In-House Development vs. Software Development Outsourcing: A Comparison of Pros and Cons

Nowadays, software development has become an integral part of many businesses. Even non-IT companies start up programming for strategic purposes. All of this has led to an increased interest in outsourcing software development as a cost-saving alternative to in-house development. In this article, we’ll analyze whether IT outsourcing is really worth the candle for your business.

In-house Software Development

In-house development refers to a team of software engineers created within the company. In this case, all developers are employed by your organization with no intermediaries. This is a typical model for IT product companies whose core business is software development. C-level managers have enough competence to create and supervise an additional development team to realize some principal business functions.

Software Development Outsourcing

Outsourcing is the process of delegating specific tasks or projects to a third party. Unlike in-house development, IT outsourcing does not involve hiring new people or opening new departments. As a customer, a company contracts with a service provider that specializes in a certain stack of technologies.

Generally, IT outsourcing makes sense for companies that do not have enough expertise in software development. They are forced to seek solutions outside their team to do short-term projects. Nevertheless, software development outsourcing appeals to IT product companies as much, because it saves a good deal of time and money.

Comparison of Two Models

Since software development is the gist of business for IT product companies, choosing between an outsourced and in-house team is a matter of primary concern. Let’s analyze the major strong and weak points of the two models and go deeper into the opportunities they suggest for tech companies.

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As can be seen above, in-house development has more advantages than IT outsourcing. First and foremost, you attract best talents and receive the highest level of commitment. This is because engineers with a product mindset prefer to work for IT product companies and be fully engaged in the software they are programming. Secondly, you can enjoy the benefits of expanding your brand globally, especially when you opt for building a development team offshore.

By outsourcing software development, an IT company cuts down on operational costs. This is true providing that the pricing of an outsourcing partner is transparent and reasonable. Another good point is the ability to tailor the outsourced team according to your needs (very practical in relatively vague projects).

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Considering disadvantages of both models, the major difference lies in management. Since outsourced teams are employed by an outsourcing provider, you can influence but not fully control them. This leads to other weak points such as low commitment, frequent team shuffling, and security risks in regards to Intellectual Property. Consequently, potential investors will doubt whether to invest in your startup company.

As for in-house development, you can face the problem of different time zones, depending on the offshoring country. In Ukraine, for instance, people live by GMT+2 which is 1 hour later then Europe and 7-10 hours later than the USA; however, the main disadvantage is the need to control operational management, as well as to recruit and train the new team. This may seem time & money consuming, but with the help of a reliable local partner like you can leverage these processes.

Which Model is Best for Offshoring

In today’s world, IT companies are forced to move offshore due to a dire shortage of tech specialists and therefore the best solution is to hire an in-house development team located there. This model is called an offshore development center (ODC). It encompasses all pros of both in-house development and outsourcing, mitigating risks of the latter. Due to the rapid development of the tech industry, Ukraine has many IT service providers. If you consider opening your own offshore development center, a full-service company like Alcor specializes in setting up ODCs in Ukraine from scratch. Starting from office searches and recruitment, the Alcor team will also help you manage HR payroll and accounting, realize legal compliance, and organize maintenance of your office. All of this to make you feel secure in that offshore location!

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