Pros and Cons of Outsourcing Software Development and Cooperation with In-House Teams

$200,000 per year and even more - this is how much you can save by using the outsourcing development services of 4 competent specialists to develop your fresh and crispy mobile app.

You can check these numbers yourself! This is the difference between costs for development services in North America compared to Eastern Europe. Take the cost per hour, then multiply it by the number of working hours and the number of specialists you plan to hire. 

We have discussed the price differences in details in our article about offshore software development. Check it out for more details!

The amount of saved money is impressive, isn’t it?

Keep in mind that cheaper prices do not always harm quality. Overseas developers are highly skilled and reliable.

However, some entrepreneurs worldwide still hesitate.

Today, we are going to share the most important facts about in-house vs outsourcing software development, their specifics, as well as their advantages and disadvantages. We will reveal potential risks and provide you with a detailed guide on which model to choose. Read our article and make a choice critical to your software solution success.

Pros and cons of in-house development

This may seem like a simple option. You rent an office, hire software developers, test engineers, designers, and sales managers, and start your race. However, this process is not as easy as it seems. The following sections discuss the basic pros and cons of in-house development.

Pros of working with an in-house team

In-house software development may be your perfect match if your goals are:

Dream Team cooperation

Are you inspired by the Avengers team? Would you like to find teammates for your web development solution? If you are willing to gather several heroes on one team, start doing it.

Personal communication

Would you like your partner to look at your project with their own eyes? Do you think there is no better way to highlight your idea than having a nice face-to-face conversation with your team-mate? In-house development allows you to make your co-workers fully aware of your product’s aspects.

Complete control over the process

You come to the office and see your team working; you go home and see them still working. You have access to every stage of development and can keep an eye on every single change or a new line of code added. Facilities management belongs to you. If you are ready to control all the processes in this way, then you should hire on-site programmers.

In-house development software: 3 main disadvantages

Every good story has a negative side. Here are 3 unpleasant facts about the on-site collaboration:

A lot of hidden costs

Renting an office in the center of your city is expensive. And the more specialists you need, the more comfortable, light and spacious it should be. The required hardware and software, office furniture, special offers for your employees, and more will cost you a fortune. However, these costs don't arise when you decide to outsource your app development

Higher prices per service

The average software engineer’s salary in San Francisco is $126,000 per year. For most startups, this sum is unaffordable. Besides, if you hire on-site team, you have to pay them monthly, no matter what progress the product has made. You define the amount of payment and must pay it whether or not a developer is actively creating something or just supporting it for just a few hours a day. The salary you pay to on-site developers doesn’t depend on the amount of work to be done; it is stable.

Complicated recruitment and hiring

Do you know what the typical hiring process looks like? First of all, you must look for a competent HR and recruitment partner who can help you handle this task. You must first design clear and informative job descriptions. Together with a recruiter, you will discuss the strategy, methods of active and passive search, your own vision of a perfect candidate and tons of other important details. And then the hardest part starts.

In average, it takes up to 30 days to interview each candidate and make sure they are a perfect match. If you need a whole team, get ready to postpone your product development process

The amount of time needed to find a great specialist is now twice as long as back in 2010.

As the years go by, the competitiveness of your local job market increases and it becomes more and more difficult to find and hire a person that will deliver high-level services and stay with you for years.

Onboarding takes time and resources as well. So before opting for this method, make sure you can afford it and can handle potential complications.

Outsourcing software development pros and cons and how to handle them

The IT outsourcing industry revenue reached $62 billion in 2018, almost $10 billion more than just 2 years ago. More and more business owners worldwide are opting for this sort of business processes organization. But what does offshore software development mean? And what value can it bring to your business? Let’s start from the very beginning.

Outsourcing app development is a type of agreement between two companies, one of which hires representatives of another to complete specified tasks. This term arose in the 1980s and means “outside resourcing”. In some particular cases, the method involves employees transferring from one firm to another.

With the accelerated rise of IT technologies, outsourcing has grown to encompass multiple definitions. And to discuss them, let’s take a look at 2 types of outsourcing models:

Two types of outsourcing software development: Offshore and nearshore

When talking about outsourcing your app development, offshore and nearshore need to be mentioned.

Offshore model

Work according to an offshore model means delegating or moving business departments to a country far beyond the border of the founder. For example, you have your company in Great Britain and transfer engineering department responsibilities to Ukraine. The key benefits of this model are cost minimization and business extension.

Nearshore model

A nearshore model involves subcontracting a project or part of a project to a company or development group based outside of your country but in the same geographical region. For example, a German company that outsources its products to Poland uses the advantages of nearshoring. This is a cost-saving option, too, while also having fewer risks than offshoring, such as differences between cultures.

7 benefits of outsourcing software development

Now that you are acquainted with the definition, let’s highlight the pros and cons of outsourcing software development. Here are the top 7 benefits of outsourcing mobile app development:

1. Reduced price for development services

As we noted at the beginning of this article, one of the offshore outsourcing advantages is that development costs are several times lower overseas. This is true for mobile, web, and desktop product development. Outsourcing is generally done to reduce costs.

2. Minimized HR efforts

By outsourcing your app development, you easily decrease the HR and recruitment efforts described in the previous chapter. Just contact a preferred agency and hire a whole team of people who are used to working together. One call and probably one more online meeting – this is all you need to start fruitful cooperation.

3. Cost efficiency

Let’s define what exactly you save with the benefits of outsourcing software development:

• Office rent

• Recruitment services

• Tools, extensions and ATSs for HR purposes

• Websites for job postings

• Development costs as they depend on the complexity of services provided

• Your own time

4. High competence and trained skills

It is not all about money. There is a common misconception that cheaper means worse. This may be true in some cases but not when discussing outsourcing specifics.

When you delegate some specific engineering tasks to your remote partners, you get the chance to build business relations with a professional who dedicated years and tons of efforts to IT technologies. They already know what you want and how to give it to you. It’s all about experience.

When there are dozens projects in someone’s portfolio, you can be sure about their competence.

5. Instant start

Recruitment and interviewing take too much time. In some cases, lost time can destroy a product’s future. For example, someone may have similar idea but rolled it out earlier than you. That’s it; you are not a pioneer anymore.

With outsourcing options, you have the opportunity to be a modern Christopher Columbus by opening a brand-new app in the digital ocean.

6. Useful flexibility

Depending on how many specialists you may need, you can hire a whole team or just a single engineer for your project. You may need several developers to design an MVP or produce a fully functional app. But, once the solution is up and running, you can continue the cooperation with maintenance engineers only.

Working with an in-house software team, it can be very expensive, problematic, or even impossible to scale up or down. You cannot hire an engineer to work with you in the office and say “goodbye” after the MVP is launched. However, this is much easier to do when outsourcing.

7. Quality you’ve been looking for

Due to high competition and demand for brilliant services, app development outsourcing companies have learned how to deliver products of the highest quality possible. They will compare your requirements to the main market trends, upgrade their skills annually and prepare an impressive portfolio. With a competent outsourcing team, you will save time and money, as well as increase the future product’s quality.

Main cons of working with offshore teams

To get a full picture, you need to analyze both outsourcing benefits and risks. And here are 3 key factors to consider:

Different time zones

Working with a team that is several thousand miles away from you may be problematic in terms of workday organization. Working in New York, if you’d like to schedule a standup call at 11 AM, it is late evening in Eastern European countries. If you want to check progress at 5 PM, your teammates will probably be sleeping.

However, our experience shows that time zone differences aren’t an obstacle to fruitful cooperation. On the contrary, our development team works hard when our partners are offline and is ready to present outcomes during evening calls. When we rest, our partners can work considering the updates they received from the development team. With outsourcing, 24-hour efficiency is easy to achieve.

Possible misunderstanding

Whether English is your mother tongue or second language, it is definitely a second language for people from Poland, Ukraine, Lithuania, and many budget-friendly outsourcing destinations. Hence, some communication problems may occur. At the same time, people involved in software development outsourcing have solid knowledge of English since this is the part of their job. So, if you’ve had problems dealing with a software development company’s poor English, this was likely bad luck. Just give outsourcing teams another chance!

Divergence in business approaches

Your engineering partner may have a different point of view on business development and work organization. The reason for this is simple: you run 2 different businesses, thus, approaches may vary. Unfortunately, this may create complications in your teamwork.

However, let’s analyze this fact from another perspective. A specialist who uses a different approach can breath new life into the processes you have become used to. Outsourcers work with multiple different companies, thus, they have huge experience in a variety of areas. This gives you another chance to turn your idea to an innovative and beneficial solution.

Security risks

While highlighting the pros and cons of outsourcing, another significant thing needs to be mentioned. This model requires you to share your innovative idea with someone else who lives thousands of miles away. So, you may feel a slight discomfort about whether those people will steal your idea and release it as their own product. You do not have full control over what your partners do all day long and you have no guarantee you have made the right choice and are working with the right people. Data theft is always possible.

However, in most cases, data theft issues occur if a business owner overlooks the necessity of an NDA or other type of legal agreement.

Fortunately, we can offer some advice to minimize this risk.

3 ways to minimize risks in outsourcing software development risks

Outsourcing is not as scary as it may seem once you’ve become acquainted with its disadvantages. There are tried and tested ways to overcome them:

Choose the right service provider

This is the most important thing you need to devote your time and attention to.

• Analyze the company’s website.

• Take a look at their previous works.

• Talk to decision makers and become acquainted with the team.

• Ask for detailed estimations.

• Make a choice.

Set the rules

After the choice is made, you should set some well-defined rules to follow.

• Schedule meetings.

• Set deadlines for every component of functionality and interface.

• Discuss actions to take in case of an emergency.

Sign the agreements

A non-disclosure agreement is something you must consider. It will help ensure that your new partner will not borrow your idea, your app, or your customers.

Final thoughts: In-house vs Outsourcing software development

Discussions about in-house vs outsourcing software development can be never-ending. But a choice must be made.

• Hire an in-house team if you have a budget large enough to invest in rent, and the necessary hardware, software, and devices, as well as pay salaries and keep your head above the water. Also, use this option if you have a lot of time.

• Outsource if you need a high-quality product developed quickly at lower prices. Research, seek and meet a reliable partner.

• Use a hybrid model where management and sales work with you on-site, and an offshore engineering team constructs and tests an app. This is the preferred method of many business owners and combines the advantages and disadvantages of both approaches.