In House Development VS Outsourcing: Which To Choose And Why?

  • 10 min read

With a dream in your head, the first question is always: How do I turn this idea into reality?

Where do I find the professional resources and how do I get development services on a budget?

Here’s another not-so-easy question that every tech startup has: Whether to choose in-house software development or outsource the entire project?

In this article, we’ll explore both paths for you to make a wise decision.

In-House Software Development

In-house software development is when the software is developed by the company itself. It is also known as ‘insourcing’.

In in-house development, it is ensured that all the essential expertise and equipment are available within the organization. If you don’t have a team you have to build one from scratch making sure the right skillset is hired. Considering an in-house development example, an organization needs to go through a detailed process of recruitment including interviews, onboarding, and training to build dedicated IT teams. The company always has access to experienced teams composed of software engineers, project managers, designers, and QA testers.

Pros Of In-House Development

Optimal Structure

In-house development is flexible as it allows you to create your own team by selecting members and the expertise of your choice. However, this requires more effort and time in the recruitment process but in certain situations this is worthwhile. A fully tailored and dedicated team contributes to the enhanced value of the software project.

No Language Barriers

Most often, an in-house team of professionals has people that belong to the same area, city, or country. When team members use the same language and have a common cultural background, communication and collaboration become easier.

Immediate Support & Rapid Changes

With an in-house team always available, it is easier to make changes in the project quickly. You can take updates from project managers anytime as there is no barrier of time zone or anything else. You do not need to pay external teams for additional features and can evolve the project anytime.


Convenience is the major factor due to which software companies prefer hiring their own  IT teams. The reason is that technical discussion, customizations, and regular updates on project progress are easily facilitated. The continuous involvement of the team in development processes helps resolve technical bugs quickly.

Cons of In-House Development

High Cost

One of the biggest disadvantages of an in-house development team is the high cost. The cost of hiring, training, maintenance and development is much more expensive as compared to obtaining development services from an external team. For instance, if you are building an in-house development team, you will bear the cost of salaries of employees, equipment (hardware and software), taxes, rents, employee benefits, training programs, utility expenses, etc.

Cost of Additional Resources

Members in an IT team are hired based on the skills of expertise depending upon the nature and requirements of the project. In case of expandability or changes in the project, an employer would have to bear the cost of additional employees and all other benefits such as medical and life insurance, holidays, new equipment, etc.

Time Intensive

It is a tiresome task to find an appropriate fit for the IT team. Moreover, new employees need to define goals, get training, and attend meetings. One of the risks of in-house development is the dismissal of employees. The company has invested significant resources and training courses in the adaptation of employees, and when they go away, the company again has to invest in new members.

Upskilling with Innovation

One of the common issues for professionals is that they do not keep themselves updated with the latest innovations and technologies in the industry. The reason is that in an in-house team, there is little to no competition among developers and that’s why they don’t pay attention to educate themselves more or get enrolled in new IT programs. To keep employees motivated, it is the responsibility of an employer to pay for the upskilling and education of employees as well as upgrade their equipment to make them compatible with advanced technologies.

Outsourced Software Development

In outsourced software development, some tasks or the entire project is outsourced. In this, the external development teams take full responsibility for the full-fledged development of your software project. One of the primary reasons that companies outsource to offshore companies is to save significant costs. With increasing competition in the market, companies are looking for a development team that can develop complex systems. It is advantageous to take development services from offshore teams instead of building your own teams and managing them.

Advantages of Outsourcing

High Cost

The hand-picked members of outsourced software development teams have vast expertise in the field. When new requirements or issues arise, you do not need to hire new members because the expertise is already available. This does not only help reach goals faster but also reduces the expense of hiring new members.

Moreover, the cost of hiring in-house developers, testers, and designers is high in the US, Netherlands, UK, Canada, etc. as compared to outsourcing the projects to Pakistan, India, and Ukraine. Enterprises therefore prefer outsourcing their projects to offshore companies. Outsourced software companies guarantee quality development services at a substantially low cost.

Fast Scaling & Time-to-Market

An external team has professional resources available that work around the clock to decrease the time-to-market. The offshore companies have access to the expertise readily without going through a detailed process of recruitment.

Proven Workflows

Dedicated IT teams by outsourcing services providers have proven workflows. The entire team works together on a project and has already experienced working with each team member. The whole team acknowledges the work dynamics based on which an efficient workflow is followed by each team member.

The work pipeline works consistently throughout the project. This is one major advantage of outsourced software development in which your project is given to an already established team. From software engineers to scrum masters and testers to UI/UX designers, the whole team works together to deliver an absolute and quality product without any hassle.

Access to Pool of Talent

Outsourcing services providers are in active search of IT specialists that have deep domain knowledge and a proven experience in the field. When a company is onboarded, a tailored team of experts becomes available to the project.

Disadvantages of Outsourcing

Inefficient Communication

Considering in-house vs outsourcing pros and cons, one of the limitations of outsourcing is ensuring effective communication with clients. Due to language barriers, time zones, and cultural differences, communication suffers a lot.

Security Risks

Security risks in outsourcing are higher as compared to in-house development. It is because the team members are not part of your company. To ensure transparency, sign an NDA contract with the service providers to protect the idea and rights of the project.

In-House Vs Outsourcing Software Development: Which Is Better?

Considering outsourcing vs in-house production, outsourcing software projects is a smart choice. According to statista, IT outsourcing is expected to reach a combined revenue of $351 billion in 2021. The reason is access to a talented pool of experts at a comparatively low cost. Outsourcing meets quality standards and ensures timely delivery of the product. It allows business owners to focus on the core values of an organization and let the external development team handle all operations.

However, choosing between in-house and outsource development could be easier after evaluating the project’s functional and non-functional requirements and need for resources. What may work for one project/company might not work for the other. In some cases, you might need to combine both to achieve expected outcomes.

Simply, the right decision is the decision that fits the needs of your project and company.

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