Anyone who’s ever considered custom software development faced the dilemma of going with outsourcing or in-house. It’s not always clear which route is best in a specific case, and both options have their own hidden benefits and potential risks.
California software development company Emphasoft specialises in partial and complete software development outsourcing. We work with many businesses that want to build new solutions but are unsure what approach to take. That’s why today, we are diving deeply into both concepts’ nuances to help you make an informed decision.
First, let’s start with definitions.
What is outsourcing?
Outsourcing is delegating all or some of the workload to a third party. In the software world, many outsource MVP product development to an agency, such as Emphasoft.
Outsourcing is subdivided into 3 categories:
1. Onshoring – when you hire a local team of programmers for your startup MVP development project.
2. Nearshoring is hiring someone in a neighboring country without big time zone differences.
3. Offshoring primarily means working with someone in a distant region, often with a significant time difference.
Outsourcing comes in many shapes and forms. For example, you can outsource the full process and rely on the startup web app development agency to execute the entire project. Alternatively, companies can partner with a dedicated outsourced team and work on the development together.
The route that many first-time outsources take is to hire selected specialists who complement the in-house team’s skillset. This type of outsourcing is called staff augmentation.
What is in-house development?
In-house development is sometimes called insourcing, and it refers to keeping software development 100% within the company, utilising only internal resources and not engaging third parties in the process in any way. With this model, all employees are on the company’s payroll and are fully dedicated to the development project.
The pros and cons of outsourcing
Outsourcing is a popular model that enables companies to stay flexible and move faster. It has both benefits and downsides that one should be aware of before going down that route.
The key pros of outsourcing:
• Quick access to an endless pool of tech specialists. Unlike hiring for an in-house team, those who outsource can engage top professionals to work on their software within days. There are no lengthy recruitment and onboarding processes, saving the project a lot of time.
• Cost management. Outsourcing may seem to be a more expensive choice, but it’s often a cheaper alternative to in-house hiring. You can assign specialists to your project only while you need them, and there is usually a flat fee that excludes worries about pension contributions, insurance, and other benefits.
• Faster product release. In-house teams often take longer to complete the project because they either wait for the missing professionals or other priorities push the development back. Hiring an outsourced team usually means they can start work immediately and dedicate as many hours to the job as you agree on.
The key cons of outsourcing:
• Limited control over the process. When outsourcing MVP website development or any of the services for startups, you give up part of your control over the development. It’s not a bad thing, but some managers find it hard to adjust. If you are not in control 24/7, you are left unnoticed.
• Security risk. Sharing critical company information with outsiders always comes with a risk. At Emphasoft, if we provide consultancy, MVP development for startups, or any other services, we always insist on maximum transparency and NDAs to ensure the client feels comfortablet. Yet, if someone is going the outsourcing route for the first time, or they are partnering with a new company, they sometimes need to catch up on those critical points and become vulnerable.
• Inadequate quality of the outcome. Sometimes companies don’t have time to perform due diligence or fall for the tempting price point and end up with an outsourcing team that can produce mediocre solutions at best. A thorough research before the start of development can mitigate most of the risks, but there is a chance that you will walk away dissatisfied with the end result.
The pros and cons of in-house development
Just like outsourcing, in-house development comes with its own perks and downsides. Here are the main ones.
The key pros of in-house development:
• Full control over the project. With an in-house team employed by your company, you get maximum control over what is done and when it’s done. There is no risk of sensitive data leaking, and you can always check what anyone is working on.
• Alignment with the company’s culture. In-house teams align with and follow the company’s culture, including ethics, communication style, and attitude to work in general. For example, companies with strong customer focus would pay special attention to culture fit as it helps maintain their vision for client relationships.
• Smarter long-term development. Given the high retention rate, investing in an in-house team will strengthen product development in the long term. Employees will know the ins and outs of the solution and will be more efficient with updates and upgrades down the line.
The key cons of in-house development:
• Slow progress. You need to have a full team of developers on standby to launch new projects. First, you’ll have to ensure the team possesses the necessary skills and knowledge and hire more people if something is missing. Second, your employees will likely be busy with another project, so you’ll be forced to wait for them to free up, which can take weeks, if not months.
• High cost. In-house teams are expensive. The hiring process itself involves a lot of investment, and so does employee maintenance. With an in-house team, you are solely responsible for paying out the benefits and providing working infrastructure, such as PCs and office space. And if somebody from your team gets hunted by another company, you are forced to slow down and start hiring and onboarding again.
• Missing out on top talent. Most growing businesses cannot afford to hire top talent across all technical fields, nor do they need to keep such a variety of specialists full-time. And if outsourcing is not an option, then going 100% in-house means letting go of excellence in some sense.
When to use outsourcing and in-house models
Choosing between outsourcing and in-house development routes is rather subjective but you can consider objective factors to make the right decision.
When thinking about your options, ask yourself these questions:
1. Is this development critical for my business?
2. Do I have enough resources (time, talent, finances) to build it internally?
3. Do other priorities distract us from this project?
4. How fast does it have to be released?
5. Am I comfortable with engaging third parties in the process?
Having answered these five questions, you will already have an idea of what route you prefer. Still, at this point, take the time to do some research – talk to your fellow managers and HR, reach out to several agencies, and compare how much their MVP development services will cost you compared to the in-house alternative.
If you lean toward in-house development, make sure you have a flexible budget and that internal expertise is enough to execute the project from start to finish. Suppose outsourcing is something you are seriously considering. In that case, it’s vital to accept that you will not be in control 24/7 and prepare a clear statement of work so that your vision is understood.
Final thoughts
Outsourcing is seen by many as a risky step, and sometimes it is. But with enough preparations and research, finding a partner that can develop MVP or can make a fully working product within your budget and deadlines can be life-changing. All of a sudden, you get extra employees to do the work you’ve been putting off for all sorts of reasons, slowing down your business growth.
To ease into outsourcing, hire the team for short-term minor projects to see how it works out. Alternatively, hire a few specialists to complement your team instead of going all-in. As you’re more confident with the format and your partner, start engaging them more in development and take it from there.