In-house vs Outsourcing: Pros and Cons Explained

Inhouse vs Outsourcing has remained a central topic of discussion among entrepreneurs over the years. While some feel outsourcing is a relatively better option, a few others still tend to prioritize in-house development. Enterprises across the globe look to outsource services these days by contacting an IT outsourcing company. But it’s also true that not everyone experiences the same level of services and satisfaction. Organizations have faced a terrible experience with their outsourcing partner in the past. So then this question arises whether to have an in-house team or go for outsourcing.

Like every coin has two sides, the same goes for outsourcing and inhouse development. Both have associated pros and cons and choosing between them can get difficult at times. But no worries! In this blog post, we will walk you through the difference between inhouse and outsourcing, explain their pros and cons, and help you make the right choice.

What is Insourcing?

In-house product development or insourcing is a business practice in which the work is performed in-house, means within the premises of the organization. The company hires or uses its own employees to perform its business activities.

What is Outsourcing?

Outsourcing, on the other hand, is when you hire a third-party firm on a contract basis to do the same set of work or fulfill your software requirements. They work either from an onshore or offshore location.

Pros of In-house Development

Why do companies prefer to stick to in-house development rather than outsourcing that specific task? Well, let’s find out.

1. Physical Availability

Having an in-house team means having people who work at your company’s location and whom you can supervise physically. There is better communication and understanding between you and your team that not only makes the work effective but synchronized as well. Since everyone in the team works together within the same workplace and time zone, it gets easier to get things done.

2. Better Control

Insourcing allows you to manage teamwork internally and provides you with better control over the work process. Hiring a pool of talented workers is a hectic and time-consuming process yet some business owners stick to that just to have everything under their control. Also, in-house involves different people working together in a similar culture that keeps things better managed and helps boost a company’s efficiency besides adding more value to the work.

Cons of Inhouse Development

Although building an in-house team seems to offer some good perks, there are several other factors involved that add to its cons and overshadow the pros.

1. High Cost

When discussing In-house vs Outsourcing, cost is a crucial factor to consider. The cost of hiring in-house developers is comparatively higher than when outsourcing IT services. This is because you will have to invest in the recruiting process, employee training, pay employee salaries, and more. It also involves infrastructure costs since you will need to buy or rent a workspace for the team. The expense associated with insourcing makes outsourcing a better option.

2. Lack of Skill Set

You cannot expect everyone in the in-house team to have the same level of experience and skill set. Different people have different areas of expertise so as per your project requirements, you will have to hire someone who has the expertise and the specific skill set to do the needful. And it’s not easy to find highly qualified specialists. Even if you do, you will have to pay more than what they are already getting, to get the required talent onboard. A lack of skill set reflects in the product quality later.

3. Low Employee Retention

In today’s IT culture, employees tend to switch jobs more frequently on being offered attractive packages by other companies. There’s always a risk that someone might leave your organization in the middle of a project which could create a hindrance to your project’s success. This is why in-house development is tagged with a low retention rate. While you look for a replacement, the workload at that time increases and the entire process also slows down, eventually resulting in a delayed product launch.

Pros of Outsourcing

Let’s now take a look at the benefits of outsourcing services for your project.

1. Lets you focus on your Core Competency

According to a global outsourcing survey conducted by Deloitte that involved over 500 executives from leading organizations, it was concluded that outsourcing enables them to focus on their core competencies and other business aspects, and provides a competitive advantage. This helps accelerate business growth. Having an outsourcing partner also significantly reduces the workload on your in-house team and enhances productivity.

2. Cost-Efficient

Enterprises prefer to outsource because it works as a cost-cutting tool for them. It helps cut down various costs involved in hiring inhouse developers. Unlike insourcing where people are usually hired as full-time employees and are paid every month, outsourcing is usually a short-term contract and involves paying on an hourly basis or a fixed amount for that particular project. With outsourcing, you can reduce costs by up to 60%.

3. Risk Mitigation

Outsourcing IT services mitigate various types of risks involved in a software development project such as schedule risks, operational risks, technical risks, etc. Outsourcing doesn’t only mean handing over your responsibilities to a third-party firm, it’s more about joining hands and cooperating to achieve the desired outcome. As a result, both participants share the benefits as well as the risks involved in the process. Moreover, the risk percentage significantly drops down when you hire an offshore partner since they are experienced in handling projects with complexities.

Also Read: 6 Important Tips to Consider Before Outsourcing Testing

Cons of Outsourcing

While some companies applaud the benefits of outsourcing, it has some cons too.

1. Communication

Communication tends to get a bit complicated in outsourcing because the team may be located in a different country at a different time zone. Thus, both firms need to adjust the timings accordingly to have proper communication. A lack of communication can hamper the work progress and also raise quality concerns. Work it out on how you are going to keep a communication flow, and it is always recommended to keep a single communication channel. Keep a regular check on whether things are going as planned or not.

2. Lack of Control

One of the areas where inhouse development beats outsourcing is the control of the project. This is the most pointed-out concern by organizations where they report losing control of the project due to the outsourcing partner not being able to comprehend it. If the vendor isn’t a good listener, miscommunication can arise which would not only have an adverse effect on the project but may also spoil the relationship and lead to a failed outsourcing decision.

Take Your Final Call

Insourcing vs Outsourcing- Considering all the above-mentioned factors and the pros and cons of both, we can conclude that outsourcing has an upper hand over inhouse development in overall comparison. It’s not just about the cost and having qualified experts to do the job but outsourcing IT services helps you find long-term players who can effortlessly address even large complexities and play a crucial role in your project’s success. Having an in-house team may seem a good choice initially but if the team isn’t having the required skills and expertise, you might have to compromise somewhere on the quality. Besides, it may distract your focus from core competencies and affect productivity.

We have done our part. The final call is yours. Whether you go for an in-house development team or pick an outsourcing partner, ensure they are the right fit for your project requirements so you don’t regret it later.