In-House Vs Outsourcing: Which Software Development Approach is Better?

There are dozens of articles that expound at length the pros and cons of hiring IT personnel in-house vs outsourcing your development team. Too often, this information is biased one way or the other, which leaves business owners feeling frustrated and wondering how to ever make an informed decision.

To clear away the confusion, we’re going to break down the facts about hiring a development team in-house vs outsourcing software development. Rather than telling you the pros and cons, we’ll present the cold, hard facts and statistics across 6 different categories, so you could make the final decision that’s best for your company.

Now let's talk about each one in detail.

Companies who want to hire in-house developers in their area may be at a disadvantage when it comes to talent pool.

If your company is based in a densely populated urban area, then you may find an easier time hiring top talent. But you’ll also be competing against other employers in a high-demand market.

Bottom Line: The talent pool for in-house hiring is limited, particularly for companies that aren’t based in large cities or tech centers. The high demand for developers is also another snag that could cause you to lose out on more skilled employees.

Outsourcing to offshore development companies presents a unique opportunity to tap into a vast, global pool of talent. In fact, some of the world’s top developers and programmers are located in other countries besides the U.S.. Poland, for example, ranks among the top 3 countries for best programmers around the globe.

Bottom Line: You’ll find a much better range of high-quality choices for developers if you expand your talent pool offshore.

Outsourcing is out in front when it comes to giving companies access to bigger talent pools for IT and software development.

Recruiting IT developers in-house requires the same amount of time as hiring for any other position - perhaps longer, as you’ll soon see.

Consider these facts about hiring.

What do all these statistics tell us? They tell us that when hiring developers in-house, speed is of the essence.

But even if you proceed with all possible speed, you’re looking at waiting over a month just to find and hire a potential candidate. That’s if they don’t receive any other offers during that time, which may be a high likelihood given the current demand for workers in that field.

Another point to keep in mind is that you may not want to hire just one developer. You may be looking for an entire team, in which case you should modify your timeline to accommodate staggered interviews. Depending on the size of your team, if you account for at least a full work week - which is 5 business days - between each new hire, you could end up tacking on a month or more to the original hiring time of 49 days.

Bottom Line: Recruiting a development team in-house could take you anywhere from 43 days to a few months, depending on the size of the team. This is less than ideal if you’re hoping to start a new project sooner than that.

An outsourced development team generally takes at least a few weeks to recruit. As a business owner, the bulk of your time will be spent researching different software development agencies. Once you find the service you’re interested in, you’ll likely go through several consultation calls and/or virtual meetings to discuss options, project scope, engagement models, prices, interview a team etc. This could take quite a bit of time, or it could all go very quickly depending on how complex your project is and how clearly your specifications are developed.

Bottom Line: At SENLA, for instance, after a contract is signed, recruitment time for developers is a fraction compared to that of any in-house experts. Typically, it lasts only 2-4 weeks. By the end of it, you will have an entire team of skilled IT personnel ready to start working on your project.

Outsourcing is better. The data shows that recruiting an outsourced team can take much less time than hiring a team in-house.

Here's a basic overview of the expenses you should expect to pay for recruiting an in-house development team.

All of that is in addition to post-recruitment expenses like equipment, office space, hiring bonuses, training, onboarding, and, of course, salaries for each developer.

Bottom Line: Recruiting your in-house developers - from finding to hiring - can get expensive, fast.

There isn’t really a specific cost for recruiting an IT outsourcing service. You probably won’t place job postings since you’ll be looking for and researching software development companies yourself. Outsourcing to a recruiter isn’t necessary in this scenario, either; and if your HR manager is involved in the process, you would have to pay them anyway since they’re already on staff.

Bottom Line: The process of recruiting an outsourced development team costs more time than money. At most, you may want to figure in your HR manager’s salary for helping you set up and negotiate the terms of the partnership between you and the outsourcing firm.

In terms of recruitment costs, outsourcing is the better choice. It doesn’t require hiring an outside recruiter or posting job listings, and it also saves you on post-recruitment expenses associated with onboarding.

When you hire developers in-house, in most cases they will not be able to jump into a project and reach full productivity right away. 

Consider these facts about an employee’s first days as a new hire.

With all that in mind, here’s what the timeline for an in-house development team reaching full productivity could look like.

First, they must undergo training and onboarding, which can last anywhere from 3 to 12 months - an entire year. It all depends on what you and your company require from your employees, how steep the learning curve for the position is, and how long it takes your new hires to fully transition into full-fledged staff members.

Second, for the first 3 to 6 months of the developers’ employment, they are on probation, which essentially means they are on a trial run for your company. You’re still paying them a full salary, but they are still learning and integrating into their new workplace. This means they’re not operating at 100% capacity.

In total, then, the time it takes for your new in-house developers to reach full productivity could take anywhere from 3 months all the way up to a year.

Bottom Line: In-house hires won’t be able to jump into your important IT development project right out of the gate. There is a lot of training and onboarding they have to go through, plus the initial probationary period. If you’re on a tight schedule and are looking for a fast turnaround, then hiring developers directly onto your staff may not be the best solution.

SENLA teams can reach full productivity in as little as 5 business days.

There are several reasons this timeline is accelerated.

The bigger the engagement model, the more time it will take to get your outsourced development team set up. But even large teams of 50 or more SENLA experts can start working full-time on advanced IT projects in around 14 business days. That’s remarkably less than the time it takes to get an in-house team up and running.

Bottom Line: Developers that are outsourced can be at 100% productivity in anywhere from 5-10 business days.

Outsourcing is the clear winner here. There is simply no comparison between being able to tackle a development project in less than three weeks vs having to wait three months - or more.

In-house developers tend to work in the same office or at least in the same building. Communication is easy, as they have the option to walk to each other’s desks and meet in conference rooms.

Since all the team members are working in the same geographical location — even if they’re working remotely, as during the COVID 19 pandemic, they are working in the same time zone. This makes it easy for them to communicate with one another, as well as their leadership, by picking up the phone or sending a direct message through a chat platform like Slack.

Bottom Line: Communication between in-house IT developers, and between the developers and their managers, is simple and easy due to them all working at the same location (or at least in the same geographical area).

As we mentioned earlier, many outsourced software development companies are located offshore. Even though technology has allowed us to communicate in more and varied ways than ever before, certain problems must still be worked around if they are to be overcome.

The biggest issues are twofold: location and time zones. 

When you’re trying to maintain communication with someone who lives or works in another country, you’re forced to rely on their network connection remaining stable. If they’re experiencing bad weather or a faulty internet, messages and virtual calls could be delayed, lagged, or cut off altogether.

And of course, when someone is in another time zone, you must coordinate your virtual meetings, phone calls, and direct messages to accommodate both your schedules. This can be challenging, although by no means impossible to overcome. And to prove our words, we've carefully put together a guide of 13 best practices of buiding effective and transparent communication with an outsourcing vendor. Be sure to check it out!

Bottom Line: Communication with outsourcing can be tricky, especially if the outsourced development team is located offshore.

In-house takes the lead here. Those development teams will always have an advantage over outsourcing when it comes to communication.

Managers of in-house developers may have a slight edge over outsourcing. They have direct access to their staff members, so they don’t have to overcome the challenges of distance and different time zones.

Bottom Line: In-house teams face no logistical challenges when it comes to management.

You may be surprised to learn that management with outsourcing is just as navigable as in-house.

The key is to choose the right engagement model. If you’re a manager who prefers to be as hands-on as possible, you may consider adopting staff augmentation in which SENLA developers will support your in-house team. But if you like to manage from far away and only check in once every week or so, then a dedicated team or development center that is run by their own management system may be more ideal.

Read our detailed article on engagement models if you want to learn more about each of them.

We have a tie! Both in-house and outsourcing provide great solutions for management. 

When opting for in-house development, companies pay salaries in accordance with local rates. This can result in higher labor costs, impacting the overall project expenses. Additionally, companies bear the responsibility of providing and maintaining their own infrastructure, which incurs additional expenses for hardware, software, office space, and other related costs.

Moreover, a business compensates its staff who are sick or on holidays, basically paying for no result in return. Personnel’s absence also affects development continuity which may be crucial for the projects with strict deadlines. Adjusting budgets and managing project timelines when unexpected situations arise are more difficult with in-house development.

Bottom Line: In-house development involves higher labor costs due to local rates, vacations and sick leaves coverage. It also requires companies to invest in their own infrastructure, leading to increased project expenses. Finally, it may be sensitive to the staff’s absence in case of strict deadlines.

With outsourcing, companies benefit from smart cost optimization as they leverage cost-effective regions. Developers’ salaries there are lower compared to those of the business’ local market.

Moreover, when development occurs on a provider's infrastructure, the company doesn’t face additional infrastructure expenses related to the project.

Additionally, businesses don’t cover outsourced staff’s vacations and sick leaves. For instance, if a developer works for 11 months and then takes a vacation during the 12th, the company doesn’t pay for it. Similarly, if a developer falls ill, it’s not compensated as well which also helps optimize costs for the business.

See for yourself how much of a smart cost optimization driver IT outsourcing is:

Moreover, when there are tight deadlines that require uninterrupted development, outsourcing providers like SENLA offer substitute experts if someone goes on vacation or falls ill.

This flexibility in resource allocation helps maintain non-stop development, ensuring project progress and meeting deadlines.

Bottom Line: Outsourcing offers the advantage of lower labor costs, relieved infrastructure expenses and savings on vacations along with sick leaves. It enables companies to optimize their budgets, reduce project costs, and achieve seamless development without disruptions.

Outsourcing emerges as the favorable option. It provides cost savings through lower labor rates and not covering staff’s absence, offers flexibility in resource allocation and may even eliminate the need for additional infrastructure investment.

Found your situation good for outsourcing? Or maybe you lack some information after reading and would like to get to the nitty-gritty, like how outsourcing will align with your case in particular?

Have your interest really satisfied by the authors of the piece that attracted you and guided you to this very moment! Just fill in the form below and we will get back to you no later than the next business day. Don’t miss the opportunities of IT outsourcing by entrusting such a monumental decision to non-professionals and inexperienced vendors. Choose quality to ensure satisfaction!