In-House vs Outsourced Software Development for Startups
Published at November 15, 2022

“Whether to choose in-house development or outsource development?”

If you’re a startup founder or entrepreneur, maybe you’re familiar with those software questions.

When you’re thinking about in-house or outsourcing software development, one of the first things that cross your mind is the question above: what are the advantages and disadvantages of in-house or software development?

A recent study found that the pandemic and the rise of the work-from-home lifestyle had no significant effects on global IT outsourcing. However, in 2020, outsourcing expenses increased to 13.6% of the usual IT budget.

You need to make sure that everything is on point. So here is the comparison between in-house and outsourcing software development you need to know.

What is in-house software development?

In-house software development is the process of creating and delivering software products within a company. It includes the creation and design of the software itself, as well as all aspects of its management and delivery.

In-house software development can be divided into two main categories: product development and system development. Product development refers to the creation of products, while system development refers to the design, distribution, and system management.

It’s safe to say that in-house software development makes you have to do the process of hiring team members. It includes job vacation postings, candidate applications, interviews, and onboarding sessions.

Advantages of in-house software development

Some benefits that can come from in-house software development include the following.

1. Reduced production costs

In order to reduce costs related to developing software, many companies turn to in-house developers for help. This is because in-house developers are already familiar with their company’s systems, so they can create quality products at many affordable prices than those generated by outside developers.

2. Increased efficiency

By using in-house developers instead of third-party contractors, companies can save time by having them develop features rapidly instead of waiting for them to finish a project before starting another one nearby. This allows companies to focus on important issues rather than taking long breaks between tasks.

3. Improved quality

When done well, in-house developers’ work is often considered as having higher quality than outside developers due to their personal experience with their target system and related tools.

Using in-house developers enables companies to focus on important issues rather than taking lengthy getaways between projects to spend more time on trivial chores or focusing on a code base that doesn’t need more maintenance.

4. Teams with specific skills

It’s possible to have team members with specific skills that align with your startup. This can be a considerable advantage when you choose in-house software developers.

Consider which project needs to be developed using a variety of technologies, but the developers of the chosen companies aren’t experts in all of them.

Even after learning it, they won't be able to master it, which will cause development to be slow and introduce lots of bugs. You can select members with the specific talents you need if you choose the in-house method.

Disadvantages of in-house software development

Some of the disadvantages that may come from in-house software development include the following.

1. Additional cost

Even if you choose in-house software development that can reduce your production cost, you still need additional costs for hiring an in-house team. This can form both visible and hidden costs.

According to Payscale, hiring an internal team has a significant financial impact. Depending on the skill level needed for the project, the cost to hire an IT technician might be as little as $29.90 per hour or as much as $74,001 per year in average base salary USD.

Further, besides the cost of hiring an internal team, the additional cost you must prepare such as bonuses, insurance, vacation leaves, etc.

2. Hard to find the right talents

The challenging part is to hire the top talents for your business. You'll struggle to stop competitors and recruiters from acquiring your IT talents because of the increasing demand for IT professionals.

According to a McKinsey Global Survey, 9 out of 10 company leaders report that there is a skills gap in their company. Your project's timeline and costs may be affected by the time it will take to find the talents you need.

3. The team's skills upgrading

Technology is rapidly growing, and also startups relate to a face-paced environment. Hence, you need to improve the team’s skills as always. Ensure that your team has knowledge and practice skills in change especially when the skills resonate with your product's impact.

Further, you need to invest in team skills improvement and use tools that can make your business more effective and efficient when achieving the goals.

What is outsourced software development?

Outsourced software development stands for the process of purchasing or contracting out a service or activity to another party in order to complete a task or project. This can be done through companies, agencies, and other businesses.

The goal of outsourcing software development is to reduce cost and increase efficiency by making the process of developing and maintaining software more efficient and less time-consuming.

Advantages of outsourced software development

1. Save costs

Outsourcing can help your business save costs. You can check that developers in Southeast Asia such as Malaysia, Indonesia, India, etc have higher skills with affordable prices than developers in western.

It means that you can get high-quality products from the best developers at a reasonable price. Save the cost equal to a great product.

2. Good talents

When you choose to outsource, you have the option to get the good talents you need. Outsource companies have developers that are experts in various technologies.

Hence, you can save time to hire good talents. It simplifies you to choose the best talent that fits your startup culture.

3. Easy collaboration

Outsourcing agencies have experience with various projects in various industries. Those agencies know well about collaboration and have workflows to produce high-quality products.

Further, a software development agency can help you to get the best talent to manage the project such as project managers, software engineers, etc.

Disadvantages of outsourced software development

1. Quality risk

Quality risks arise when developing software by outsourcing companies, as they may not have the same level of experience or expertise as the expert developer team.

As a result, these companies may not meet the same quality standards as the in-house developers and end up with lower-quality products. Additionally, this can lead to increased bugs and glitches in the final product, which can cause significant problems for customers and clients.

2. Lack of control

Outsourcing development can also lead to a lack of control over project deadlines. This can be problematic if there are tight deadlines set by the in-house developers, which can prevent them from meeting their obligations to customers or clients.

In such cases, the project may not come out as planned or at all, potentially causing serious consequences for both parties involved.

3. Lack of communication

This part can be challenging too. Well, because we know that communication is the key to a successful project. However, a lack of communication can be an issue if you outsource to software development agencies worldwide.

Hence, you need to control scheduled meetings due to the different time zone. By holding the scheduled meeting, you can prevent the lack of communication that relates to your project. Also, language can be a barrier between your team and outsourced talents.

At last

Before you decide to choose between in-house or outsourced software development, understand your business needs and priorities first. Then, both in-house and outsourced software development has advantages and disadvantages that can’t be compared.

It’s safe to say that you can combine in-house and outsourced software development for your startup business. Well, VirtualSpirit can help you with outsourcing software development. We’re a mobile and web apps development agency in Malaysia that services worldwide. Book us a call now.

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