Insourcing VS. Outsourcing software development: Your complete guide Should you outsource or hire in-house devs?

Insourcing vs. Outsourcing
Nov 02
Read 6 Min

All business owners came up against the same puzzle at some point. Should they outsource parts of their work or keep it in-house? This question is particularly frequent among those who seek professional developers to help them out. So, when it comes to insourcing vs. outsourcing software development, what’s a company to do?

Before you make up your mind, it’s essential to amplify your knowledge regarding both options. What are the pros and cons, how much will it cost, which one’s more efficient? Know the basics to get optimal results. Here’s your cheat sheet. Use the information to come up with a clever tactic. 

The basic stuff you must know:

What is the difference between insourcing and outsourcing software development?

It all comes down to a single question – who will you put in charge of your software projects? There are two popular and efficient ways to build a product. One’s by using the technical knowledge you have in your company. In addition, you would most likely hire another software developer to join the squad and contribute to faster delivery and increased quality. The other option is to choose a trustworthy development team outside your company. Now, there’s another choice to be made – you could collaborate with a freelance software developer or assign your duties to a reliable BPO company. And that’s the principal difference between insourcing vs. outsourcing. Insourcing is equivalent to having an in-house team, while outsourced teams take charge of your tasks from another location and with a different type of agreement between you. 

What are the advantages and disadvantages of insourcing and outsourcing?

Each business decision requires careful planning and thorough research. That way, you will draw the right conclusions and take the right steps. In this case, knowing the key insourcing vs. outsourcing pros and cons is crucial. Remember – both options can work like magic! But it’s unavoidable to get the timing correctly & hire the best people for the job! So, here’s what (and who) to beware of and which perks to look forward to. 

Pros and cons of outsourcing

Countless companies use outsourcing to get the best results. WhatsApp and Slack are on this list, and so are major eCommerce businesses who’ve chosen to hire a web development team outside of their organization, outsource customer support, and much more. The main benefits of outsourcing they have encountered include: 

  • Having a bigger talent pool and more access to relevant sets of skills and knowledge,
  • Saving a lot of time (and money) when hiring, plus saving even more time on building successful products and client base,
  • Increasing efficiency and productivity,
  • Lowering churn rate among the employees,
  • Obtaining more coverage due to different locations and time zones, 

And much more. However, there are quite a few risks, challenges, and disadvantages of outsourcing to keep in mind. You could face some delays, unexpected costs, and similar setbacks. Also, there is a chance that your project might bump into an obstacle due to poor management and inaccurate estimations and planning. 

Key benefits and downsides of insourcing

We’ve seen a few important benefits of outsourcing software development and other business functions. Now, let’s see – what are the advantages of insourcing? First of all, the levels of security will be much higher. You can monitor what goes on and prevent any issues regarding data or other security problems. Also, it is usually much easier to detect errors and spot misunderstandings – and fix them in a snap! That way, the communication will flow much more efficiently. And finally, it’s known that in-house development teams usually take better care of quality. And although the evolution of outsourcing suggests that this business practice now pays way more attention to quality rather than quantity, sometimes it’s better to rely on tested practices that you’ve built in-house. 

On the other hand, insourcing software development is more expensive. You will be having increased costs of hiring (in addition to expenses connected to the empty seat), plus you will have to pay for all training, onboarding, and upskilling. Also, you’ll reduce your potential by only relying on the knacks you have within your company. 

Insourcing VS. Outsourcing software development: Proven tips on how to choose one

So, both approaches have substantial perks. And also, both have considerable downsides to keep in mind and strive to eliminate. However, the main way to determine which alternative suits you best is by covering the most significant aspects and answering the questions regarding them. Now, here are a few tested steps to take when deciding on insourcing vs outsourcing IT services: 

  • Pay attention to your finances,
  • Spot the difference between core projects and those that can be outsourced,
  • Know the time frame and stick to your agenda,
  • Be objective regarding the sets of skills you want on your team (and the ways to obtain them).  

Once you assess these key points, settling upon one of these popular business practices will be much more manageable. 

How much cash do you have at your disposal?

According to Statista, the revenue of the global BPO industry reached 26 billion US dollars in 2019. And all forecasts have foreseen its unstoppable growth for the years to come. So, yes – it’s a very profitable industry. And no – you won’t need to burn a huge amount of cash to get started. In fact, if you decide to outsource software development, you will actually save up. Cutting down on cost used to be the primary reason companies considered outsourcing, which is why this practice quickly became popular between startups and small businesses as well. Let’s break this down. If you choose to insource, you will need to keep these expenses in mind:

  • Employees’ gross salary
  • Taxes and other mandatory payments
  • Office plus equipment costs

And that’s just to cover the basic fees that await. So, in conclusion, when it comes to insourcing vs. outsourcing software development, it’s usually less expensive to go for the second option. Still, picking a reputable BPO company isn’t that cheap. Actually, if you want the best results, it’s far better to get a pricier service provider with the necessary technical knowledge and other traits that make them a perfect partner. Surely, it might drive some (higher) expenses at the very beginning, but it does save you money in the long run. First of all, when you choose a trustworthy third-party dev team, you will be less likely to run into some hidden costs later on. 

Calculating how much you’ll spend on a reliable BPO provider means factoring in these key points:

  • The scale and complexity of a project,
  • A number of developers and other experts who will work on the project,
  • Your time frame and established deadlines.

Assess your true needs and search for an outside software development team that matches your requirements and budget, and make sure they have good references. 

How core is the position you plan to outsource?

Although the future of outsourcing clearly points to this trend where companies assign their outside allies with some core assignments, that’s not always the smart way to do it. Non-core functions are the ones that should be outsourced. At least at the beginning. When picking a BPO company that suits you well and possesses the tech experience you need to finish your project, start small. You might choose to delegate the truly essential tasks at some point. But until you make sure that your requirements are fully aligned with their capabilities and that you’ve built mutual trust – don’t test your luck. 

Do you need results in a snap?

Is finishing up certain tasks immensely urgent? If so, we have an obvious winner in this insourcing vs. outsourcing combat. Picking to outsource software development when there’s a precise deadline (that’s approaching fast) is usually the smartest decision. Surely, it will impose some other dilemmas. But know this – outsourcing tech roles and responsibilities can actually strengthen other core business processes. It will reduce the pressure and lift a heavy weight off your insourced team’s shoulders. Quick results, faster time to market, more efficiency, and more productivity accompany BPO services – when they’re done right and provided by a dependable and skilled crew. 

Which key tech skills does your team lack? 

How well do you know the market? When selecting a tech stack, it’s crucial to understand which technical skills are essential for your project and what their benefits are. So, planning to build an app or a platform means learning about technologies that will interact and integrate with that stack. And ultimately, you’ll have to learn how easily you will find the people that will bring those masteries to the team. If you choose to outsource, define a clear scope of work first. Then, separate the must-haves from nice-to-haves while screening third-party vendors. Also, if the necessary skills aren’t labeled as core long-term, outsourcing does the trick. Nevertheless, if the expertise you seek is more of a permanent type of deal, it could be better to teach your in-house team or hire more professionals full-time. 

Bonus benefits of outsourcing software development: Innovation & freshness

Innovative solutions and quick delivery are what most tech companies seek. If that’s something you’d be pleased with, it might be best if you choose to outsource. It’s true, most skilled IT teams that participate as third-party developers bring in a dash of freshness to their clients. How so? Internal processes often slow down the insourced devs. With numerous procedures and non-tech stuff to worry about, they can lose their focus a bit or just get tired of a project. But a brand-new team with spick-and-span eagerness to contribute can bring quick results. 

Make a smart choice: Learn all there is to know about Insourcing VS. Outsourcing

Insourcing vs. outsourcing software development is a tough choice. Since both options offer substantial progress, profit, and unquestionable perks, it’s hard to just pick one. However, if you find the right BPO company, the outcomes you can count on will be remarkable! In this particular scenario, you’ll certainly hit the jackpot! Just make sure to double-check their references and to cover the steps we’ve mentioned before. If the timing is right & their technical skills + reliability are just the way you want them to be, you’re in for a successful collaboration. 

And, who knows, maybe your ideal BPO partner is right here

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Tatjana Zotovic