Outsourcing software development versus doing development projects in-house

The debate remains open as to which is better, outsourcing software development or in-house development of software. This article tries to answer this question by showing the benefits and downsides of both in-house software and outsourcing software development.

The first question that comes to mind is why outsourcing software has gained so much momentum? Why has it become so popular? The primary considerations include a lack of specific skills, the high costs of hired talent, as well as strict deadlines, among other things.

Outsourcing has its benefits, hence its popularity. You can allow for tasks that do not require face-to-face collaboration with an external team and focus on your business’s essential operations. Some believe that outsourcing produces reputation damage and job loss.

In-house software development entails putting together a team of skilled individuals, and, though it may sound simple enough, it is a time-consuming, costly endeavor. It involves a lot of effort, infinite patience, as well as the development of a strategy for the long-term.

To determine which hiring option is best for your project, read on about the benefits and downsides of in-house development versus outsourcing software development.

Outsourcing vs in-house: The Multifaceted Nature of Software Development Outsourcing

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When you want to outsource web development or any other type of development, you have several options because outsourcing software development has many facets.

You can outsource a project to a development agency that will handle it from beginning to end. You can also rent developers on a need basis. There is also local and offshore outsourcing depending on the location of your developer, agency, or house.

Outsourcing vs. In-house: Downsides of Software Development Outsourcing

Frequently, it is the immense cost of hiring full-time developers that drives many business owners to turn away from in-house development and consider outsourcing. However, there are some downsides to outsourcing software development that you need to be aware of:

1. Varied quality and hidden costs

The main problem with outsourcing is that not all development agencies provide the quality you need, expect, and require. Quality is crucial because if you need to fix a low-quality, non-scalable code, you would be paying a lot more than if you chose in-house development.

You must ask yourself if you are willing to pay your development house for the time their team members need to learn and understand your environment and your technologies in case they can’t make the necessary refinements immediately. What is your answer?

Remember: the hourly fee doesn’t say anything about the developer that does the work.

2. Communication issues

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It only takes one face-to-face meeting to define a project’s specifications and establish trust and build a connection between you and your development agency. It is that simple!

Despite the extraordinary today’s technology, communication remains a problem when your developers are on the other side of the world, and more often than not you don’t get to ever see the face of the developers that you are paying to handle your project.

This is a problem that occurs mostly in the case of offshore development outsourcing, where the geographical distances cause daytime differences that are difficult to overcome.

3. Client prioritization

When you choose outsourcing software development vs. in-house development, you must understand that your development agency is a business and you are not their only client. Since you are a business as well, you understand the concept of client prioritization.

Which client gets more of your time and attention? A one-time client or a long-term client that provides you a constant stream of business? The answer is obvious, is it not?

Outsourcing vs. In-house: Benefits of Software Development Outsourcing

The main benefit of outsourcing software development is that development houses specialize in specific areas of software development and you only need to make sure that you choose a house that has expertise and experience in the niche that interests you.

If you need Java-based development, look for a company with a history of completed projects in that field. The same if you need data engineering, eCommerce, eHealth, or Scala outsourcing. Look for a development agency with a rich portfolio in your niche!

When a software development house focuses exclusively on a development niche, it becomes highly specialized in the field while remaining competitive as far as price goes.

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Summary of pros & cons

What does in-house mean? What does outsource mean? Define in-house vs outsourcing before you make a final decision. If you taught your decision was simple, you were wrong.

An in-house development team may understand your business values and project perfectly but may be deficient in skills. An external agency might not understand your business values, workflow, and project perfectly, but will compensate with skills and knowledge. The business world is getting more competitive. If you’re looking into outsourcing, always take the time to research. The following outsourcing statistics will help you understand how big the outsourcing industry is, whether or not it’s truly worth your time.

The Advantages of In-house Development

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  • Face-to-face interaction and robust project engagement;
  • Quick guidance, coordination, and feedback;
  • Undivided dedication and attention to your project exclusively;
  • No language or cultural barriers;
  • Capacity to implement changes promptly;
  • Project expertise that makes possible efficient support and maintenance;

The Downsides of In-house Development

  • Expensive: taxes, salaries, insurance, etc;
  • High costs of hiring talent: recruiting, interviewing, and training;
  • Limited availability of skilled developers at a local level;
  • Staff dismissal: new costs generated by new hires;

The Advantages of Outsourcing Software Development

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  • Less expensive compared to in-house development;
  • No added expenses with hiring talent: recruiting, interviewing, and training;
  • Limited commitment on your side to a specific period or project: you can choose to work with another house if you are not happy with their performance;
  • Access to a pool of skilled developers specializing in the niche that interests you;
  • Better value-price ratio with no need to hire people and better budget planning;
  • Quick project delivery without the staffing problems of in-house development;

The Downsides of Outsourcing Software Development

  • Confidentiality and security risks because of data sharing via online communication channels;
  • Risk of deceit as you may choose to work with a company based on a fake profile while the developers actually lack the skills and expertise they promote;
  • Impaired communication because of cultural differences, language barriers, and the differences in daytime caused by geographical distances;
  • Trust issues and lack of transparency that may arise because of the lack of face-to-face interaction or the nature of a contractor;
  • Potential dependence on another outsource agency for maintenance in the situation you receive an unsupported code;


Outsourcing software development is a growing field as per the findings of the Global Outsourcing Survey conducted by Deloitte. Outsourcing is estimated to grow most in the financial, human resources, and IT sectors, according to the same study.

Also, the study shows that businesses choose to outsource because they want to cut costs (59%), focus on core operations (57%), and solve capacity problems (47%). 

Furthermore, outsourcing is turning in out to be more significant in facilitating acquisitions and mergers, says the same survey. Will it surprise you to hear that outsourced developments gave the world Slack, Skype, MySQL, and GitHub? 

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