In the digital era, more and more businesses rely on software development in order to enhance their business processes. Therefore, the need for software development is increasing at a mind-boggling rate. Inhouse software development is the first choice of businesses around the world.
However, the shortage of developers or skilled professionals compels the business leaders to go for outsourcing. More businesses are relying on external teams in order to handle their software development projects.
Outsourcing has evolved as an ideal alternative to inhouse software development. Businesses hire a dedicated development team in order to develop their software efficiently. In this article, we will discuss the difference between inhouse vs outsourced software development.
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The dilemma
When it comes to developing a software application, many businesses fall into the dilemma. They keep wondering whether they should go for inhouse software development or hire a dedicated development team. Well, in that case, you mainly have three following options.
- Hire software developers and develop the software inhouse
- Completely outsource the software development project to an experienced agency
- Combine both inhouse software development and outsourcing.
The decision of inhouse development or outsourcing will rely on your project, business goals, and location. Make sure to analyze your situation carefully and, accordingly, go ahead with the right option. It is crucial to have an understanding of the benefits and drawbacks of both types of development in order to make an informed decision.
Inhouse vs outsourced software development: A brief comparison
Inhouse software development refers to the process of developing software by using the internal resources of the company. Adequate infrastructure and sufficient resources are necessary to develop software in-house.
On the other hand, outsourced software development is the approach of getting the software developed by a third-party software contractor. If software development isn’t the core competency of your company, outsourcing comes in handy.
Here is a quick glance at the difference between inhouse and outsourced software development.
| Inhouse Software Development | Outsourced Software Development | |
| Location | The software development is done within the premises of the company by the internal team members. | The software development is done by an external software agency that may be located within or even outside the country. |
| Cost | The cost is usually higher. | The cost is less. |
| Workforce | The workforce may have a good understanding of the culture and business requirements. | The workforce may not have a clear understanding of the culture and exact requirements of the business. |
| Software Quality | The quality of software developed by the internal team may be a little low than the outsourced team. | The outsourced teams have expertise in the domain and offer the best quality software development. |
Pros and cons of inhouse software development
Inhouse software development is also referred to as insourcing. All the professionals working on the software development project are employed by the organization. No external help is required in the case of inhouse software development.
If you have the resources and capable developers, inhouse software development is an ideal choice. However, a point to note here is that an efficient inhouse team may not be readily available at the time. It takes time and effort to build a team that can help you develop the required software.
Before deciding to go for inhouse software development, knowing its pros and cons is important. Here are some of the main pros and cons of inhouse software development. Let’s dive in!
Pros of inhouse software development
1. Complete control and culturally fit
When you choose inhouse software development, you have complete control over the process. You can train your software developers on how to use different tools to develop the desired software. Moreover, the inhouse developers have knowledge of the culture and exact requirements of the business. It, thus, enables the development of culturally fit the software.
2. Ease of communication
Another significant benefit is the ease of communication. As the inhouse developers work together at the same location, there are no communication or language barriers. You can easily communicate relating to expected changes and avoid any development errors due to miscommunication.
3. Quick changes
To launch flawless software, it’s imperative to remove all possible bugs. With inhouse software development, eliminating the existing bugs is easy and quick. It allows making faster changes to the features of the software and adding new features
4. Better team involvement
In the case of the inhouse software development, the development team includes the permanent employees of the company. Owing to their sense of belongingness, the team members get more involved in the projects. They pay attention to every minute technical detail and ensure better customization.
Cons of inhouse software development
1. High cost
On average, the salary of an IT developer is USD 73,691 per annum. It clearly shows that hiring software developers and developing software inhouse can be a costly affair. Moreover, there are other costs such as training expenses, overhead costs, office rent, etc.
2. Lack of expertise
Lack of expertise in software development is another drawback of inhouse software development. The lack of expertise may result in the development of low-quality software, thereby affecting the company’s reputation. The best way to enhance their skills is to invest in proper training.
3. Slow time to market
Inhouse software development can take more time to develop the software than expected. With a slow time to market, you are likely to miss out on lucrative opportunities in the market. It may limit you from staying ahead of your competitors.
4. Staff turnover
When you opt for inhouse software development, staff turnover can be an issue. Software developers change jobs frequently in search of better working conditions and higher pay. Developing software with an inconstant team can be quite challenging for the organization.
Pros and cons of outsourced software development
Software outsourcing is becoming a popular trend in recent times. Organizations choose to hire dedicated development teams and outsource the entire software development project. In this case, the complete work of software development is done by a specialized company.
While many believe that saving money is the core of outsourcing software development, there is actually more to it. In the present era, applications are increasingly becoming complex, thereby requiring more expertise. With years of experience and competencies in the field, outsourcing agencies can successfully handle complicated projects.
Now, if you are planning to outsource your software development and hire a development team, knowing the pros and cons is important. Here are some of the pros and cons of outsourcing software development. Let’s take a look!
Pros of outsourcing software development
1. Reduces costs
Choosing to outsource your software development projects can lower costs significantly. By outsourcing, you can avoid the costs associated with hiring, training, and retaining full-time employees. Moreover, you do not have to invest in the infrastructure and tools that era vital for software development,
2. Easy scalability
Scalability is one of the main benefits of outsourcing software development. An outsourced team can expand when you have a big software development project. You can also scale down your outsourced team when you have a smaller project without any issues.
3. Fast Time to market
Outsourcing agencies have highly skilled and experienced developers who can efficiently build different software applications. When you outsource your software development project, they start working on it immediately. They can speed up your time to market and allow you to release your app before your competitors, giving you an edge over the competition.
4. Proven processes and workflows
Outsourcing software agencies have experienced developers who have developed various applications for diverse sectors. They are well-versed with the workflows and leverage the well-defined processes to develop different software. They help in delivering high-quality codes and enhance overall productivity.
Cons associated with outsourcing software development
1. Communication barrier
As the outsourcing agencies are most located in different counties, communication becomes an issue. Due to the difference in the time zones, scheduling meetings and communicating regularly can be a problem. This, in turn, limits you from getting an idea about the progress and development of the software projects.
2. Security
Security is also a major concern of companies when outsourcing their software development projects. As the outsourcing agency has access to your business data, there is always of risk of potential data leakage. A nondisclosure agreement with the outsourcing company is crucial to preventing the leakage of business data.
3. No full control
When outsourcing your software development projects, you do not have complete control over the development process. You also do not have direct access to the team members. It may take several hours or even days to fix the potential bugs.
4. Unsupported codes
Another disadvantage of outsourcing your software development projects is unsupported code. Outsourcing companies may not offer you codes of the right quality. Hence, it is crucial to maintain the codes without the involvement of the software contractors.
Here is our complete guide to outsourcing software development.
Inhouse Vs outsourced software development: Choosing between the two
Now that you have a comprehensive idea of both the software development type, you must be wondering which is best for you. Well, the choice of inhouse and outsourcing software development will completely depend on your situation and business goals.
For instance, if you want complete control, have skilled developers, and are ready to invest more, inhouse software development is ideal. But, if you have budget constraints and lack the required talent, outsourcing is the best option.
The hybrid approach
To get the best of both worlds, you can choose to combine both. It is often referred to as the hybrid approach of software development that combines inhouse and outsourced development. Many businesses today are increasingly adopting this hybrid approach of software development.
You can have an internal team to handle the core dependencies of the software development projects. On the other hand, you can outsource software development projects that require specific skills.
There are a number of benefits of adopting the hybrid approach. Some of them are:
1. Optimal costs
If you want to optimize your overall software development cost, then the hybrid approach is the best option. Outsourcing can significantly reduce your costs. On the other hand, inhouse software development can prove to be quite cost-effective in the long run.
2. Better project organization
Adopting the hybrid approach can help in better organization of the software development project. It allows for in-depth analysis, efficient planning, and effective better delegation. However, there are some drawbacks to choosing to combine inhouse software development and outsourcing. Here are the potential challenges of adopting the hybrid approach of software development.
3. Complexity
The inhouse software development project is quite different from outsourcing. When you choose to combine them both, it can give rise to challenges for the business owners. Managing the operations and processes of inhouse and outsourced software development can be complex and hard to handle.
4. Loss of time
In the competitive world of today, time is very precious and valuable for every business. Adopting the hybrid approach may require the investment of a great deal of time.
Wrapping up
By now, you must have gained a detailed insight into the difference between inhouse vs outsourced software development. There is no one answer to whether inhouse development or outsourcing is ideal for businesses. It completely depends on the specific situations of the businesses.
However, when choosing to outsource software development, it is vital to partner with the right agency for better outcomes. Combining both works best for maximizing the benefits.
The demand for software development is not likely to decrease any time soon. It will increase even more in the coming years. Makes sure to leverage the best software development method and stay ahead in the competitive era.
Harikrishna Kundariya, a marketer, developer, IoT, ChatBot & Blockchain savvy, designer, co-founder, and Director of eSparkBiz Technologies @Software Development Company. His 10+ experience enables him to provide digital solutions to new start-ups based on IoT and ChatBot.