In-House vs. Outsourced Software Development: Making the Right Choice

How Outsourcing Helps

If you collaborate with an outsourcing vendor, you can save ~ $419,000+ annually since they offer a remote cooperation model. You don’t need to cover office, hardware, and software expenses. Your specialists work remotely, and your trustworthy partner will handle all hardware and software-related costs, allowing you to allocate these resources to more critical aspects of your project.

The Impact of Outsourcing Solutions

Many outsourcing companies can provide you with seasoned developers from Eastern Europe and Latin America. The average software developer’s salary in Eastern Europe is ~ 70% lower than in the US. For instance, a mid-level JavaScript developer will make $47,700 in Poland and $47,000 in Romania. While the salaries are lower, the quality of developers provided is top-notch. According to our clients, we always present high-caliber candidates.

Here is a comparison of the developer salary between the US market and Poland, a top outsourcing location for Qubit Labs’ clients.

What Makes Outsourcing Effective

Usually, most outsourcing providers carefully analyze the client’s requirements and search for suitable candidates for free. We sign a contract after we find a match. Their recruiting processes are smooth, fast, and effective. For instance, in two days, Qubit Labs found and hired a skilled .NET developer for TraxGo, a tracking and monitoring platform. Also, for The Open University, a UK edtech company, we built a dedicated outsourced development team of 5+ developers and helped save budget costs by 58%.

How Outsourcing Enhances Operations

Many firms offer a full-stack accounting team with services covered by a set monthly fee. This allows businesses to allocate budgets effectively, avoid budget overruns, and ensure transparent pricing.

Why Outsourcing Is an Excellent Alternative

Retaining existing employees is more effective than searching for new ones. Outsourcing vendors allow businesses to replace specialists during recruiting for free, avoiding unnecessary expenses and delays.

Besides, their professional HR teams leverage the best remote team managing practices to guarantee the specialists’ outstanding performance and job satisfaction. Most of their developers have worked on the same project for over three years, contributing successfully to the initiative’s growth.

The Value of Outsourcing

Outsourcing can provide comprehensive HR services, including the creation of HR onboarding and retention plans with the support of a dedicated HR manager. These professionals ensure effective employee training and development, manage payroll and benefits, and guarantee legal and administrative compliance.

Perfect Cultural Fit

In-house employees will share the same mentality and language, be 100% integrated into your company’s structure, share your goals, and follow common company’s values. This will ensure high-quality output and consistent development.

Fast and Direct Communication

Employees who share your working hours and office space will likely keep you in the loop. This will make communication more comfortable and transparent, eliminating misunderstandings, promoting problem-solving, and boosting effectiveness.

Excellent Responsiveness

Usually, in-house employees fix errors and bugs quickly, ensuring the project remains on track and all delays are avoided. Besides, their iterative improvements enhance the overall quality of a digital solution, helping a company to stay competitive in the market.

Long-term Value

Investing in developing and training in-house specialists always pays off, as they become more skilled, better understand the company’s processes, and bring fresh perspectives to new projects. Continuous development also fosters high loyalty and reduces turnover costs compared to hiring and onboarding external candidates.

Robust Security and Intellectual Property Ownership

Businesses in specific domains like game, fintech, e-commerce, and healthcare prefer hiring in-house staff to ensure data security and compliance, avoid leaking trade secrets, and save costs on additional licensing or royalties.

Limited Talent Pool

What are the challenges of in-house software development? According to Qubit Labs’ latest report, 76% of tech companies are experiencing an IT talent shortage. Many companies struggle to find the right talent locally, leading to increased local salaries and generous bonus packages. As a result, firms can hire on-site specialists who lack experience or knowledge at a steep price simply because of the limited pool of specialists.

High Cost

In-house development is always much more expensive than outsourcing. It usually entails taxes, social benefits, office space, hardware, software, training, insurance, and a salary that heavily depends on the competitive local market and the cost of living in a particular country. To illustrate the point, let’s consider the taxes and average salaries in the USA and Eastern Europe.
A software engineer in the USA makes, on average, $105,147 annually, and the tax is progressive and varies by state. A software developer in Poland earns $42,000 annually, with a tax of 12%.

Low Retention Rate

This factor is crucial because an in-demand specialist may quit at an essential project stage. In that case, the company would have to urgently find a replacement, which would cause additional costs and losses for the current project.

Cost Efficiency

“Hiring from developing countries can be much cheaper than hiring locals by our average wage rate. Due to the difference in currency and other financial factors, the wage rate of these countries is much lower hence, it is cost-effective to hire those candidates instead. Moreover, outsourcing month-based projects can save you some money too. Instead of hiring a permanent employee on your payroll, you can just pay a certain amount to get the work done in days. This is especially efficient for roles that are occasionally required,” states Kyle Kroeger, Entrepreneur and Finance Expert at The Impact Investor.

Qubit Labs survey proves that 82.9% of tech businesses work with remote teams due to their cost-efficiency. They offer competitive rates and reduce operational costs by eliminating the need for infrastructure, personnel, and equipment investment. Eastern Europe, Asia, and Latin America are some of the most popular outsourcing destinations. They boast low taxes, reasonable salaries, government support, and vast talent pools. Since the competition and cost of living in these regions are lower, you can easily find top-league developers at an affordable price.

Human Resources Savings

Hiring and onboarding new employees can be lengthy and pricey. This situation occurred with our client, an automotive e-commerce platform. The client needed PHP specialists, so instead of partnering with an outstaffing agency, the firm decided to go with it alone. Instead of filling vacancies fast, they only increased their HR department and spent a lot of resources on finding the right fit. After several setbacks, they contacted Qubit Labs, and we provided a selection of 59 candidates over three months, allowing them to tap into a pool of qualified specialists, save costs, and prevent project delays.

Access to Qualified Experts

Outsourcing offers access to a global pool of professionals within hours. You can quickly find the required knowledge in cost-effective locations without compromising quality. Most companies hire talent in Eastern Europe, a booming hub with first-class specialists, perfect time zone management, excellent business culture compatibility, and high English proficiency. Qubit Labs has been in the local market for over eight years, and we know how to match you with a specialist who meets your project and budget requirements and demonstrates outstanding communication skills and unparalleled productivity.

“Successful outsourcing begins with two things above all else: organization and transparency. With effective communication, an alignment on goals, and clear deliverables, all companies — both startups and large corporations alike — can lead successful outsourcing efforts,”

says Gerald Lombardo, Co-Founder of The Word Counter.

Extensive Talent Pool

The second option has a huge advantage when choosing between in-house development vs outsourcing. It provides unlimited hiring opportunities, allowing you to choose from an extensive talent pool of experienced specialists with any required skills.

“There is a misconception out there that just because someone is from another country they are not as smart as an American worker – this could not be more wrong. Some of the best developers we have found are abroad,”

says Dave Evangelisti, Founder and CEO at Test Guide.

Unmatched Scalability

The key benefit you get when collaborating with third-party vendors is freedom. You can decide how many experts you need, how to arrange your workforce to focus on your strategic goals, and when to scale your dedicated team to keep your initiative running. Qubit Labs can support any of your plans. We can expand your team to keep up with your development pace or reduce team size after a peak period. These outsourcing services do not require much time or additional cost.

Quality Issues

In some cases, it may be challenging to uphold uniform quality standards. Therefore, it is necessary to establish transparent communication means, performance monitoring, and implement robust testing techniques.

Potential Security Risks

Collaborating with external providers can pose certain security risks, so it is paramount to ensure robust security measures. Companies handling sensitive data must establish strict security rules to prevent data leakage or unauthorized access.

Lack of Direct Control Over Employees

Outsourcing isn’t as transparent as in-house development, and you can’t gather a meeting in 15 minutes. You can’t reach the outsourced team in person, which might cause some trust issues. However, various software solutions will help you monitor the team’s progress.

Different Time Zones

Although this is one of the most commonly mentioned factors in the inhouse development vs outsourcing comparison, it doesn’t hinder the development if you have a professional team. Besides, multiple tools help synchronize the work and keep all team members on the same page.