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August 30, 2022

In-House Development vs Outsourcing: How to Make a Choice

Outsource software development or opt for in-house software development? Check out the article to learn more about both options and make the right choice.

Mitya Smusin

Chief Executive Officer

Building any type of software product requires a development team. Tech specialists, UX/UI designers, QA engineers, project managers, and business analysts—all of them contribute a lot to the final website or app. So, the logical question here will be “how should I start working with them?”

Two main choices for you include hiring an in-house software development team and partnering with an outsourcing agency. On the one hand, in-house development seems more secure, but on the other, a lot of companies from various sectors regularly opt for outsourcing.

Outsourcing Stats
Source: Computer Economics

Both options have their own advantages and disadvantages, benefits and risks. In this article, we will cover these topics and help you make the right choice.

What is In-House Development

In-house software development, or insourcing, means that you hire developers as a part of your staff. You don’t get any help from third parties: The team is employed by you, you pay their salary, assign tasks to them, and provide them with social benefits.

What is in-house development

Building a functioning and efficient in-house team is a long process of trial and error. Each team member, from a project manager to a junior developer, will need to perform a specific task where they can apply their experience and expertise. The chances that you will hire a perfect team right away are quite low. But if you will be patient and make the best use of your resources, your efforts will pay off.

Pros of In-House Development

Employing an in-house software development team can result in the following benefits:

  • More control of the situation: When you hire a specific team for your software project, you will have more direct control over how your product grows during the whole process and the necessary specialists will always be at hand.

  • Clear communication: Since the team will work on-site, the communication between them, you, and other departments will be better.

  • Talent nurturing: You can easily create a pool of skillful specialists experienced in software development and they will be invested in every task you give them.

Cons of In-House Software Development

It’s fun to talk about pthe ositive aspects of hiring in-house specialists but to make an informed decision, you need to know both sides of the deal.

  • High costs: Having a full-time team of software developers is expensive since it’s a long-time commitment. If you want to build only one or two projects, these expenses will be unnecessary.

  • Lack of expertise: It’s possible that the expertise of your in-house development team will not be sufficient enough for the project.

Now, let’s explore the option of working with an outsourcing partner.

What is Outsourcing Development

Outsourcing software development means you don’t hire an entire team as a part of your staff. Instead, you sign a contract with a software development company that develops and releases your website, mobile app, or other types of software.

What is outsourcing software development

Thanks to the Internet, finding the right partner won’t be a problem. There are services like Clutch and GoodFirms that list thousands of agencies so you can take a look at them, compare, and contact those who fit you best.

Pros of Outsourced Software Development

Here are the positive aspects of third-party software development

  • Flexibility and scalability: You can scale the team of software developers up and down depending on your project’s needs and requirements.

  • Saving money: Working with an outsourcing agency, you will only need to pay them for the time you work with them. Also, you don’t need to worry about buying expensive and spacious equipment.

Global outsourcing rates
Source: Accelerance
  • Quicker start and increased efficiency: You will choose a team that is already experienced enough to complete specific tasks of your project, so no time is spent on training, as they’ll apply the best project management tools right away.

Cons of Outsourcing Development

Outsourced software development also has some downsides that you should know about before signing a contract:

  • Lack of control and communication: Since the outsourced team is not located in your office, you cannot observe their process 24/7.

  • Security risks: NDA doesn’t eliminate the risks of data leaks or misusage, so choose wisely who you work with.

Here is a comparison table to highlight the key points of both options:

CriteriumIn-house teamOutsourcing
Development costsHigherLower
Pool of talentsLimitedBroad
FlexibilityLower and time-consumingHigher and faster
Level of controlHigherLower
Cultural fitMinimal risksMay become an issue
Time zone differenceNoneMost likely
CommitmentLong-termMostly short-term

When and How You Should Outsource Software Development: Best Practices

Whether you wonder how to create a hotel management system or how to build a mobile banking app, both insourcing and outsourcing can be useful. It’s hard to make a statement that one option is better than the other, but there are situations where each of them fits best. For example, PA Consulting (UK) claims that 71% of companies choose to outsource for cost reduction and 50% want to improve service quality. At the same time, control over intellectual property and faster time to market make them go in-house (63% and 88% respectively). So, what to choose? Here is the answer.

When to opt for outsourcing software development:

  • You plan on a short-term partnership.

  • The budget allocated to software development is limited.

  • Your in-house team doesn’t have the necessary expertise or is too overwhelmed with tasks.

In-house as an option for software development will work if:

  • You want to keep full control of the development process.

  • You have enough tasks for developers to make a long-term commitment.

  • The information you have is too sensitive and thus too valuable to be handled by third parties.

If you decided to stick to outsourced development, here are some tips to remember when choosing a service provider:

  • Pay attention to the region: Developers from various parts of the world can have the same hourly rate but different reputations.

  • Study their portfolio. You can ask them to send you case studies with specific projects from your industry to see their quality of work.

  • Sign the NDA. And make sure the company you work with follows the EU General Data Protection Regulation (GDPR).

  • Ask for transparency. You and the outsourced team should use tracking software like Jira or Trello to see the progress and always stay in touch via email or chat apps like Slack.

When Yellow was just starting out, our team wasn’t expecting to create any in-house products. We were happy with outsourcing – helping our clients get their work done.

But this all changed when we took the plunge on our first self-created app. We went through the whole cycle, from the general idea to launching the app itself. The final result satisfied the entire team, and ever since, we have continued creating in-house products. How can knowledge from in-house app development help you? We’ll tell you about that right now.

How our in-house development benefits your project

Our company was founded in 2015 as a web and mobile development agency. We created tech solutions for ideas that our clients brought to us. Our main task was to program the essential functions they wanted to see in their apps. Our software development team was focused on the tech side and we didn’t pay a lot of attention to the ideas themselves.

So, when we made an in-house development team and started creating our first in-house product, StickerBox, we didn’t know much about creating software from scratch. The idea of building this app came to us when we found out that Slack supports custom-made emojis. It was highly supported at a hackathon, so we decided to give it a go. 

StickerBox went through the whole development cycle: idea, prototyping, design, programming, review, testing, launching, and support. After everything was done and the app was released, we understood one truly important thing: 

Programming an app only occupies 20% of the entire product development effort. 

What makes the other 80%? Well, the list is pretty big: 

  • Before the development process starts, it’s important to consider why you want to create the app, who your target audience will be, and what’s the best way of implementing each feature. At this stage, an MVP (Minimum Viable Product) can help shape the final version of the app.

  • Then, as you proceed with software development, you should think about the app’s content. How will the buttons be labeled? What will your notifications say to the users? How will the app onboard new users?

  • Finally, when the app is ready to launch, it’s time to devise a good marketing and advertising strategy! Good marketing plays a massive role in an app’s success and how well it appeals to your target audience.   

Applying new expertise to outsource development

In-house software development literally opens new perspectives for digital agencies. It allows developers to look at the process of app development holistically – seeing it from all sides, not just the technical one.

In-house helping outsourcing

Focusing on business as a whole

Coding is only a means along the path to success. The most important part is to plan this path, highlight its most important parts, and analyze all possible ways to implement the product.

This analysis consists of many different processes, from experiments with advertisements to customer development. For example, it might be useful to create an empty landing page to find people who would be interested in your product. Then you can talk with them and discover what they would like to see in an app like yours and why they trusted you with their contact information.

Noticing alternatives

In-house development helps you notice the many possible alternatives for implementing a particular function and opt for the best one. Frequently, developers must choose between building a large and complex version of a feature or a smaller one, and the costs for each can vary drastically. But if the function won’t have a significant effect on the app’s functionality as a whole, it’s best to find a compromise for its development.

Thinking about the future

Every product needs a business model that will definitely pay off. Sometimes people begin developing software with only a vague notion of how they will make money from it. They think, “Well, yes, there will be some profit—someone will write a review or post a few sentences about my app.” Product promotion helps you understand that first, you need to calculate the Unit Economics—the sum of all economic activities belonging to one unit of any product or service, loosely calculated as Lifetime Value (LTV) divided by Customer Acquisition Costs (CAC).

Thanks to our in-house products, we now believe that code is only a tool for completing the global goal, which comes first.

How we started creating our own apps

So, anyway, how did we get started with in-house software development? The very first app that we decided to take a chance on was StickerBox, an AI-based mobile application that lets users make fun stickers out of their photos. The main issue we had to resolve before StickerBox could see the light of day was face segmentation, and we found a successful solution.

Then our team decided to pivot and build… a game. TravelTrivia is an iOS trivia game where you answer fun questions about travel and tourism. It has ten difficulty levels, two types of questions, hints, and additional lives to continue if you fail a level. Because we were testing the idea of this type of game, we developed TravelTrivia as an MVP. The team united to achieve the best possible results, using all their experience from our previous projects, and the final result satisfied everyone.

Source: TravelTrivia

After TravelTrivia, we decided to pay attention to our favorite industry – chats and chatbots. Dialog House is a chat development suite that makes life easier for those who want to build a chat or a chatbot and add it to their apps. With the help of Dialog House, you can create a true WhatsApp-like application experience.

The next app we built was Fonts Changer, a tool for iPhone personalization that lets you change the fonts in your messenger and text apps. While working on this project, our team needed to ensure that product creation was smooth. This required time, the introduction of techniques that were new to us, as well as involving the expertise of our many specialists.

Our most cherished project is Fairy—an app for kids that contains more than 40 fairy tales and lullabies for children to help them go to bed.

Source: Fairy

Are we done? No way! We continue to generate ideas and create new apps for our audience.

Why hire Yellow for your project?

Developing our own products really means a lot to us. The expertise we gain in creating our apps improves our skills and broadens our vision on app development. Here at Yellow, it means we don’t just help with programming your app. We can also help make your app a successful business.

Some stats to prove the point:

  • 7+ years on the market

  • 5+ years of building in-house products

  • 100+ client projects delivered on time and within budget

  • 70+ experienced engineers

To top it all off, we pay close attention to the client's participation in product development. We don't disappear only to come back in six months with a product you didn't want. Yellow values transparency and our specialists always keep in touch with our clients. We regularly ask for feedback and work with it efficiently to stay agile and deliver the right product.

🖱️ What is in-house development?

In-house software development means that you hire developers as a part of your staff without additional help from third-party agencies.

🖱️ What is outsourcing?

It means you don’t employ a team as a part of your staff, but you delegate your software development to a specialized agency.

🖱️ What option to choose?

Outsourcing software development will suit you if your time and budget are limited and you don’t plan on a long-term commitment. An in-house team will be a better choice if you work with too much sensitive information and want to control the process closely.

🖱️ Why does your in-house team make you different?

Thanks to our product lab, our engineers are able to look at the process of app development holistically and make the decision based on your business needs.

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