During the growth phase, every business faces the dilemma of whether to Outsource Development of their IT services or do it on their own. The answer mostly depends on which option is more efficient. Both approaches have their pros and cons, therefore we’ll discuss them in detail in the latter part of the article. But, first, let’s know the basic difference between in-house development and outsourcing software development.
The In-house IT team are the group of IT professionals that you hire yourself and that become one of your employees. You probably have heard the phrase "if you wanna do it right, do it yourself". So if you live by this as a motto for your company, the in-house software development model will suit your needs. With this model, you will be hunting for software development specialists, interviewing them, and being responsible for the recruitment as well as development.
With the outsourcing model, where you will be outsourcing the software development process and IT maintenance services, you will search for the right managed IT service provider that can provide you with a dedicated team of developers. Depending on your requirements, you can hire just a couple of developers and manage the project on your own, or you can outsource the entire process of software development. I recommend that you go with entire project outsourcing if you don’t have a dedicated project manager in-house.
Let’s talk about both the approaches in detail.
In-House Software Development
As mentioned earlier, the in-house software development is a great option for the companies who want complete control over the development lifecycle. There are several benefits of this model and because of this, companies like Paypal, Amazon, and Salesforce build their IT infrastructure on their own.
Pros of In-house Software Development
If you keep the development team in-house, you will have complete control over all the development phases. This becomes very important for businesses who greatly prioritise flexibility and frequent changes over cost in their software development.
Direct Access to the Employees
With the in-house software development model, you will know every ability or inability of your team members. This helps you assign them appropriate tasks based on their expertise. You’ll know the issues right when they occur and can resolve it quickly to avoid delays in the development timeframe. You can ask your in-house team to dedicate their time to work on the urgent tasks or bug fixes.
Ability to Work Immediately
Of course, recruiting and streamlining the in-house team will be a time-consuming process. But, once you’ve done it, your team can immediately jump on your projects. Access to in-house talent is seen by some investors as very favourable for a competitive advantage.
Understanding of the Project
The in-house team will be working alongside you and will have better insight into the project. They’ll be involved with the project from the start, therefore it will be easy for them to manage it post-deployment.
Thus, the in-house software development model suits companies that are ready to invest heavily in the talent recruitment and management process. The in-house development model is mostly adopted by large corporations as they have a heavy amount of funds to invest in. However, even companies like Google and Adobe outsource some part of their software development due to the comparatively much smaller cost of software development outsourcing.
Cons of In-House Software Development
No matter how fabulous the idea of in-house software development looks, the reality is far different. It isn’t always feasible for companies to hire IT professionals in-house for a one-time software project. These projects often will require less effort to manage once the software is launched, which means your expensive in-house software team will no longer have much work to do.
Sometimes, the companies management don’t have the expertise to manage IT projects, and don’t want to conduct recruitment for higher management. In such situations, the in-house development becomes a less practical approach. In fact, this is why around 64% of the companies across the world are outsourcing the software development process.
Having a development team in-house is an expensive process. It would require a significant amount of investment in the recruitment process. You will also need to buy or rent out an office space to set up the workstations. After the project development is complete, you will still have to provide new work for the IT employees. This need can result in companies constantly being indulged in identifying and implementing new projects, even when initiating a new project is not suitable.
Hunting for the right talent isn’t easy. You’ll be looking to hire decently qualified IT specialists who are willing to come to your company. This is very hard to find because it is likely that these qualified individuals will already be working with a company. So, to encourage them to join your company, you either will have to offer a higher salary, an interesting project or some other attractive benefit. But, whatever it is, it will cost you time and money. Looking for suitable talent, ensuring selected new talent are on the same page as the company, and building a team culture all takes time and attention. Whilst all this is happening, your project will remain paused. In current times, almost every innovation needs fast implementation and therefore it will be a gamble for your business if speed of launch is of high-importance.
Outsourcing Software Development
When outsourcing the software development work, companies often hire a third-party software development company to handle complete IT requirements. Such development projects range from custom software development for the enterprise itself or commercial software for the enterprise’s customers.
Pros of Outsourcing Software Development
It Saves Time and Money
This is one of the main reasons why companies outsource their software development process. As per Deloitte, 59% of businesses utilise outsourcing as a cost-cutting tool. But, how does outsourcing the software development process reduce cost?
Earlier, we’ve discussed that hiring IT resources in-house is expensive for companies. But, when you outsource the work to a company which already has a team in place, you save money on recruitment, training, onboarding, and even the office space extension.
Outsourcing the project offshore cuts down the costs even further. For example, the cost of development is much less in developing countries as compared to developed countries. It is because the cost of living is lower in the developing countries. Cost of living in countries like the UK or Australia is way higher than Poland.
Thus, by outsourcing the software development work, you will be able to hire top quality resources at the fraction of cost which might have occurred within an in-house team in your country.
Access to Global Talent
The outsourcing of software development frees you from the geographical boundaries. You can search for third-party software development service providers around the globe and find the perfect fit for your project.
Most of the software development service providers like us (Nimble AppGenie) have accumulated the expertise to work with a wide range of clients worldwide. We make use of best in class project management software tools like Slack, GitHub and Jira that help us as well as our clients to stay tuned with the development process. Additionally software development companies know the best project development methodologies well. For example, Agile is a brilliant methodology for ensuring that your software is built around your customer’s needs.
Allow you to focus on core business processes
Outsourcing the software development process benefits your in-house teams too. When you transfer the software development process to a third-party development company, you have one less thing to worry about.
The IT company to whom you will be outsourcing your development, won’t require much guidance from your side. It will leave you with more time to focus on your core business processes due to the reduced workload of your internal tech-team. Also, by outsourcing the development of a new project to a third-party company, you will take the pressure off your in-house tech team. Because then they are not taking sole responsibility for delivering a project that they are not specialised in.
You get the quality deliverables
Although, it is said that if you want to do it right, do it yourself, having the software development process outsourced often leads to improved product quality. But, how?
If the company, to whom you outsource your software development process, is specialised in your niche and have dedicated resources to work on your project, the final product is more likely to be a success. As the team possibly have experience in developing similar software applications, they will be having many recommendations for you to improve your software idea. In some cases, they might even have a solution to your existing business problems, which they can resolve via software application development.
Avoid Unnecessary Recruitment
Every IT project requires a significant amount of resources (man-hours) during development. But, the requirement suddenly decreases in the post-development phase. If you develop your software application in-house, you will have to recruit employees before and after the development has been completed. Once the work is completed, you will have to think about finding them new work to do, or firing them. This is bad for both the company reputation and for employee morale. Outsourcing software development helps you avoid such issues by providing you with the right amount of resources at the right time.
Cons of Outsourcing Software Development
Lack of proper communication is one of the major disadvantages of project outsourcing. Problems like language barriers and cultural conventions can cause issues if the correct contingencies are not put in place. These can of problems can cause misunderstanding and friction between the business and the outsourced team. This is why we place importance on deeply understanding our client’s key business values, mission and their customers. Unfortunately not every software development agency follows our protocols, which is why many other agencies experience issues with differences in language, culture and values.
Such issues slow down the development process and also hamper productivity. But, there are solutions to such problems. IT consultancy companies should make use of collaboration tools like Jira and Slack to enable clear and consistent communication.
Working with an outsourcing team does bring an element of privacy risks. From the beginning of the conversation when you share the product requirement document with them, you are sharing very confidential information. Your business idea or software algorithm is at the risk of being replicated or stolen by someone else. Even if the outsourcing company’s database unintentionally leaks, your valuable information is compromised.
To safeguard yourself from such issues, you should sign an NDA with the outsourcing company at the initial stage of conversation. This document provides your data with legal protection. Also, use IP rights clauses in the contract to protect your intellectual property.
What is the Best Software Outsourcing Model?
In 2020, outsourcing in the IT industry offers multiple development methods that you can choose from. These different models help companies outsource their software development, testing, or maintenance processes. The following are the top three IT outsourcing models that you should know:
Project-Based Outsourcing Development
This model of IT outsourcing includes end-to-end project outsourcing. All you have to do is to hand over the project requirement document to the IT consultancy, and they will work on the project from start to finish. The price and timelines are decided at the time of signing the Statement of Work (SoW) or Master Service Agreement (MSA).
This model is suitable:
- If your project requirements are clear
- If the Scope of Work is defined and fixed
- If strict deadlines are agreed
Hiring Dedicated Team
With this model, you’ll be hiring a team of skilled IT specialists from a third-party resource outsourcing company. The resource you hire will work as an extension alongside your in-house team. The team you hire can consist of software engineers, UI/UX designers, web designers, project managers and product architects.
This model is similar to managing a remote team. The price depends on the total man-hours. This model is suitable:
- If your software requires regular maintenance and support
- If your software solution is scalable
In the staff augmentation model, the third-party IT outsourcing company will form a software development team for you. The outsourcing company will itself be responsible for the productivity and management of the staff you hire.
Your role will be to manage the project and allocate individual tasks. Meanwhile, the outsourcing company will look after employee management and compensations. The prices can be based on an hourly rate or fixed rate. This model is suitable:
- If you want to be more involved in the development process
- If you want to keep innovating during the development process
The increasing shift towards outsourcing has proved that it is the best way to manage a part of business activity in which the particular business doesn't have a forte. Even companies like Google and Adobe are outsourcing some parts of their IT projects.
From a small company to the fortune 500, outsourcing has become the easiest way to save money and time to market for businesses, while keeping their focus on core business processes. If you still have the dilemma of whether to outsource your project or develop in-house, feel free to contact us at firstname.lastname@example.org, we’ll tell you how much cost you will be able to save if you outsource your project with us.