Published On June 6, 2017
- posted in Blog, Opinion

It’s no longer news: companies that don’t embrace digital have a small chance of staying in business 2-3 years from now. So, what’s the best option for developing the necessary software solutions: setting up in-house or outsourcing to software development companies?

While there are benefits to keeping software development in-house, there are also significant challenges, especially at project outset. Outsourcing teams bypass many of those, making it easier to start the actual development.

Here is a list of aspects to consider.

  1. The (high) cost of IT recruiting

    To start in-house development, you first need to recruit the IT talent. And this is quite the task.
    Not only are IT professionals high in demand, but they’re also hard to get. They don’t respond well to standard sales-like messages, and while some are persuaded by a strong employer brand, most of them need specific details. What project will they work on, colleagues, environment, management, technologies and professional development opportunities – all those matters to them when considering a job offer.
    Recruiting is also a matter of time, regardless of the role: it takes, on average, about 42-43 days to fill in a position (source). That is almost a month and a half when development is stalling.
    Moreover, recruiting for IT positions is expensive. It can cost up to $22500 to fill in a developer position when working with an in-house recruiter (source). Working with a recruiting agency comes with an even steeper price tag – close to $32000 as the standard recruiting fee is 15% – 20% of the yearly salary for a developer.
  2. Putting together a performing IT team

    Development teams are made up of different roles: business analysts, software developers, QAs/testers. Team composition depends on various factors, including project complexity. Without a background in IT, it’s difficult to get the balance right and to know how many people you need for each role.
    Also, getting IT talent is one thing. Getting them to work together efficiently is quite another. Whether it’s sales, accounting, marketing or any other department, it takes time until your new hires settle in and until they learn to work together as a team. According to the Harvard Business Review, new employees need about 8 months to reach full productivity.
    Outsourcing software companies have another advantage here as they have the necessary knowledge and experience for putting together the right development team. What’s more, chances are that team members have worked together before and they’re familiar with each other’s work style and abilities. Outsourcing teams don’t need the time to settle in and they have already proved that they can deliver on time and according to specifications.
  3. Accommodation and integration

    Unless you consider remote work, adding on a new team implies having the office space to accommodate them, along with adequate furniture and equipment. Even if hardware costs have gone down, this can still add up to a considerable amount. Outsourcing teams already have their own established offices, equipped according to needs.
    Also, a project’s success depends on a lot on how teams work together, how well they understand the other side’s needs and how they address them. To this end, a similar culture, good communication, and close collaboration are essential.
    For in-house teams, you will need to work extra to integrate the new team with the rest of the company. Not only do you need to find candidates that match your company culture, but you also need to make sure that there are a good work relationship and no friction between different teams.
    With outsourcing teams, you can easily get a good idea about the company culture from the very first meetings. Additionally, you can also see if there is a match with your own standards and values. There is also a smaller chance of friction as the outsourcing agreement establishes a solid framework for collaboration and cooperation.
  4. Managing IT teams

    Managing IT teams is different than managing other types of teams as they need a framework for delivering efficiently and on time. Even if Agile/Scrum framework is very popular right now, that doesn’t mean that it is also the best one for your team.
    Outsourcing teams generally have a technical team lead and a delivery manager who oversees project progress. Additionally, they also have experience working with different frameworks and can select the one that best fits your project needs.
  5. Lack of industry experience

    Industry challenges and specifics apply to a software level. Without in-depth knowledge of a field and without experience across technologies, it is hard to anticipate all the potential issues. Even if your new hires have some prior experience or knowledge of a field, it is highly unlikely that they have all the necessary experience with various technologies. All these might delay the start of the project, with a considerable impact on delivery.
    Outsourcing teams have the upper hand here, too. They work with different clients and across different industries, building up expertize with specific fields. All this adds to the considerable experience that enables them to advise on what would be the best approach to build the software you need. Outsourcing software companies also usually have software architects onboard, and that makes it easier to decide on what technologies to use. Additionally, if needed, team members can reach out to more experienced colleagues for advice.
  6. Scaling teams – up and/or down

    While the initial development effort will be higher, chances are that, in time, the workload will decrease. Keeping software development in-house means regularly adding on and letting go of staff according to needs.
    By outsourcing to software development companies, scaling teams – up or down – is not that big of an issue as the software company can reassign its developers to other projects. A significant point to keep in mind here would be the cost of hiring IT professionals mentioned previously.
  7. Keeping up with technologies

    Unless they work on side projects outside of the day-to-day job, in-house software development teams tend to focus on fewer technologies – mainly the ones required for the project at hand.
    Developers in outsourcing teams, on the other hand, are exposed to more projects, each with its own architecture and each using different technologies. Their experience across a variety of projects and industries allows them to draw from that experience.
    Moreover, outsourcing companies usually have research initiatives regarding new technologies, which makes it easier when it’s time to upgrade. They can also be faster to adopt new technologies or to implement them across a project.

Conclusion:

Working with an outsourcing company may have its drawbacks, depending on various factors. There can be language barriers at some point, difficulties that span from the lack of face to face communication, distance between teams or integration issues.

However, with the right software development partner, all these can be worked out through honest communication from both sides. Additionally, there are different collaboration models that you can opt for, ensuring flexibility for a software development outsourcing agreement.

We’d love to hear what you think on this issue. If you want to talk about this, drop us a line and we’ll set something up.

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