Insourcing vs Outsourcing of Software Development: 10 Points of Contention

The insourcing vs outsourcing argument is something that many businesses have to face at one point of their existence or another. While focusing predominantly on software development, the data can be applied to the vast majority of tasks. In order to decide which option is better for your enterprise, first, let’s consider the criteria with which the two practices can be compared on.

Insourcing vs Outsourcing Points of Contention

Scalability

Scalability with in-house teams is a lot more difficult. The process is long and arduous. To scale up, you need to hire new people and, to scale down, you need to cut your staff. This is a non-issue with outsourced teams. You can customize the team according to your resources and demands with no questions asked. 

Flexibility

There is a reason the most common software development methodology is called agile. It’s a reflection of how flexible the outsourcing practice can be. In the vast majority of companies with an in-house team the processes are rigid. If you want to change any aspect, you need to clear it with a superior and prove why in this particular case your solution is better than the established tried and true system. When outsourcing you are in charge. The team will adapt to the clients needs and do their best to implement new suggestions.

Cost

This factor is often the deciding one for many cases. Lower costs is one of the main reasons people outsource their processes at all. Naturally, that means that outsourcing is substantially cheaper than having an in-house team. You don’t need to keep your partners on your payroll or allocate extra funds for overhead expenses. You just pay them for their work and that’s it. 

Hiring Speed

If you don’t already have a team with the necessary skills, outsourcing is without a doubt quicker. Searching for new in-house staff members to fit your requirements can take months, especially if you need a lot of people. Not to mention, new hires need training. When outsourcing, you work with a skilled team that has the expertise you need. All you have to do is find a reliable partner and the work can start.

Security

This is an area where working with an in-house team is more beneficial. You always face the risk of fraud and intellectual property theft. It should be mentioned that there are plenty of ways to ensure the safety of your information and funds. That’s why you need to choose your partners carefully and meticulously. Insourcing allows you to eliminate such risks almost completely. Take into account how sensitive the data you work with is and never undervalue its importance.

Legality

Related to the previous point, legal issues often come into play in the insourcing vs outsourcing argument as well. When the team is employed by your company there are fewer force-majeure issues that can come up and the ones that can are generally easier to deal with. There is no confusion in terms of different legislatures and applicable laws in comparison to offshore contracted work.

Resources and Technology

More often than not, outsourced teams possess more resources at their disposal. Their entire business is focused on providing a specific service, while the tasks companies outsource are just parts of their workflow. Therefore, it’s easier for growing outsourcing providers to venture into different technological areas. Insourcing is far more rigid with that regard. It’s hard for such teams to acquire new resources due to many constraints.

Expertise

The main criteria here is the range. Local team usually have experience in one specific area that they’ve been working on for a long time. With outsourcing comes a variety of options. You can find custom software developers proficient in any stack of technologies. That way you don’t have to fit the restrictions of your expertise, but rather can find one that is best suited to your requirements.

Communication

Many companies worry about potential difficulties with communication when working with partners from other countries. That concern is not unfounded. The time zone difference and the lack of English-speaking definitely affect the collaboration. To combat that, many outsourcing firms have adapted their working hours to better suit their partners. Also, most companies require their new hires to have a good grasp of the English language. However, nothing can be as centralized and responsive as your in-house team.

Quality

This is a contentious point for many. Those who have received low quality results once, never trust the practice again. Indeed the quality is variable, however, it’s unfair to paint with a wide brush. You have to do some research to ensure the high standard of work you receive. You know what you get from your staff but there is a real chance for you to strike gold and get higher quality work from offshore partners.

Previous Experiences

You don’t have to take our word for it. Many world-famous companies can serve as an example in the insourcing vs outsourcing debate. There are organizations preferring the former option, such as Amazon, PayPal, Salesforce, and many others. However, there are also plenty of examples of companies who chose to adopt IT outsourcing:

• Google
• Slack
• Skype
• GitHub
• Alibaba
• Opera
• MySQL
• WhatsApp
• Basecamp
• Expensify

All of these companies have successfully used IT outsourcing and have reaped its benefits. Huge enterprises and small startups alike forge their own path with whatever works best for them. As you can see, many success stories come with the help of outside partners.

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The Pros and Cons of Both Practices

Insourcing pros:

• Direct control over the entire development process. Easy access to the team doing the job. There are no communication issues that may arise while working with remote teams.
• Company culture ensures that your employees see the bigger picture and are dedicated to the company’s growth. They share the same vision and values, which makes cooperation easier.
• Personal involvement. As a general rule, the staff is more attached to projects their company works on. Therefore, they are more interested in its success.
• Possibility to raise the company’s profile. All of the achievements you reach with the help of software development are only yours.

Insourcing cons:

• Large expenses required. Therefore, the return on investment is harder to achieve. Not every organization can afford it. 
• The hunt for employees. On average it take companies 35 days to find just one software engineer. Also, you need to take extra measures to prevent the high churn rate in this industry.
• Limited expertise. You don’t have as much variety when it comes to the pool of experts who can work on your project.
• You need to manage the training and improvement of the team yourself in order to enhance their skillset and technical abilities.

Outsourcing pros:

• It’s easier on the wallet. The results you get are often just as high quality if not better, but for lower rates. The price/quality ratio is widely considered to be the main advantage of outsourcing.
• There is no need for full-time recruitment of your partners. Once their work is done, you don’t have to use their services anymore.
• You aren’t limited to the technology your guys are proficient in. You have a wide range of expertise to choose from.
• More time to dedicate to other pressing matters. Time and attention are both valuable resources you can use more effectively. 

Cons of outsourcing:

• You can easily lose control over the development process. Many clients choose to give their partner a task and forget about it but this is the main factor that leads to misunderstandings.
• Other communication difficulties. They can surface as a result of time zone differences or cultural and language barriers. These are becoming less of a factor with time as vendors become more experienced. However, you can still encounter firms with poor soft skills.
• Security issues. Whenever you share sensitive information you face this risk. Some unreliable teams can use that data for personal gains. Never sign anything prematurely.
• Not to say that outsourced developers don’t feel pride in their work, but there can be a lack of personal connection to the project. Chances are, they won’t be as invested in its success as your in-house team members would.

The Final Verdict

There is no end in sight for the insourcing vs outsourcing debate. Both have their advantages and disadvantages. In fact, a lot of organizations who are in the position to make that choice often settle for a middle ground of sorts. A dedicated team is one such option. You can integrate highly skilled remote contractors into an existing team. This is also a great opportunity to test the hard and soft skills of an outsourcing vendor.