Today we have a very important blog for you because we are going to talk about in-house vs outsourcing software development.
We will help you understand the benefits of in-house vs. outsourcing software development and talk about which kind of software development is perfect for you.
We will also talk about the different requirements for each such as in-house development teams or outsourcing software development teams.
Along with that, we will help you get a better idea about how IT services work so that you can also formulate your cost analysis and do the best kind of project management.
We will discuss various important aspects such as the impact of quality control and a long-term strategy when it comes to in-house software development and outsourcing it as well as the issue of intellectual property safety.
And then there is of course the issue of growing the company’s technical expertise and risk management but also the management of communication channels.
So, it is going to be a fun and informative blog and we are going to start with understanding in-house software development as well as outsourcing software development.
What Is In-House Software Development?
In-house software development is exactly what it sounds like and it is when you develop software using your own company resources.
This means your employees do all the work and no part of the process is outsourced. This is a comprehensive process where company resources will be utilised and company employees will do that development.
If new employees are needed then they will be hired as permanent company employees to work on that software development project.
The software developers that work in the in-house software development team are permanent employees with full employee benefits and permanent employee salary and gratuity and everything else.
This means you can have complete control over every step of the process because you control the entire process right from the place they work to the resources they utilise.
This was in-house software development and there are definitely pros and cons of this process. But before we move forward with that, we need you to understand outsourcing software development as well.
So, What Is Outsourcing Software Development?
Outsourcing software development is the exact opposite of in-house software development.
This is because in-house software development is developing the software for the company and by the company with company employees.
However, outsourcing software development is delegating the task of software development to a different software development company.
This is when you do not have to allocate resources and company employees as well as company time and company locations simply because your company is not going to develop the software.
This is when you allocate the software development as a contract to a different third-party software development company.
In fact, this is much more popular than in-house software development because of the level of resource and requirement needs of in-house software development.
India is one of the leading countries where software development is outsourced.
Now that we know what is in-house software development and outsourcing software development, let us look at the pros and cons of both of these kinds of software development.
These Are the Pros of In-House Software Development
The Best Level of Control
If you want to have the absolute best level of control in the entire software development process then in-house software development is the way to go.
The reason for this is fairly simple and it is because with in-house software development, the team members are familiar with the resources are familiar and the entire process can also be closely monitored.
For example, this is just like making your own homemade cake instead of buying it because when you make your own cake you can be completely sure of the baking process and the ingredients.
Coordination And Communication
One of the primary problems with outsourcing software development is coordination and communication because you are ultimately working with a different company that has a different development process and a different set of beliefs and protocols.
That is why it can be difficult to accommodate your software development needs and requirements with the working principles of a different third-party company.
But with in-house software development, everything is happening within company doors which means communication is a breeze. Your team members are sitting right next to each other and working very efficiently because there is no latency when it comes to communication.
Trust, Experience and Morale Boost
While this is not often talked about but developing your own software is also a trust-building exercise between all the different employees of your company.
If your employees work together on software that will not only help in team building but it will also improve their trust and the challenges faced will also improve their morale and confidence.
These are some important things if you want to run a company and that too a software development company.
While software development might be very expensive with your own resources and management might be time-consuming but you are also getting a boost in employee morale as well as employee experience which is overall good for the company.
These Are the Cons of In-House Software Development
Costly And Not Financially Logical
If you are running a software training institute then in-house software development is going to be logical for you but you are ultimately running a company.
The most logical thing for a company is to maximize profits and ensure the best level of efficiency when it comes to company capital.
That is why it is completely illogical to do in-house software development when you can get that same job done through a third-party company for a fraction of the cost
This makes even more sense when you just need something as a one-off service and let us help you understand that with an example.
Let’s say you need a few disposable plates for a party at home. It would be much more logical to get them from the store than creating an entire assembly line and hiring permanent employees to manufacture a few plates.
That is the same case with in-house and outsourcing software development.
Hiring Is a Headache
The problem with in-house software development is that it is very difficult to find the exact candidate for the exact kind of job you have on offer.
And that is why hiring the right person for the software project can take up a lot of company time and in order to do that you are also going to spend a lot of resources.
That is why companies usually try to get generally good employees who do an overall good job but are not specialised to do a particular job.
This can also lead to compromises in quality because when you want to do in-house software development with a limited talent pool, you might not get the exact person for the job and while your employees can get the job done but there will still be compromises.
Not Ideal for New Companies
Now we present you with a very unique challenge and that is the reason why many new and upcoming companies simply do not do in-house software development.
This is just that new companies that grow at a steady level simply do not have the resources or capital to create an entire team of new software developers.
While they can do it but it is not the best and most efficient thing to do and it is also not very logical for new companies to do it and it will simply slow down their growth.
The thing with new companies is that they have to utilise their funds and capital very wisely and they have to find the most cost-effective solutions for all the software needs and in-house software development is neither affordable nor practical.
New companies would much rather keep taking in new projects that ensure earnings and steady growth and get it done through outsourcing than focus on a few in-house projects.
These Are the Pros of Outsourcing Software Development
The reason why software outsourcing is a thing and the reason why most of the world’s software outsourcing is done to companies in Asia is simply because of its cost practically.
It is much more affordable to get your software developed by a third-party outsourcing company not just because it’s in a different country and because of purchasing price parity (PPP) factors but because of a simple reason.
The company that is outsourcing its work to a third-party company is only going to pay the service charges. The alternative is in-house software development that needs permanent employees, resources, location etc.
Let us understand this with the example of buying a cake. When you buy a cake, you are only paying for the market rate of the cake and the making charges and profits. You are not paying for the cake oven or the shop in which the cake is being manufactured etc.
That is the same thing with outsourcing software development and that also includes mobile app development.
Software Development Expertise
When you outsource your software development to a third-party company, you do not need to think about hiring the exact people for the exact job.
Instead, you get a choice of some of the finest software developers in the world because when you are outsourcing software development, you are not limited to your own company premises but the entire world.
This means you do not have to compromise on software developer quality because you can outsource your software development needs to a company that has the specific software development team that you need with the exact set of skills that you require.
Excellent For Growing Companies
This kind of arrangement is excellent for companies that are new and growing because with outsourcing you do not have to worry about scaling requirements.
This is because, with software development outsourcing, you can simply assign new projects to new third-party companies based on your requirements.
This would have been a completely different thing if you had to do it in-house because every new project would question your scalability threshold till it would become impossible to run an in-house operation efficiently.
It also makes much more financial sense to do it in a way that does not result in new managerial challenges as now you can simply take in new projects and assign them to third-party companies.
Companies ultimately need to make a profit for mobile app development and other forms of software development and that is why outsourcing is the best option for new and growing companies.
These Are the Cons of Outsourcing Software Development
Lack Of Micro-Management and Less Control
If you are someone who likes to be in the captain’s chair and manage everything minutely and according to your working philosophy then outsourcing will not be a good option for you.
This is because, with in-house software development, you can manage and monitor each and every step of the process but with software development outsourcing the development is probably taking place in a different continent.
This means you simply cannot operate like a manager when it comes to that kind of an arrangement and you have to operate like a client.
You will still have control when it comes to all the major decisions and you will still get regular updates depending on the company. But when it comes to micromanagement, that might not be possible.
Privacy And Property Protection Issues
This is a big issue with outsourcing software development simply because if you want to develop proprietary software and patent it then the worst thing you can do is to outsource it.
This is because if you want software development services for a regular piece of enterprise software then it’s all fine but if it is your company’s flagship software with a remarkably new idea then chances are that idea can be stolen with software outsourcing.
This is where we start to understand the value of control because with in-house software development, you get to control each step of the process and that includes property protection.
But with software development outsourcing, you cannot ensure property protection in the best way possible because while you can ask the third-party company to sign multiple non-disclosure agreements (NDAs), that is not enough.
This is because if you outsource your development to a bad reputed company then they might not violate the NDA themselves but they can sell the idea to another company and do other kinds of maliciousness.
Communication And Collaboration
Most of the time, software development outsourcing works in conjunction with the client company as software developers from both companies work together.
But we hope you understand the issues with that because let’s say that two companies are situated in two different countries without a common language, that can give rise to language issues.
Let’s say that the software project is based on a culturally significant idea that is specific to the culture of the client’s company. The third-party company that is situated in a different country might not be able to understand the significance of that software.
This can be a major issue but is not really much of an issue if we talk about India because the Indian software industry communicates in English which means the Western markets are very comfortable with outsourcing the software development to India.
So, Should You Outsource Your Software Development?
It all depends on your needs and requirements because if you are a new and growing company then you simply cannot afford to expand your operations.
In that case, outsourcing software development is going to be a very practical thing because you can keep taking in projects and outsource them and generate revenue.
If you are a company that is trying to develop your flagship software and the company rests on it and its success then outsourcing is probably not the best idea because without a patent your idea is prone to be copied.
But if that is not the case then outsourcing software development makes sense for every other scenario because it is affordable and practical as well as efficient and does not stop your growth.
Or you can even adopt a hybrid approach and do some of the work in-house and outsource the rest. This is usually how it works in most cases.
If you are someone who is looking for a reputable software development company in India that has been in the web design and development as well as software development industry for more than a decade then we are here for you.
We are Think To Share IT Solutions Pvt Ltd and we are the fastest-growing and most popular software development company in India where you can outsource all your software development needs.
We have extensive teams in place to deal with all your software needs as well as some of the simplest communication lines to always keep you in the loop when it comes to software development updates.
We treat our clients as team members moving towards a common goal of software excellence and we welcome you to visit our website to find out more about what we do.
Common Software Development FAQs
Why would a company choose in-house software development?
A company would choose in-house software development if software development is the only thing they do and if they need the best kind of privacy protection.
This means that a company like Google for example will never outsource their core software development needs to any third-party company no matter how reputed or experienced that company is.
That is why if a company has a proprietary flagship software that dictates the success of the company, then that company is going to do that software development in-house.
Other than that, every company would rather and generally do software development outsourcing.
What is the best choice between in-house development and outsourcing?
Generally speaking, software development outsourcing is much more practical than doing this software development in-house.
This is even more so if you are a new and upcoming company and you are growing at a steady level because it simply does not make sense to invest a huge chunk of resources to expand your operations because that can slow down growth.
You can only take in a certain number of projects with in-house software development and that is why outsourcing software development is not only practical but also affordable and much more efficient.
Is outsourcing cheaper than in-house?
Outsourcing is generally cheaper but it is a lot cheaper if you consider every expense out there.
This is because, with in-house software development, you need to hire permanent employees and pay them permanent salaries and also invest in resources and software development tools and hardware and location.
You do not have to do any of that with outsourcing your software development because you are simply paying for the skill and the service cost and you are not paying the salaries of the employees of those third-party companies.
You are not paying the land tax of the property of that third-party company’s physical location. You are simply paying for the service and that is why it is a lot cheaper.
Is outsourcing good or bad for employees?
If you talk about employees then outsourcing is generally considered bad because people have the argument that it is bad for employee morale because the employees do not do anything and the job gets outsourced to a different company.
But that is not the case because if you outsource something that your employees are not able to do then it will not demotivate them and they can focus on the job they are good at.
This means you do not need to hire additional employees and the existing employees can maintain their teamwork and work on projects that they are actually capable of.