Hiring In-House VS Outsourcing Developers: What Should You Pick And Why?

A. In-House Developers

In-house development enables your organization to build its own team from scratch. This lets you fill-up the necessary positions based on the specific skill sets and experience needed to build the product you focus on. Big tech companies like Amazon and Paypal hire in-house developers, which allows them total control of a project, albeit at a higher cost.

Hiring in-house development is no different from hiring permanent staff. You’ll need to go through the process of recruiting, interviews, and onboarding, to build your own IT team. If your organization is strictly focusing on IT products, it may be viable to hire in-house as the complete projects remain in your direct control. Here are the few pros and cons of having in-house developers:

PROS:

  • Build a team that is completely aligned with your organizational culture:  With in-house development, you have the opportunity to pick and hire team members that align with the organization’s culture. When a team operates in synergy, there will be better results compared to outsourcing a project.
  • Direct communication: Direct communication is a clear benefit of having an in-house team. An in-house team is exclusively dedicated to your company, and often, the members are working within a physical space. Face-to-face communications have better results than when a team is working on a project. It speeds up discussions, and encourages collaboration, especially when finalizing the project’s requirements.
  • Availability: Immediate support is a privilege that comes with in-house development. With an in-house team, it is possible to have immediate investigations on bugs, and the fixes applied without delay. With an outsourced team, the response may be delayed as the team could be having their hands full at the moment.

CONS

  • Higher expenses: With an in-house team, be prepared to pay for the visible and hidden costs of hiring. The average salary of an IT developer is approximately $71K. That’s not including the hidden cost of sick leaves, vacation, insurance, social security, recruitment, and on-boarding each member you’ve brought on board. Even when the team is idling between projects, the organization will still have to cover their fixed salaries. 
  • The turnover rate can be high:  IT talents are in high demand, and you’ll have a tough time fending off poaching attempts by competitors and recruiters. You may end up counteroffering your developer with better benefits, which ends up ballooning the payroll. Else, you’ll lose the talents in your team.
  • Upskilling: The IT industry undergoes constant change, with the introduction of new technologies, tools, and languages. You’ll have to ensure that your team keeps up with the changes, especially if it affects your products’ growth. Investment in training and tools can significantly affect the bottom line of your business.
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B.  Out-Sourcing Developers

Outsourced development involves delegating the process of building a product to an external entity – be it a singular developer or an agency. It is usually done through a contractual agreement, where the requirements are conveyed to the outsourced developers. Outsourced development is favored due to its low cost and scalability. It has been an ever-growing trend, especially after the pandemic. Google and Slack are some of the renowned tech giants who outsource some of their IT developments.

PROS

  • Controlled cost:  If your organization is operating in a country where local talents come at a premium cost, you’ll have the advantage of outsourcing. You can engage developers in countries where the salaries are considerably lower, with the same level of expertise. Eastern European countries are one of the top destinations for IT outsourcing. 
  • Larger talent pool: When you outsource, you’re no longer confined to a limited choice of candidates within your vicinity. Your organization will have a global pool of talent to choose a developer from.
  • No technology constraints: Some projects require diverse skill sets, and it can be difficult to find developers who are a master of all trades. However, you can collaborate with several different developers proficient in different technologies with varied expertise to build your project.

CONS

  • No full control:  An outsourced developer or team does not exclusively work for you on your project. It means you have little control over the development, progress, and troubleshooting. Without direct access to the team, you can be oblivious to what’s happening with your project. It may take a few hours or days before your emails are replied to, and a bug fix is not immediate. 
  • Communication barrier: If you’re outsourcing to a developer or an IT firm halfway across the globe, it will be hard to schedule a meeting due to the time zone difference. Language difference is also an issue if the team leader of the outsourced team has difficulty understanding your concerns.
  • Trust issues: When you outsource, you’re entrusting confidential information to a 3rd party developer. You could be worried about the agency’s privacy policy and if it will also take on projects from competitors in the future.
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C. What Should You Pick For Your Organization?

As we can see, both in-house and out-sourcing developers have several pros and cons. However, depending on your requirement and the project, you can use a mix of in-house and outsourced teams. Ideally, you can use in-house developers when:

  • You have money to spare: If you’re not running a bootstrapped startup and have plenty of capital at your disposal, hiring an in-house team will give you all the benefits and minimal cons. 
  • You need to be in full control: You can’t afford the risks of problems popping up, and you have no control in mitigation. With your own team, you make the calls on every decision that affects the product’s development. Any problems are addressed immediately. 

Comparatively, you can use an out-sourced developer or team when:

  • Budget constraint: If your organization is operating on a tight budget and couldn’t afford a permanent team, out-sourcing gives you better flexibility in cash flow, and the commitment of monthly salaries does not tie you down.
  • Lack of available talent: Somehow, you can’t find the right talent in your vicinity. Rather than spending months on training one, you’ll be better off engaging an Iout-sourced expert to get the job done. 
  • Tight launch deadlines: If you have no prior experience in software development, you could be blindsided by common obstacles. When you have a deadline to meet, you can’t afford delays that can be averted if you engage an external experienced IT developer. 
  • Lack of insight: It is a mammoth task to develop a complex IT solution even with an in-house team. There is a gap in turning business requirements into technical specifications. An outsourced agency often has a business manager who is experienced and can act as the intermediary between your organization and the developers.