Over the last two decades, outsourcing has emerged as one of the widely adopted business trends. In 2019, the global outsourcing market was estimated to be around $92.5 billion. IT outsourcing is one of the largest sectors which accounts for $66.5 billion. Software development is one of the niches that IT service providers offer to companies. Why does outsourcing work? According to attorneys at Cohnlg (which specializes in intellectual property), once a company manages to properly develop its brand, half the battle is already won and now the company can outsource the technical work while it continues to build its business.
But despite the popularity of IT outsourcing, it remains a contentious topic. Companies, large and small, use this delegate their IT needs to third party providers to meet their needs and grow their business without straining their budget. When implemented properly, IT outsourcing is seen to improve the quality of service.
Although some business experts recognize the benefits of IT outsourcing, some remain wary about this business trend. Some companies report of terrible experiences and outcomes outsourcing their software development needs. These contrasting views often lead to confusion.
So, should you delegate software development to an in-house team or an outsourced developer?
To determine which is best for you, let’s take a look at these two service delivery models, and their pros and cons.
In-house Software Development
With in-house software development, an organic IT team handles the entire process of developing business IT solutions. It is easier to manage and develop software solutions because the team is ready and just waiting for orders. If you need new IT software, update an existing one, or redesign an old software, you simply call up the IT department.
According to specialists at Entrance Consulting, a full-pledged IT team is composed of developers, software engineers, project managers, designers, and testers. Unfortunately, there are not many qualified and experienced IT professionals, thereby making this stage quite a challenge. It can take a few months before a recruitment team can assemble an IT department.
Recruitment is just a one-time deal. Once the in-house development team is assembled, they can now start working on IT projects exclusively for your organization. All their time and effort are directed towards achieving your company’s goals. Resources are restricted to your company and no external organization can access them. This ensures the integrity of your intellectual property.
Furthermore, the IT team assimilates your unique company culture and they work as part of a larger team towards achieving the same vision. This facilitates seamless communication and collaboration across departments. In case some areas need support, your in-house IT team will be readily available.
In an ideal world, every company should have an in-house software development team. But this is not the case, recruiting and maintaining IT personnel can be very costly and is replete with challenges. Recruiting applicants, conducting countless interviews, screening, and validating can be time-consuming. And it doesn’t end with hiring; you need to spend on training and improving their skills. Maintaining in-house employees proves costly. Some expenses you’ll incur include such as salaries, taxes, training, office space, and IT resources.
Here’s a quick rundown on the pros and cons of in-house software development.
- Exclusivity of services
- IT team assimilate company culture
- Dedication towards the company’s success
- Better communication and collaboration
- Continuous support and modernization
- High cost
- Lack of qualified IT experts
- Infrastructure and technology investment
Outsourced Software Development
The desire for innovation has spurred the popularity of software development outsourcing. With this service delivery model, the software needs of a company are delegated to a third-party provider. This gives business access to global talents at a fraction of cost.
But just like hiring an organic development team, the process of IT outsourcing entails challenges. Foremost is the need to choose a reliable to outsource company. Your outsource provider should have experience in your industry and must be compatible with your company’s culture. Efficient management and communication are crucial in ensuring the success of your software projects. Once you’ve found the right software developer, you can significantly cut the time and cost of software development as compared when done in-house.
Outsourced software developers can offer surprisingly competitive rates because of the wage disparity between developed and developing countries. They can get qualified talents at a lower cost. They also have the necessary technologies and infrastructure, thereby cutting the need for an initial investment.
Depending on the complexity and timeline of the project, you can request the IT developer to scale up the manpower. This way, projects are completed and deployed much faster than in-house software development. Most important of all, software outsourcing allows you and your IT team to focus on core functions geared towards more innovation and success.
But even with these advantages, software outsourcing can cause you a headache if you choose the wrong developer. One major risk is the possibility of losing exclusive rights on your intellectual property. The vendor might share information with others, either purposefully or inadvertently. This makes it vital to create an NDA to ensure that the vendors keep your information classified.
Likewise, communication barriers can lead to problems. Make sure to capitalize on technology, such as video calling, instant messaging, email, etc., to overcome this challenge. Collaboration is vital in the entire software development process.
Here’s a quick rundown on the pros and cons of software development outsourcing.
- Cheaper cost
- Better risk management
- Access to qualified IT specialists
- More time on core functions
- Faster software development and deployment
- Confidentiality of information
- Lack of direct supervision over employees
- Time and cultural mismatch
- Potential communication barriers
In-house or outsource?
Having known the difference as well as the advantages and disadvantages of in-house and outsourced software development, the omnipresent question is: which path should your company go?
There are three things to consider: project scope, timeline, and budget. First, know the project scope; will it be a one-time thing or a continuous one? If it’s just a one-off deal, you better choose to outsource it. If your business requires constant innovation, then assembling an in-house IT team is better.
Next, you need to consider, how soon do you need the app running? If the project gives you the liberty of time, then you can recruit software engineers for your organic team. Meanwhile, if you need it deployed soon, then outsourcing is the best route.
Lastly, you should factor in your company’s financial resources and how much you can spend on software development. If you’re running on a shoestring, then outsourcing is the best route. In-house software development tends to be costlier.