situation, it can be very challenging for a company to select the right staff and coordinate their work effectively, especially if its main operations are not related to software development. By outsourcing a project, a company can focus on the core business processes and just control overall software development progress. 
  • The project is based on a variety of technologies. Such a project requires either multiple specialists or specialists with knowledge in various technologies and domains. Such experts can be hard to find, while hiring several specialists will take time and money. An outsourcing provider has a variety of developers with different skill sets and can easily choose professionals or hire new ones who meet all project requirements.  
  • Difficulties in translating project needs into technical requirements. An outsourcing company provides the client business with a project manager who acts as a bridge between the client and the team. First, a specialist discusses all project details with the customer and then sets tasks and objectives for developers. A manager also controls development progress and provides a customer with comprehensive reports. 

On the other hand, a company might choose an in-house team when:

  • There are no budget limits. If a company has an unlimited amount of money for a project, it can get all the benefits of an in-house team, including strong control.  
  • The company is planning a long-term project. An in-house team will be beneficial if a company expects to have more software projects in the near future.
  • The project requires ongoing technical support and updates. For this purpose, it will be more cost-effective to deal with specialists who have built the solution or have been working with it for a long time, rather than involve new developers.
  • Developers need to interact with the company’s specific equipment. Some solutions are created specifically for particular equipment. If it is necessary to interact with it all the time during project development and interactions can’t be done remotely, an in-house team makes sense.
  • A company wants full control of the development team. An in-house team is also suitable if a company is not ready to delegate responsibility for project development to third parties and wants to be fully immersed in its details and progress.

Another option that some companies turn to is to mix in-house and outsourcing development. Most often this happens when a company has a certain staff of IT engineers and they need several specific developers. Outsourcing specialists may be needed if a company:

  • lacks needed expertise among its in-house developers;
  • wants to speed up a project’s development;
  • needs to add new specialists quickly without spending time on recruiting.

However, there is no definite guideline on what type of development is best for a particular solution. Every project is unique, and businesses should rely on their capabilities, requirements, limitations, and preferences while choosing in-house software development vs. outsourcing.

HQSoftware Experience in Outsourcing Development

HQSoftware has been in the market for over 6 years and has developed more than 450 projects for 300+ clients all over the world.

We strictly select our developers and encourage their professional growth to offer reliable teams for all our clients. Our specialists have 4 years’ average employee tenure and are ready to provide their expertise to create high-quality solutions.

Also, we handle both common and more specific technologies and programming languages. So, we are ready to provide professionals for different project requirements.

Do you need to develop a software project or do you just have a project idea, but don’t know where to start? Feel free to contact us and get a personal consultation.

Andrei Kazakevich

Head of Production

To ensure the outstanding quality of HQSoftware’s solutions and services, I took the position of Head of Production and manager of the Quality Assurance department. Turn to me with any questions regarding our tech expertise.

LinkedIn Email

Frequently Asked Questions

What are the main differences between in-house and outsourcing?

Who is outsourced software development suitable for?

Who is in-house software development suitable for?

What are the main differences between in-house and outsourcing?

Read also

How to Hire a Dedicated Development Team: A Complete Guide for Businesses for 2022

How Much It Costs to Build an E-learning App – Project Types and Estimation

6 Problems You Will Face When Developing E-Learning Project And How Dedicated Team Can Help You Out

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Sergei Vardomatski - Founder - HQSoftware dev company

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