In-House vs Outsourcing Custom Software Development: Which is Best?

Outsourcing custom software development is a popular approach to creating a unique application. Nevertheless, it is also possible to maintain an in-house software team for the same purposes.

Therefore, businesses have to make a choice and commonly don’t understand when to choose software development outsourcing and when in-house development is better. To answer this question once and for all, let’s examine both approaches and cases and determine when you can benefit the most from each method.

What is Outsourcing Custom Software Development?

Let’s start with custom software development outsourcing.

The main idea behind outsourcing is creating a software application or extending its functionality by engaging third-party custom software development services.

Apart from saving costs by hiring developers with smaller salaries, outsourcing your development can help to:

• Speed up the development
• Extend the team when you lack employees
• Cut the time and expenses on HR processes
• Gain access to a global talent pool
• Find niche experts and professionals
• Implement or integrate innovative technologies

Long story short, the popularity of outsourcing custom software development results from its overall convenience and efficiency. It is commonly the only possible solution for small businesses and startups, which have many limitations in terms of finances and timelines. Still, it is not the final list of the pros or cons of such an approach.

Pros of Outsourcing Custom Software Development

The main benefits of outsourcing custom software development include:

1. Specialized skills and personalized development
2. Resource-saving thanks to reduced labor costs
3. Team flexibility and project scaling

Specialized Skills for Your Specific Project

First, when you outsource custom software development, you contact outsourcing companies.

Unlike in-house development, software outsourcing assumes hiring a software team as a service, i.e., finding a full-fledged team at once. Besides, the vendor covers its maintenance and management.

Moreover, such IT companies are also deeply engaged in your project: to tell you the price and scale of the project, they must estimate your project, define the number of employees, choose software technologies, etc.

Many outsourced companies provide their clients with niche insights and advice on software creation, suggesting unique and personalized solutions for your project. So, apart from providing your business with niche-experienced developers familiar with your industry, many companies offer other beneficial services to ensure your project succeeds.

Faster Development Timelines Due to Experienced Teams

Another result of cooperating with IT outsourcing companies is the faster and more efficient development process.

Most outsourcing custom software development companies have extensive experience and expertise in software development: they earn money by developing on demand.

So, choosing custom software development on demand is a great solution when a business requires a fast and efficient idea implementation. Frankly, more rapid software development is helpful for all companies: quicker development means accelerated software delivery, monetization, and investment return. Most software projects can’t be monetized until they are delivered.

Reduced Labor Costs

In addition to faster custom software development and delivery and investment return, outsourcing software development helps reduce expenses thanks to lower labor costs.

Outsourcing app development gives access to the global talent pool. In addition to finding developers with specific skills and expertise, companies can profit from regional salary differences.

For instance, a senior front-end developer from Ukraine provides much cheaper services than a US-based engineer with the same expertise. Yet, more affordable costs don’t impact the overall software quality.

Flexibility in Scaling the Project Team

Finally, outsource custom software development services is one of the most suitable solutions for scaling project teams.

In fact, outsourced software development is commonly used not only for new projects. Hiring outsourcing teams is a popular way to extend an in-house team when a business project scales.

Even tech giants like Google or Meta regularly engage such developers despite having sizeable in-house staff. As a result, while in-house software engineers are involved in prioritized processes and tasks, outsourced developers are used for various features development and integration, supplementary services implementation, etc.

Outsourcing certain parts of scaling a software project is always faster and cheaper than extending the in-house team. Moreover, you won’t need to fire or shorten the in-house team later, saving you time and resources.

Cons of Outsourcing Custom Software Development

When considering to outsource software development, you should also remember its challenges and potential drawbacks.

Barriers in Language and Cultural Differences

First of all, outsource custom software development assumes constant communication with people from various regions.

Sometimes, you won’t face any inconveniences, and sometimes, you might struggle with cultural specifics, time zone differences, and language barriers. Unfortunately, it is tough to predict or prevent these issues in advance. Most such problems become apparent after some time, making them impossible to avoid.

The only way to avoid these difficulties is to find a reliable software vendor who can assure and prove the quality of the services.

Privacy and Security Concerns

Custom software development outsourcing is much riskier compared to in-house development.

While in-house development can be easily protected by countless security practices and measures, allowing businesses to create a safe development environment, outsourcing requires a more concerned and cautious approach.

Fortunately, outsourcing software development also offers many security solutions, such as VPN access and enhanced credentials. Still, it also requires better monitoring and engagement.

To summarize, outsourced development demands high standards from each side of the agreement. Cooperating with an experienced outsourced company helps reduce risks and ensure project security.

Risk of Lower Commitment or Understanding of Company Culture

Again, a lot depends on your contractor. If you cooperate with an unreliable technology partner, you might face low commitment and a mismatch in company culture.

Finding a trustworthy IT outsourcing company is the best way to ensure commitment to your project goals, demands, and requirements, as well as the company’s culture. To do so, you must research and deeply examine your candidates, review their feedback and reviews, and analyze case studies.

What Is In-House Custom Software Development?

Simply put, in-house custom software development is the most basic way to develop software. It suggests gathering a software team on-premises and maintaining all processes related to software development by the business itself.

Advantages of In-House Development

Advantages of in-house development include:

• Direct control and oversight of development
• Streamlined communication and quick feedback
• Focused outlook on the objectives of the final product

Direct Oversight of Development

In-house development takes place in your office. This makes it much easier to maintain your team and monitor the progress of software projects.

Besides being more convenient, on-premises development is much safer and protected thanks to numerous best security practices. This also helps to avoid language barriers, time zone differences, or other inconveniences.

Finally, having your team on-premises significantly simplifies internal communication and speeds up the feedback or updates.

Streamlined Communication and Quick Feedback

Having your team in the office suggests fast and streamlined communication. Your developers don’t need to wait for the rest of the team to be online.

Your software engineers will most likely share neighboring tables, making the communication as seamless as possible.

Focused Outlook on the Objectives of the Final Product

Eventually, in-house teams are easily managed and monitored. You can literally check the project's progress whenever you want.

Moreover, such cooperation terms make it easier to focus on the objectives and their fulfillment during development and until the initial product delivery. You can also track your team's commitment in real-time.

Disadvantages of In-House Development

The most common and crucial In-house development drawbacks consist of:

• Limited technological expertise
• High costs and extra expenses
• Time-consuming recruitment and onboarding

Limited Expertise in Certain Technologies or Practices

In-house hiring is aimed at your local talent pool. It is commonly highly competitive and offers a limited number of available niche experts.

If you aim at general and standard technologies, it won’t be a significant disadvantage. However, if your project requires specific software solutions or expertise, like AI or Blockchain integrations, you might lack experienced developers.

High Upfront Costs

As we mentioned before, local hiring is a more expensive approach compared to software outsourcing. Developers from various popular outsourcing destinations offer the same level of expertise for a much lower price.

Additionally, in-house development includes extra spending on sick leave, holidays, bonuses, and other related expenses. Don’t forget about the hiring process itself and office maintenance.

Time-Consuming Recruitment and Onboarding Process

Finally, in-house recruitment and onboarding take much more time and resources.

While outsourcing custom software development provides your company with a full-fledged team as a unit, an in-house approach assumes finding each developer, interviewing them, and inviting them to the team.

Combined with the limited talent pool in your region, the recruitment and hiring process might take up to a few months, and there is no guarantee that you will collect a complete team by that time.

Comparing In-House vs Outsourcing Custom Software Development

When choosing between in-house or outsourcing custom software development, it is possible to define a few scenarios and factors when each of them will be more beneficial. In a nutshell, the list of core factors to consider when choosing an approach consists of the following:

• Cost Comparison: In-house vs Outsourcing
• Talent and Expertise Availability
• Project Timelines and Speed of Delivery
• Scalability and Adaptability to Changing Needs
• Risks and Challenges for Both Options

Cost Comparison: In-House vs Outsourcing Development

Frankly, outsourcing development is much more flexible in terms of costs and expenses, offering several options to meet all types of project budgets.

Software outsourcing is prevalent among startups and small companies that require software solutions. It is also commonly used by mid- and large-scale businesses for part-time projects and low-priority task completion.

So, software outsourcing is a clear winner in cost efficiency.

Talent and Expertise Availability

Outsource custom software development also offers more flexibility and options for talent acquisition.

To summarize, outsourcing gives access to a global market, offering more developers with different backgrounds, experiences, and tech expertise. At the same time, in-house development has many limitations and restrictions, making it more complicated and expensive to find the required specialists.

Thus, the software outsourcing model wins once again.

Project Timelines and Development Speed

One of the significant drawbacks of outsourcing software development is the limited time on the project. Dedicated development teams can be used on demand for various software development projects.

Still, they won’t be there for you forever. At some point, a dedicated team will have to leave the project, leaving your business needing to maintain and support existing software. So, outsourced development is an excellent solution for developing and delivering software.

In the long run, hiring an in-house team will benefit your business more. By gathering a team on-premises, you will indeed have a delivered product and full-cycle services, including post-launch maintenance and support.

In other words, in-house teams are better for long-term projects, supplying businesses with extra services and full-cycle coverage.

Scalability and Adaptability to Changes

Frankly, both teams are highly scalable and adaptive to changes.

To cut a long story short, any software team offers fine adaptability to changes, being flexible and adaptive. However, while in-house team is used only for dedicated project development, outsourced teams can be used both for development from scratch and scaling existing teams.

So, it is fair to state that there is a draw in these terms.

Risks and Challenges for Both Options

In-house and outsourcing software development shares the most common risks and challenges:

• Lack of proven expertise in the niche
• Lack of team’s dedication
• Unpredicted challenges during the development

Thus, it is a draw once again.

When to Choose In-House Custom Software Development

Despite all the drawbacks of the in-house model and the advantages of software outsourcing, gathering a team on-premises is a common choice among many businesses eager to design and develop their software products.

The reason is simple: in-house development is more beneficial in the long run. Although gathering and maintaining such a team is more complex and expensive, it offers complete dedication to your project, i.e., it will be engaged in post-launch support and maintenance in addition to its development.

Custom software development outsourcing also offers post-launch support. However, it is much more limited in time and resources and is mainly targeted at ensuring everything works as it should. Usually, their engagement in software maintenance takes up to a few months, and if you need new updates or feature integration, you will have to sign a new contract.

When to Choose Outsourcing Custom Software Development

Outsourced software development, on the other hand, is an excellent model for scaling and optimizing software products, automating business processes, creating new features, migrating to the cloud, and performing other similar part-time tasks.

It is also a great solution for companies with limited budgets, such as startups. By choosing an outsourced team, they can embody and test their ideas while still staying within their budget. However, they will also need to consider gathering an in-house team in case of success.

Summing up the above, we can assume that combining both models is probably the ideal approach to custom software product development:

Engaging outsourced developers brings countless benefits and advantages during the software development, while the in-house team ensures and covers post-launch support and maintenance.

You can always contact us for more details. We can answer your questions, discuss your ideas, and even provide a free project estimation. To examine our expertise, you can also check our recent case studies.