According to Statista, the IT outsourcing market keeps growing and will most probably reach the revenue of US$591.24bn by 2025. Another report by SumatoSoft states that 30% of companies in the USA outsource at least one function and that outsourcing is seen as a valuablle productivity-boosting option for businesses. That being said, it’s safe to assume that outsourcing will keep growing in popularity and will become more and more widespread across various industries and countries. But what makes it so popular and how does outsourcing compare to in-house software development? Let’s look at both options in detail below.
The biggest challenges of in-house development
In-house software development implies that a business has its own software development team and works solely with own employees to create software products. On the contrary, outsourcing development implies that someone else does software development for you. For example, SoftTeco is an outsourcing development company that has been working with international clients since 2008 – and for many projects, we collaborate with in-house teams so that’s a valid option to consider. Such hybrid approaches are perfect when you need extra specialists aka outsourced developers to add to the existing team. Back to the topic, if we compare in house vs outsourcing, in-house development undoubtedly has its own benefits such as:
- Deep involvement in the product
- Excellent knowledge of the product and internal processes
- Easier and more transparent team management and project control
- More effective communication
However, there are also several major challenges that complicate the in-house software development process and can result in significant spendings of time and resources in the long run:
High costs
One of the main reasons why companies are switching to outsourced development is the high cost of retaining an in-house team. The costs of in-house development normally include:
- Employees’ salaries
- Rent of the office space
- Equipment
- Paid sick leaves, vacations, etc.
- Employee training
If you add them all up, in a long run they will turn in significant spendings. So if your organization needs one-time software development services, it will be best to turn to an outsourcing company.
Limited talent poolÂ
It often happens that software projects require knowledge and experience with specific software that your in-house team may not be familiar with. In this case, you will need to rapidly find the needed specialist and spend time and resources on their onboarding and training processes. This might be okay if you need just one specialist – but what if your project requires several new people on the team? In this case, the project deadline will most likely be delayed since you will have to find, interview, and onboard new employees.
Low flexibility
Lastly, inhouse development team often lack flexibility which is needed in fast-paced software projects. This is especially relevant for companies with established processes that are hard to be adjusted on the go. That means that in-house team may have problems with reacting to unexpected changes in a timely manner, which in turn can negatively impact the project.
Advantages of outsourcing development
Now, let’s turn to outsourcing development and let’s define it first. By outsourcing software development, you delegate the process to a third party and pay for its services. There are several outsourcing models to choose from:
- Fixed price: the client and the IT provider agree on a specific budget and outline what services and deliverables are included in this budget. This model is most suitable for projects with a definite timeline and business goals.
- Time & Material: the client pays for the hours and resources spent on the deliverables. This model is suitable for long-term projects with fluctuating requirements.
The great thing about third party outsourcing is that these software providers usually have years of experience in the IT industry and a vast talent pool. And here are the main advantages of outsourcing:
Lower costs
The core reason why so many companies switch to outsourcing is that the costs are relatively low, especially compared to in-house development. The first reason for that is that outsourcing does not require such fees as equipment, office space rent, employee vacations, and etc. Instead, you pay a predefined fee and can scale the budget up and down in a flexible manner. Second, the cost of software development services differs from country to country but the quality of these services usually remains on the same high level. So instead of assembling a costly local team, it will be more cost effective to hire international software developers.
Access to wide talent pool
Another big advantage of IT outsourcing is access to a wide pool of talents, ranging from software engineers to QA specialists and designers. This is especially important since you won’t need to spend time finding specific specialists and will be able to instantly assemble the perfect team for your project. One more good thing about outsourcing is that you can scale the team up and down (same as your budget), based on the project needs. Meaning, you can always add needed specialists and continue the project within the defined deadlines.
High scalability
While in-house software development may lack scalability and flexibility, IT outsourcing is known for being highly scalable and offering unmatched level of freedom. What this means is that you can control when and how the deliverables are carried out, whom to add to the team, and what tasks are of top priority. And if you need to quickly adjust to a change in the market or to a new business goal, a reliable IT provider can seamlessly do that.Â
Rich experience
One more benefit of IT outsourcing is rich expertise of third-party software providers in various domains and technologies. Whether you operate in fintech, healthcare, advertising, or manufacturing, chances are high that the selected IT provider has several case studies on similar projects. Deep understanding of varius industries and their requirements turns outsourced IT providers into valuable business partners that can recommend the best solution.
Top myths about outsourcing and why they are not correct
Finally, let’s briefly talk about the main concerns that companies have when comparing outsourcing vs in house and considering outsourcing in general:
- Security: some clients hesitate to partner with outsourcing companies as they fear low security of software products. In reality though, all trusted and reliable IT providers usually have certifications like ISO 27001 and 9001, meaning they comply to international security and quality standards. Also, such companies usually have own in-house security policies that are 100% transparent for the clients.
- Lack of motivation and dedication: another common fear is that outsourced specialists are not as dedicated to the project as in-house employees. However, the big benefit of outsourcing is that it provides a fresh perspective on your product and outsourced developers are usually highly enthusiastic and provide valuable recommendations on product improvements.
- Limited control: lastly, one more misconception about outsourcing is that you can’t obtain proper control over the project and the team. However, all reliable outsourced companies provide a detailed plan for communication and reporting to their clients so you always know the status of your project and can instantly look into any issue.
Final word
Both in-house and outsourcing pros and cons are significant and valid but in modern fast-paced world, outsourcing is more popular due to its flexibility and scalability. But you need to pay utter attention to the selection of a reliable IT provider and ensure that the company is trustworthy and operates by recognized standards. This will serve as the guarantee that your software product will be both user-centric and secure.
Guest writer
