The Better Choice: In-House Development vs. Software Outsourcing?

in-house development vs software outsourcing

Software is the core of any business! Whether it is a business or a startup, no business can prosper without software. Software development can be done in two ways: In-house development vs software outsourcing. In this article, I will compare in-house development to outsourcing and detail when to choose which.

Software development outsourcing is a catch-all term, and in recent years, companies have leaned more towards outsourcing their IT requirements. The factors that led to this decision are high value for money, fewer hiring problems, faster time to market, etc.

The other way out is in-house software development. Assembling an internal team takes a lot of time, commitment, and patience.

There are risks involved in both approaches. Let’s first try to understand what in-house development and software outsourcing are. Then, we will compare in-house development or software outsourcing using the pros and cons of each approach.

What is In-house Software Development?

In-house software development means leveraging company resources to develop or implement software according to specific company requirements. This involves the lengthy process of the job posting, interviewing, and hiring suitable candidates.

In this approach, you need to invest money and time in bringing together all the different people or roles involved in creating a solid foundation for developing good software. 

When developing software in-house, software development should be the core competency of the business. They need to have enough resources and infrastructure to support software development on their own.

What is Software Outsourcing?

software outsourcing company


In simple words, outsourcing is a delegation of tasks. Therefore, software outsourcing is an agreement made by a company to hire developers via an external software contractor to do the work related to the software rather than in-house.

In this approach, the initial time and cost savings come from not hiring internal employees and not investing in infrastructure.

This is typically done by companies whose primary competence is not IT or when their IT department board is full of other core processes. 

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Now that we have a brief idea of ​​in-house development vs outsourcing let’s look at both approaches’ pros and cons.

Advantages of hiring an in-house software development team:

  • A better understanding of corporate culture and business
  • Always available
  • Total dedication to the project
  • No cultural differences
  • No language barriers
  • Face-to-face discussions
  • Maintenance, modernization, and support, all internal

Disadvantages of hiring an in-house software development team:

  • Increased costs (salaries, benefits, raises, insurance, travel expenses, etc.)
  • Investment in infrastructure
  • Lack of skills
  • Hour
  • Exit, which means starting the whole process over again

Advantages of outsourcing software development:

software development outsourcing


  • Cost savings
  • No hassles of hiring employees
  • Access to global skills
  • Flexibility in business processes
  • Faster time to market
  • Greater focus on core business
  • Better risk management

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Disadvantages of outsourcing software development:

  • Partial loss of control
  • Cultural and time differences
  • Communication and management
  • Confidentiality of information

A must-read: How to Hire Programmers for Startups in 5 Easy Steps?

Let’s now compare outsourcing and in-house software development in detail:

In-house Software Development

For startups and companies with an in-house IT team, there’s nothing like in-house development. It is easier and much more manageable. If you need a change in requirements or an upgrade, you can walk a few blocks and order them with a cup of coffee. That’s great.

But before sharing coffees, keep in mind that the internal software development process is lengthy.

Step 1: Suppose you work for an e-commerce company. Your boss tells you that the company requires inventory management software to streamline inventory processes. Accept the request and communicate with the business analysts.

Step 2: The business analyst prepares a business requirements document and informs you what kind of resources are required.

Step 3: Now you know what software is and what it does, so the next step is to put together an IT team: developers, designers, project managers, and testers. So, you contact the recruiting team.

Step 4: Job Offers, Interviews, and Hiring – Have a good few months!

Step 5: Once you assemble a team, development begins, and now you can order the coffee;)

Do you know? Hiring a software engineer takes 35 days, on average, in the US.

But with internal development, the IT team that you put together will develop all the company’s projects, with dedication, directing all efforts towards the company’s success. There will be no distractions with other projects.

All your company’s resources are restricted to yourself, and no external organization has access to them.

As the team you hire is local, they will know the company’s culture well and will work the same hours as everyone else in the company. This will result in better collaboration. During the hours when the software needs support, his team will be available to resolve any errors that arise as soon as possible.

Well then, all good! Dedicated services, no communication barriers, regular availability – then life is excellent with in-house software development. Wait!

The hassles of hiring an entire team should be discussed. Proper screening, validation, back and forth interviews, etc., come into play here. Also, the skills you need may not match those of the applicants.

There’s also training, project management, and the enormous risk of employees going off between projects.

And now, let’s move on to the critical factor for almost every business: cost! Because I never heard anyone say, whatever the cost, we don’t care. When you hire internal employees, the costs you incur are:

[a] Salaries

[b] Taxes

[c] Benefits and other expenses

[d] Training

[e] Office space

[f] IT architecture, etc.

The average web developer salary in the US is around $ 88,000.

Moral: Hiring and maintaining an in-house team is expensive.

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Software Development Outsourcing

Outsourcing in today’s age, where everyone has an insatiable desire for innovation, means a great opportunity to gain a competitive advantage. You get access to globally qualified developers, and the good news is that you can choose and hire whoever you want.

The software development outsourcing process might have some problems at first. You need to understand the company, its culture, its experiences, ask for references, etc. Along with that, constant communication and management are crucial to the success of the project.

But, once you find the ideal software development company, your cost and time drop dramatically compared to in-house development.

The cost is reduced as there is a considerable difference in wages in developed and developing countries. And a great deal of money is also saved in the form of salary and employee benefits.

Outsourcing also means faster time to market, as you can dictate deadlines according to your schedule, and your software company will have dedicated developers serving you accordingly.

But yes, software outsourcing can also result in a big headache if the software company is wrongly chosen or is not fit to develop according to exact requirements. A big risk is the possible loss of information, as your idea will be shared with some vendors. Create an NDA and make sure your vendors sign it to avoid possible loss of information. 

With the right attitude, you will not only save money, but you will also find a great quality software solution.

Communication is another debatable topic when it comes to outsourcing. But in the 21st century, where almost 9/10 people own a smartphone, there are ample ways to cross these communication barriers. 

Video calls, email updates, video demos, instant messages, etc., are bringing the outsourcing company and software provider much closer in terms of collaboration.

software consulting company

So why outsource?

A vast majority of business owners hesitate when it comes to custom software development. The main reason is the price. As discussed, capacity issues remain one of the biggest challenges, along with hiring talent for internal development, and outsourcing seems like a quick fix.

According to a report on the state of software development, companies and startups were asked, “Have you ever outsourced software development in whole or in part?”

Of the people who outsourced, 57.33% outsourced development to a top software development service provider.

We now know what in-house development and outsourcing are and their pros and cons. So, when it comes to in-house versus outsourcing, the ever-present question is:

When does outsourcing software development make sense, and when does hiring in-house software developers?

Both are time-consuming. Both require due diligence. If you don’t hire a competent developer, your project will suffer. Likewise, if you don’t hire a competent software outsourcing company, your project will suffer.

Keep three things in mind when you need to decide on outsourcing versus in-house:

[1] Budget

[2] Chronology

[3] Scope of the project

Let me explain with an example: Suppose you decide to develop a taxi sharing app, and your whole approach and business revolve around that. That becomes your core business. You know you have some time before launch, and you also have some money to support development. Opting for an internal team is the best in this case.

This development will be continuous, and all aspects of your business will revolve around this. Is it a specialized service that you need to handle full-time? So, hire an in-house team! In-house development or software outsourcing

Now, let’s say you need inventory/warehouse management software to help you automate business processes. But your business doesn’t revolve around this, and once you have the software, you won’t need daily maintenance. Also, you need this software quickly, and you don’t want to spend too much on it. It is best to outsource this to some capable software outsourcing company.


Summing up the article, outsource activities that are not the core of your business. When used correctly, outsourcing can help you optimize your business operations more strategically and help you gain a competitive advantage.

All you need is to hire software developers from a top software outsourcing company and give your business the gift of success.

If you have any other queries or suggestions, comment below. Till then, that’s all, folks!

Frequently Asked Questions(FAQs)

Question- What is the in-house development definition?

Answer: If a company develops its software, rather than contracting a third party to build it, it’s considered in-house.

However, many companies outsource development work and then develop their programs internally. The choice between in-house development and outsourcing depends on company size, resources, expertise, time frames, and business goals.

Question- What is an in-house company?

Answer: When you refer to a company using internal sources, it hires and utilizes its employees to complete specific jobs, turning them into an in-house job or operation. An in-house company is a business that does not outsource any of its tasks to outside companies. Instead, all tasks are handled by employees within their organization. 

Question- What is the difference between developing applications in-house & using a third party?

Answer: In-house development mainly involves hiring a team of developers to work on your software in your office. The main advantage is that you will have more control over your project, and you will be able to oversee every aspect of its creation.

On the other hand, outsourcing means hiring a third party to develop your software for you. With outsourcing, you can get your product to market quickly and at a lower cost than if you were creating it in-house.

Question- In-house vs. Outsourcing: Which is more cost-effective?

Outsourcing is more cost-effective than in-house development because of economies of scale. It’s easier to manage a few outsourced projects than it is to manage one project with many developers working on it.

Outsourcing allows you to get things done faster and cheaper without sacrificing quality. If you’re deciding between outsourcing and in-house development, you should consider how much time and money you have available for your project.

Question – In-house vs. Outsourcing: Which one offers faster time-to-market?

In software development, outsourcing can be a great choice if you’re aiming for a quick turnaround time on bug fixes and new features.

Outsourcing saves development time because you don’t have to wait for new employees to be hired, trained, and up to speed.

In other words, outsourcing can help you meet your deadlines.

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