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

You get to train your team from the ground up, making sure they know exactly how to use the tools at their disposal to develop software in accordance with your company’s philosophy.

As permanent members of the company, in-house developers are more aware of its needs and can adapt to them as they move from task to task much faster than any external specialist will. This compatibility is often called a cultural fit.

Since your in-house developers work directly with you at your company’s headquarters, interacting with them face to face is a lot less cumbersome than in the case of outsourcing.

You can communicate easier, implement unexpected changes to the project faster, and eliminate any mistakes caused by miscommunication almost completely. However, think twice before you opt for an open-space office in hopes of improving communication.

Because an in-house team member is a far greater commitment than an external contractor, you’re bound to spend more time finding the right candidate.

This may extend the recruitment process a bit, while also making it more thorough. As a result, the person you end up adding to your team will likely be a much better fit for the role you’re looking to fill.

All that loyalty to your company and the cultural fit come at a cost; buying equipment, training, and maintaining employees all need to be paid for by the company.

Unlike with outsourcing, this isn’t a one-time payment, either. More employees within your organization mean a greater long-term investment.

To get employees to work for you locally, you need to post a job offer, wait for the candidates to come in, and conduct a bunch of interviews to make an informed decision. Not only that, but you’ll also spend a lot of resources on training, meetings, setting goals, and much, much more.

Without an easy access to a comprehensive talent base, you will drain a lot of your time and resources on the recruitment process alone.

Let’s face it: the number of people you can meet in real life doesn’t even compare to the number of people you can encounter online. This extends to seeking out employees.

When hiring in-house, you only get to choose from a group of people that either already lives where you are or is willing to move there. Between a limited talent pool and the total cost of full-time employees, you’ll have a harder time hiring all the talent you need for your projects.

In other words, are you going to make the potential hires come to you, or are you willing to get your hands dirty and hunt for the prospective employees on your own?

a) The outbound way

The outbound approach may take several forms.

There’s the classic messaging through LinkedIn and other similar websites, which involves you contacting someone you think is a good fit directly. Here, you’re doing your best to convince them to join your company, so the way you present your offer is crucial.

You can also try to scout out new talent by hosting various workshops, conferences, and presentations—all of which are a great way to showcase your brand at its strongest and let people know they’re welcome to join you if they have what it takes.

b) The inbound way

The inbound approach mostly involves posting job offers for the general public to see, rather than targeting specific individuals.

Job hunting portals are, unsurprisingly, great hunting grounds. Developers usually huddle around LinkedIn Jobs, Indeed, AngelList, Glassdoor, or Dice, just to name a few, so those are definitely all good starting points.

Of course, you might also turn to social media, such as Facebook, Twitter, or LinkedIn. A nice, clean, visually appealing post can make a huge difference here, since people who might not even be actively looking for a job now may turn their attention your way if you do your job right.

Finally, there’s the career page of your website. It’s important to make sure it has just the right amount of content; an empty or otherwise neglected career page won’t send the message that you’re open to new hires. Conversely, a career page overstuffed with content will most likely feel overwhelming.

Once you’ve sent out your offers, the next step is to wait for the résumés to come in. What’s incredibly important at this stage is that you respond to every single one of them.

It doesn’t matter how short or to the point your answer is; it doesn’t even matter whether the candidate seems perfect for the job or horribly mismatched. If they actually took the time to send you their CV and give you their personal information, it’s common courtesy to acknowledge them. Remember to do it if you wish to maintain a good reputation.

Every résumé needs to be screened to determine whether the candidate has the skills you require. Once you take your pick, it’s time to set up an appointment. Leaving some room for the interviewee to reschedule the interview is also a good idea.

Then comes the main event: the interview. In the field of software development, we usually hold separate HR and IT interviews.

The purpose of the former is to eliminate the candidates who are clearly incompatible with your workplace, while the latter is meant to draw out precise, technical information that will determine whether they have the knowledge to complement your team the way you need them to. Regardless, all candidates should receive feedback, whether you hire them or not.

Always keep in mind that a completely in-house team is a team of full-time employees. That means taking care of their training, monthly paychecks, benefits, etc.

It’s fine if you decide this model is more profitable to you than the largely commission-based outsourcing. Just remember there are always ways to switch gears and try the other approach.

Arguably the greatest advantage of working with an external outsourcing partner is the ability to scale your team up or down. You can do it whenever you need and much faster than in the case of an in-house team, without any hiring or firing involved. Consequently, scaling this way doesn’t reflect poorly on you as an employer or hurt your company’s brand.

When you hire people in-house, you need to pay them at the end of the month, every month. This may seem like the most obvious thing in the world, but should you ever find yourself in a tough spot financially, it will quickly rise to the top of your concerns. With an external company, you can negotiate payment dates if you need to, dramatically improving your cash flow.

With outsourcing, you don’t have to worry about providing the contractors with workspace or equipment. You also only pay for them when you need them—if you need to scale your project up or down depending on your budget and needs, it can be done very easily. Plus, if your existing outsourcing partner proves too expensive for you, nothing stops you from switching out your developers by going with a cheaper option.

Since you’ll be looking for someone specialized in a given area immediately, you won’t be wasting time on training. Instead, the experts you hire will be able to start working on your project right away, making the entire process much quicker.

The internet gives you unlimited access to experts in almost any field, with whatever background you’re after. Whether you’re in need of a developer, graphic designer, or any other specialist, you get to choose among the best specialists in the world, free of geographical restrictions.

Most of the communication with your outsourced team will be conducted via email, Slack, or any other means that doesn’t exactly carry the same weight as face-to-face communication. This can potentially lead to misunderstandings.

Additionally, you’re more likely to find yourself working with people who don’t speak the same language as you, which would only add fuel to that fire.

A non-disclosure agreement is pretty much a must with outsourcing, and even that may not be enough to protect you in time if you aren’t careful.

It’s important that you carefully research whoever it is you’ll be working with before you sign any contracts, as the risk of your company secrets spilling are far greater here.

While training your in-house crew costs more, a huge benefit of that is a team that understands your goals on an intimate level. With outsourcing, you have much less control over the experts’ process, which might lead to some hiccups down the road.

Due to disparate time zones and schedules, either as a result of cultural differences or practical reasons, communication can become extremely hampered.

Even your sleep schedules can be wildly different, making it next to impossible to communicate face to face. You’ll need to resort to emails, which doesn’t bode well for any issues that demand immediate action.

If you do manage to find specific hours when you can reach each other, you may still find it difficult to communicate due to different energy levels. If it’s the early hours of the morning where you are and the late hours of the evening where they are, you’re not going to be on the same wavelength while talking.

Since email is the only viable form of communication in this case, both parties may need to check their work email after hours. This can understandably put a serious damper on their work–life balance.

Because of all this, if you’re seriously considering offshore outsourcing, you need to be ready to both set boundaries and compromise. However, respecting each other’s time and working toward an optimal solution is definitely worth the effort, since offshore outsourcing can yield many new, otherwise unavailable opportunities.

Make sure that you pick a partner that not only meets your profile best, but also has a history of reliable projects to their name.

The best way to go about this is to conduct your own research—check listings, such as Clutch.co, and see if the company has what it takes. Be on the lookout for their experience, level of transparency, and scalability, just to name a few.

Do you need a partner that will act as an extension of your team? Or maybe you need someone to offer you end-to-end solutions, including product design, frontend and backend development, as well as code deployment?

With your project either being split between your headquarters and a third party or handled entirely outside of your office, a good project management tool will come a long way in helping you retain control of the situation.

There are plenty of high-quality tools available on the market. Which one works best for you depends solely on your individual needs. Give Trello a shot if your process is lighter in scope. However, if you have money to spare and a project that’s more demanding, Jira would most likely be better for the job.

This cannot be stressed enough! Since your team will be working independently most of the time, you need to make sure both your time and theirs isn’t wasted.

Be available for questions and make sure your team isn’t afraid to ask them. Everything should work out just fine then.