StarNavi Blog - Outsource VS Inhouse IT Services & Development

By starnavi | Development | November 2020 | 132 views

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IT outsourcing exponentially increased while enterprises turn to global tech talent to deliver complete business solutions. Not only does it bring expanded work opportunities, but it also alleviates pressure from the in-house development team. This article talks about the comparison between outsourcing software development and in-house development, highlighting the pros and cons of each working model.

In-House Development

In-house development refers to businesses that leverage their internal resources to develop and launch software or products. This growth requires a significant amount of time and budget to form a development team responsible for the project. From software developers, software engineers to UX designers, every member has a specific role in fulfilling. In other words, businesses assemble a team to establish the infrastructure and utilize the right resources to support software development.

Advantages

Appointing developers from your internal staff streamlines software development. Instead of going through the recruitment, onboarding, and training process, your team can start as soon as possible. Here are more of the pros of developing software with your in-house developers:

In-House Teams Follow the Specific Needs of the Company

Your in-house development team is likely more knowledgeable about your business goals, requirements, and needs. As permanent members of your organization, they tend to be more engaged with the project. They are more motivated to deliver the best results going above and beyond your expectations. It is also easy to coordinate with your teams in-case problems arise.

Face-to-Face Communication

In-house developers work from the same office within the same office hours. There can be no issues regarding communication, collaboration across departments, and delegation of tasks. Face-to-face communications through meetings and direct conversations make it easier to make suggestions, changes, and raise concerns. Clear communication prevents misunderstandings, which further accelerates the development process. Anyhow, the perfect organization and right communication tools make this process as smooth as direct communication.

face-to-face communication in development process

Make Quick Changes Easily

Internal developers can streamline the development process from building, testing, and deployment of the product. The staff can collaborate quickly and amend the particular features of the project. It is also more convenient to assess your product’s quality when your team members are physically present. Software developers and QA engineers can work side by side to fix bugs and errors.

Disadvantages

Just as there are benefits to in-house development, there are also downsides to it.

High Cost

Fulfilling a comprehensive team of IT professionals requires a substantial investment. It also happened that most tech positions are among the most sought-after and highly paid workforces. The average hourly rate of an entry-level developer in the US ranges from $75 to $125. If compared to outsourced developers, they charge an hourly rate of around $25 and $50. Apart from their wages, there are financial incentives and tax holidays associated with regular employees.

Staff Turnover

With the increasing demand for IT professionals all over the world, many employees leave for better opportunities. A high IT staff turnover accounts for delays for your projects, along with the additional costs of hiring a replacement.

Lack of Specific Tech Talents

As IT positions become one of the most in-demand jobs in the market today, more people begin to explore this career path. The influx of IT professionals does not mean that the search for tech talents will be easy. Many recruiters find it more difficult to find and attract the right people to complete a development team. It is incredibly difficult to find developers with a specific set of relevant skills for your budget. As a result, forming a software development team can take longer than you expect.

Outsource Development

Outsourcing development refers to businesses hiring external IT services from third-party providers. From application development and infrastructure solutions to digitalization, your outsource team needs to provide the right strategies and techniques to deliver the best results. IT outsourcing became the modern solution for businesses looking for top talent without compromising their allocated budget.

Advantages

Outsourcing a development team comes with the following advantages:

Cost-Flexibility

It is imperative for businesses that have only been starting to reduce their budget as much as possible. Outsourcing a development team can help the business focus on its core competency. Hiring software developers outside the US tend to be cheaper than the local market rate. You can find those with the same skillset and experience to fulfill your business requirements at a lower cost. This flexibility allows you to acquire the best talent without sacrificing the quality of work.

Vast Talent Pool

Businesses can find a vast talent pool of top-tier IT professionals with diverse expertise and extensive experience. You can even broaden your horizon and hire developers abroad at a significantly lower cost.

vast talent pool to outsource development process

Scalability

IT outsourcing allows businesses to earn substantial savings. You can utilize the savings to invest in market research, marketing, and performing advancements to improve your products and services’ functionality.

Faster Project Delivery

Hiring an outsourcing development team skips the tedious processes of recruitment, onboarding, and training. Having access to quality tech talent means that you can begin building your software almost immediately. As a result, outsourced IT staff accelerates the deployment and launch of your product.

There are Various Tech Stacks to Choose From

As previously mentioned, outsourcing development teams allow you to select members with a wide range of knowledge and skills. You can find IT professionals with specific expertise in platform development, UX, or infrastructure when needed. If you prefer your team to be experts in a particular tech stack like MEAN, MERN, MEVN, or others, you can always tailor your search accordingly. In other words, you don’t need to waste time to train your existing team to learn specific programming languages. You can assemble a team that draws on skills that are crucial in the software development process. Their extensive industry experience also allows outsourced teams to handle diverse clients. They know how to collaborate efficiently using agile workflows that boost the productivity of the group.

Disadvantages

Just as there are benefits to outsourced development, there are also downsides to it.

Increased Security Risk

There are security risks involved when outsourcing your software development team. This risk working with the development team consists of the necessity of sharing confidential information about your business. When your staff is geographically-distant from your physical office, there are high chances of outsiders stealing parts of your project and claim it as their own. Fortunately, the signing of an NDA can drastically mitigate this risk. A non-disclosure agreement can protect you if the other party compromises the data you have shared on the duration of the project. It protects your confidential information during the development of the product or software.

security risks of outsourced development

Communication Gap

Similar to any remote work arrangements, IT outsourcing can account for communication gaps across team members. Communication barriers can arise when you don’t speak the same language as your team. This gap can raise confusion when it comes to task delegations and deployment of the product. Your outsourced staff might also find it difficult to express themselves better when they struggle with the language. Additionally, the communication gap interferes with software development when there are time-zone differences between team members. Emergency messages placed outside of the office hours may take a few hours to be seen, considering they are only just waking up or about to sleep. For requests and approval for actions, it may take until the next day to get their response. However, experienced outsourcing developers are well aware of these issues and developed ways to deliver optimal services regardless of location.

Famous Companies and Their Work Models

The following industry giants obtain a dedicated team of in-house developers for software development:

  1. Amazon

  2. PayPal

  3. Salesforce

Outsourcing software development is a huge commitment for any business, from startups to global corporations. Here are the pioneering companies that outsource their software development team.

  1. Google - Google began outsourcing software development in India and Latin America to handle non-core work like IT management and maintenance.

  2. Slack - As one of the most reliable communication channels used in workplaces, Slack streamlined its brand’s establishment through outsourcing. From logo development, website design, and mobile app development, the company reaped most of its success through its partnership with India and nearshoring Canadian freelancers.

  3. Skype - Similar to Slack, Skype outsourced the earlier stages of its product. The Skype application that started the initiative to connect friends and families worldwide outsourced the website’s development before gaining its colossal success.

Tips and Tricks to IT Outsourcing

If you are planning on outsourcing your development team, consider the following tips to succeed.

Be Careful with Low Hourly Rates

A majority of business owners prefer outsourcing tech talent to acquire relevant expertise without compromising the budget. A diverse talent pool of developers may charge less, but the proper screening is in your hands. However, you can opt for recruitment agencies for a guarantee that your new hires offer excellent value. The rule of thumb in outsourcing is that when prices are way low, it’s probably too good to be true. Watch out for freelance workers that oversell themselves. When in doubt, ask for verifiable data that prove their credentials.

Study Previous Projects

Most freelance developers publish their resume that details their comprehensive experience and skill. It is essential to pay close attention to this information to weigh your options. You should be able to find their previous projects on their resume if they have experience in freelancing. It’s best to work with developers that have accomplished tasks that are similar to your own. But make sure not to discriminate against your applicants when it comes to their work history, educational background, or lack thereof. Seasoned freelance developers may have honed their skills through experience. Others might have gained knowledge through formal education. Either way, you can always provide assessments to measure their abilities and check if they fit the job. Additionally, it is imperative to ask coding samples from your prospects to see their work ethic, skill, and expertise.

Protect Your Data

Working with an outsourced development team requires trust. Considering the team is working remotely, you need to provide remote members with system access. Doing so should not imply that you are taking any risks with your data and security. If you want your business to stay safe, implement additional security layers to prevent cyber threats and compromise. You can ensure that your staff cannot handle data they don’t need to through data access controls. This limitation allows you to remove access privileges from the third-party services as soon as the project gets terminated or when a security threat is detected.

Bottomline

IT outsourcing is ideal for supporting the non-core operations of a business. When an exceptional development team augments your current processes, it provides you with a competitive edge. It also streamlines product development to accelerate time-to-market. Build, develop, and deploy your product with StarNavi - the best development team