December 23, 2019 Last updated December 20th, 2019 1,264 Reads share

Software Development: Outsourcing vs Insourcing – How to Decide?

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If you are thinking of hiring an outsourcing company to assist you in software development, read about the basic advantages and disadvantages your business will face. Dig into the concept of insourcing to find out which one is a better idea

The 2016 Deloitte’s study proved that outsourcing is the prevailing trend driving the global market these days. Finance, HR, and IT are currently the top three market niches that have the highest rate of outsourcing decisions. The surge of outsourcing over the last ten years is due to companies longing for the adoption of innovations they are unable to implement themselves. IT outsourcing services, in particular, the demand for mobile app development software experts, are most requested by international and local businesses. The global IT outsourcing market is expected to exceed $481.37 billion by the year 2022.

An alternative to outsourcing is insourcing. The principal difference between outsourcing and insourcing is that insourcing companies fully rely on their potential. They assign projects on their in-house employees and never resort to a third party when handling their tasks. Insourcing can also yield positive results but in limited cases underpinned by a business’s nature. Nowadays, the majority of IT firms opt for outsourcing when faced with choosing between outsourcing vs insourcing.

It does not mean though that your business equally needs it to get ahead of its rivals. To understand which strategy is more beneficial to your company, you should have a clear image of which benefits and losses you are going to take.

The Merits of Outsourcing

High level of expertise. Not every in-house team is all-knowing. Some technologies are overly specific and require you to hire specialized staff that is capable of implementing them perfectly. For example, outsourcing is a smart decision for companies that need high-end mobile apps, but their core activity bears no relation to mobile development. They engage several developers that have been working with app development software for years and get their user-friendly app within a month. In contrast, an in-house coder would work for months before you could see the same app.

Cost savings. Outsourcing companies impose fewer financial obligations on you. Besides the total price for the project they undertake, you might only be bothered with taxes or some additional costs related to the development of your product. If you need to assign a long-term project, an in-house team is a more costly option compared to outsourcing.

Access to a large talent pool. Outsourcing lets you interact with absolutely bright and educated professionals with a vast body of knowledge and experience. The value you get is a huge contribution to the growth of your business and substantially exceeds the value you could possibly produce alone.

Focus on your core activity. Outsourcing firms are mature players on the market. They are adept in project management and software development methodologies. This is why you won’t have to solve problems faced by UI/UX designers or QA assistants. Moreover, you will be totally ignorant of the entire software development lifecycle because the only thing you will focus on is your core business activity.

Faster project delivery. Outsourcing specialists often complete their projects way before the deadline. Their wealth of experience allows them to rapidly generate brilliant ideas and avoid troubles that typically face green developers.

The Demerits of Outsourcing

Security risks. Outsourcing requires you to share part of your confidential business information.

It is therefore important that you should fully trust the outsourcing company you are going to hire. Take the time to examine your outsourcing company’s credentials and transparency before making a deal with it.

Communication gap. Be ready to address difficulties in communication. Since your outsourcing developers will be miles away from you, it might be more complicated to discuss some aspects of the work. If you cannot agree on a particular subject, do not despair and stay patient. You are still in control of the situation. Online communication just takes more effort to develop a shared vision.

The Merits of Insourcing

Business confidentiality. When your business has no external relations, it is much easier to maintain your product’s uniqueness on the market. If you pioneer some innovative and ground-breaking ideas, insourcing safeguards your company from rivals and helps to hold the leading positions longer.

Face-to-face communication. Software developers are more talkative and inclined to interaction when you see them in person. An in-person conversation creates better conditions for achieving successful results than virtual communication.

Quick changes. In the event that an in-house team runs into challenges, it takes you far less time to develop a new strategy and introduce changes to the development irrespective of the software development cycles. Therefore, your project development is more stable and less prone to collapse.

United community. Your in-house team participates in all the essential processes that shape your company’s activity and image. They are thus more aware of your company’s product and have a nuanced understanding of how to apply their professional skills to bring the best results.

The Demerits of Insourcing

High costs. In addition to salary, you will have to cover sick leave, vacation, and holidays that result in considerable extra spending. Moreover, you should take into account some perks and bonuses that are usually offered to diligent and skillful employees, whereas newcomers commonly need training to get settled in.

Staff turnover. People come and go. You cannot shield your business from it. However, if your employee turnover rate is high, your business is bound to suffer major losses.  Start-ups are the most insecure in this sense because many employees tend to leave in search of better opportunities. Each time you have to hire a software developer, there will be a delay in work and for this reason a decline in sales.

Poor technical expertise. The IT-market is extremely competitive. Insourcing prevents you from sharing tech expertise of reputable companies that potentially can help to grow as an influential business player.

Outsourcing vs Insourcing: Which is better?

Your business nature typically shapes your company’s needs. These weighty criteria are a helpful guide towards realizing what advantages you would like to get. Nevertheless, it is entirely in your hands to choose the path that will lead you to prosperity.

Betty Lockwood

Betty Lockwood

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