In-House vs Outsourcing Software Development: What Do Startups Usually Opt For?

In-House vs Outsourcing Software Development: What Do Startups Usually Opt For?

It’s not a secret that IT outsourcing is on the rise nowadays. Global companies and young startups leverage this opportunity to grow their projects and attract vetted professionals. Yet, many businesses still opt for in-house development, thinking it’s more reliable. 

So the dilemma about choosing in-house vs outsourcing software development takes place more often than one can imagine. Qubit Labs knows how critical it is to make the right choice. So, we are here to outline the advantages and pitfalls of both options for you to find out what strategy matches your company’s needs best.

 

In-House vs Outsourcing Software Development: The Main Differences

Before moving to the in-house development vs outsourcing comparison, let’s clarify the terms. 

 

What is In-House Software Development?

In-house development means building a team from the employees you have at your company and assigning specific tasks to them. Usually, you hire specialists by yourself to make sure they share the same goals as your company does. Building an in-house team makes sense when you have a long-term project and tasks that the specialists need to perform regularly. 

 

When to Opt For In-House Model?

To make the right choice between in-house vs outsourcing software development, answer the following questions:

  • Do you want to have full control over your projects?
  • Do you want to stay in touch with the developers during working hours and communicate face-to-face?
  • Do you have a project that requires frequent updates and optimization?

If you answered “yes” to all these questions, it’s better to opt for an in-house development team. 

 

What is Outsourcing Software Development?

Outsourcing software development is one of the best ways to attract skilled specialists to your team. The remote team will build the products for your company, and the outsourcing vendor will ensure smooth development processes and take care of all the hiring and firing activities. Software outsourcing is a great way to free up your time, focus on primary business goals, and reinforce your company with vetted specialists without spending a fortune. 

 

When to Consider Outsourcing?

  • Does your company specialize in software development?
  • Are there enough skilled specialists in your area whose salaries stay within your project’s budget?
  • Is it easy for you to scale your team?

If you answered “no” to all these questions, make sure to opt for software development outsourcing. A piece of advice from us: Ukrainian developers for hire deliver top-rated products and are experienced in working with global companies. So, it’s worth paying attention to them when deciding on the outsourcing destination

 

In-House vs Outsourcing: Pros and Cons

As you can see, both options are popular in particular cases. But to know which one is more suitable for your business, let’s review in-house vs outsourcing pros and cons

 

In-House Development Pros

  • Cultural fit. Most often, in-house developers come from the same city-country as you are. So, they will have the same mentality and language, which will eliminate misunderstandings within the team. 
  • Dedicated specialists. In-house software engineers will be deeply involved in your project, knowing the nitty-gritty of each product. So, it will be easier to introduce any changes whenever needed and adjust the projects to make sure they meet your current business needs. 
  • Direct communication with the employees. The employees who share the same working hours and office space with you are more likely to keep you in the loop. In this way, the communication will be more comfortable and transparent, which helps to increase effectiveness. 

 

In-House Development Cons

  • High cost. Hiring the developers within your city or country might be several times more expensive than attracting foreign specialists. Also, there are many additional expenses that significantly affect the cost, including taxes, office tent, software, hardware, insurance, and more. These include sick days and employee perks as well. 
  • Staff turnover. The demand for talented developers is high, so some companies are able to offer better working conditions than others. As a result, software developers tend to change working places rather often, causing various challenges for the business owners who need to seek candidates to replace those who quit. 
  • Lack of experienced specialists. Sometimes, the project requirements are such that it’s impossible to find suitable specialists within your area. They are either already employed and don’t want to leave their jobs or ask for too high salaries because they have unique tech stacks. This makes it hard for the companies to stick to the planned budget and achieve the desired results in time. 

Now, to make our in-house development vs outsourcing comparison complete, let’s see what to expect from cooperating with remote software engineers.  

 

Software Outsourcing Pros

  • Cost efficiency. The world is filled with IT outsourcing companies that offer hiring specialists from any desired region. 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
  • Increased flexibility. Need to scale the project up or down? No problem. Programming outsourcing ensures a speedy hiring process, which makes it easy to increase or decrease the number of specialists once your project requirements have changed. 
  • Large talent pools. When choosing between in-house vs outsourcing software development, the second option has a huge advantage in this matter. It provides unlimited hiring opportunities, allowing you to choose from an extensive talent pool of experienced specialists with any skills you require. 
  • Fast project delivery. You don’t have to spend time on recruiting and training specialists if you hire skilled developers right away. Besides, you can facilitate your project development by hiring more specialists. Also, you don’t have to pay the programmers if there aren’t any tasks for them, which is cost-effective. 
  • High price-to-quality ratio. The remote developers for hire often come from locations where they have many opportunities to receive high-quality education and hone their skills. So, they are experienced in many technologies and deliver top-notch products without requesting sky-high wages. 

 

Software Outsourcing Cons

  • Lack of direct control over the 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 team in person, which might cause some trust issues. But there are various software solutions that will help you keep an eye on the team’s progress. 
  • Different time zones. Although this is one of the most commonly mentioned factors in the in-house development vs outsourcing comparison, it doesn’t hinder the development if you have a professional team. Besides, there are multiple tools that help synchronize the work and stay on the same page with all team members. 
  • Security risks. There are some cases when the company’s secret and private data get in the public eye because of unreliable employees. But it can happen both with in-house and outsourced team members. So, it’s critical to check employees’ or vendors’ reputations before hiring them.  

Here’s a comprehensive in-house software development vs outsourcing comparison to unscramble main points:

In-House Development Software Outsourcing
Expertise Narrow Advanced expertise in several fields 
Cost High Reasonable, depending on the outsourcing location you choose
Quality High-quality services High quality, but it might depend on the vendor
Communication Transparent and smooth Less seamless but depends on the team
Talents Limited talent pool Global talent pool
Speed Low High
Security High Lower, but NDA and other agreements can improve it

Stories From Startups that Switched to Outsourcing

Qubit Labs gathered some insightful stories from startup owners who said “yes” to the second option in the in-house vs outsourcing software development dilemma. Spoiler: they made the right call. 

Now, let’s take a closer look at how this choice impacted their businesses in the long run. 

 

Dave Evangelisti, Founder, and CEO at Test Guide

Test-Guide.com is an educational website that specializes in offering free study materials. It has helped more than 50 million students pass their exams, all for free!

“We have a team of 4 full-time employees. However, it was becoming harder for us to accomplish everything we wanted to. We decided to experiment with outsourcing.

Since our business is 100% online, development work is something we are always looking for. We decided to look abroad for a developer who met our criteria. We found a great candidate from India who met all of our needs. We brought him on the team on an hourly basis, mostly for overflow projects.

One of the biggest issues we faced was the timezone difference. India is 11 hours ahead, so it took some coordination to make meetings happen, but we made it work. The biggest thing with outsourcing talent is to be on top of your communication. We would have weekly check-ins to ensure everything was running smoothly and this individual was added to all of our internal communication networks to make communication easier.

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.”

Main Insights from Dave:

  • Be on top of your communication when outsourcing talent
  • Opt for weekly check-ins to ensure everything is running smoothly
  • Don’t be scared to look for specialists abroad because they’re as skilled as local ones

Advice from Qubit Labs:

  • Working globally but staying local is a proven method for growing your business
  • Use communication tools to make your development processes smooth and facilitate synchronization
  • Software outsourcing helps to increase time to market, so it’s a go-to solution if you want to stay competitive

 

Thomas Hawkins, Startup Founder at Electrician Apprentice HQ

Electrician Apprentice HQ is a company, the main purpose of which is to consolidate all the jargon on the web about becoming an electrician apprentice and streamline it into one site.

“We never used outsourcing before, but recently embarked on such a strategy. Overall, it’s been an amazing success, although there are a few caveats. First, you have to fully vet your candidates. Don’t do this and your results won’t be good. Second, the outsourcing folks need to be aligned with your company goals, which can be a challenge. Third, analyze costs. There are times when going  in-house makes more financial sense.”

Main Insights from Thomas:

  • Fully vet your candidates before making the final choice
  • Make sure your outsourcing specialists align with your company goals
  • Analyze costs to ensure that the selected option makes financial sense 

Advice from Qubit Labs:

  • Come up with clear project requirements to see what option will help to achieve the desired results
  • Pay attention to the culture fit of candidates

 

Gerald Lombardo, Co-Founder of The Word Counter

The Word Counter is a dynamic online tool used for counting words, characters, sentences, paragraphs, and pages in real-time, along with spelling and grammar checking.

“When it comes to outstaffing and outsourcing, perhaps the greatest perceived disadvantage is the lack of control + oversight that the manager/CEO has on their outsourcing efforts. Indeed, it in many ways seems as if startups are at the “mercy” of these outsourcing individuals/companies, and can very easily be led in unproductive directions. However, 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.”

Main Insights from Gerald:

  • Focus on organization and transparency
  • Ensure effective communication
  • Don’t forget about the alignment on goals
  • Emphasize clear deliverables

Advice from Qubit Labs:

  • Schedule regular meetings to make sure everyone’s on the same page
  • Create clear tasks and take time to catch up with the team members to confirm they understand the expectations you have on them
  • Don’t be afraid to give your outsourced team members enough freedom to show that you trust them

 

Daniel Javor, Founder & CEO of Step By Step Business

Step By Step Business is a site that helps people save time, money, and stress when setting up their companies. The company consists of a team of serial entrepreneurs who have first-hand experience starting dozens of small businesses.

“Outsourcing has benefits because you can turn it on or off as necessary, which can save money. In-house teams, however, as they become enmeshed in your company have more of an investment in making the company better. They become part of the company culture and learn the company’s ins and outs so can therefore add more value. Sometimes, though, an outsourced person can become part of the team. We hired an outsourced IT person at Venture Highway who came to work in the office by choice to learn about the company. He was young, and he worked really hard and learned a lot. Eventually, we hired him part-time and it worked out well. He gained a lot of valuable experience, and when we had no room to advance him, he ended up getting a fantastic job for a larger company. It turned out to be a win-win. We got great work from him, and he advanced his career.”

Main Insights from Daniel:

  • Outsourcing is a great way to save costs because you can turn it on or off as necessary
  • Outsourced team members can become part of the team and bring valuable impact

Advice from Qubit Labs:

  • If software development isn’t your company’s core service, it’s more cost-effective to choose the second option in the inhouse software development vs outsourcing dilemma
  • Finding the right talent and spending months on training decreases the company’s performance, but engaging an IT vendor will help you get the job done right away 

 

Kyle Kroeger, Entrepreneur, and Finance Expert at The Impact Investor

The Impact Investor is a company that helps people with their investments. The company’s owner shares that after working 10+ years in sustainable private equity and impact investing, he realized there is a significant lack of awareness regarding how to invest and where to invest your money sustainably. That’s where he stepped in to help.

“My business requires me to have a team of talented individuals who can help me run The Impact Investors without any glitches, of course, it can no longer be a one-man show like it used to be. Some of these positions are permanent and required on-site such as financial experts, consultants, and tech guys. However, others can just be hired remotely such as writers, researchers, and marketers. Here is why I prefer outsourcing these tasks mostly from India and Pakistan:

Cost-effective

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.

Diverse talent

Outsourcing work beyond borders breaks through the limitations of geographical boundaries. You can hire the best candidate for the job from anywhere in the world! Looking for experienced clients is also much easier as you can easily skim through portfolios available online instead of a long and tedious onboarding process.

Some pitfalls

It’s not all glitter and gold when it comes to remote hiring. There are a few glitches you can be wary of such as the payment process. Different countries have different payment procedures and it can be a hassle to pay your dues sometimes. Moreover, internet scams are also a possibility.”

Main Insights from the Specialist:

  • Hiring outsourced specialists is often cheaper than hiring locals
  • Outsourcing month-based projects can save you some money
  • Outsourcing is especially efficient for roles that are occasionally required
  • Looking for candidates is much easier when you can skim through portfolios available online

Advice from Qubit Labs:

  • Developers from rapidly-growing countries, such as Ukraine, Poland, or Romania, are as skilled as your local professionals but have lower rates and are globally-recognized
  • Such companies like Google, Amazon, and Cisco outsource their software development services to increase business performance, so you can also benefit from this strategy
  • There are many IT outsourcing vendors that offer high-quality services, so make sure to reach out to them and reinforce your team with vetted specialists 

 

Outsource Your Software Development with Qubit Labs

If you opted for the second option in the in-house vs outsourcing software development comparison, we’re here to help you out. 

Qubit Labs has significant experience in the IT market and offers to choose top-notch candidates from a talent pool of over 212,000 developers. We ensure a hassle-free recruitment process and take care of all administrative tasks. 

Focus on your core business goals while we stack your team with vetted developers. 

Ready to discuss your project ideas? Don’t hesitate to contact us and schedule a free consultation call.

 

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