Outsource vs In-House Software Development

We’ve already made praises to the Ukrainian development market. But in this article, we’d like to examine outsourcing from two different perspectives: Costs and talents. From the first glance, it seems to be a trivial question: outsourcing is a cheaper way for software development. But it turns out that many clients who have decided to outsource the project don’t quite understand their benefits and how to make the most out of them.

Now, let’s hit the road!

Inhouse vs Outsourcing software development costs

Recruitment process

You may know that the recruitment process is quite challenging in any industry as these days, the range of highly skilled specialists is huge, and the selection becomes harder than it used to be several years ago. The average cost of hiring a new developer in the U.S. ranges between $4000-$7000. The hiring is not a one-day process as it can take at least 40-50 days. Commonly, the most time-consuming activities are:

• Job advertising – all professional networking websites, job boards, LinkedIn, and Facebook charge you for their services;
• Screening – this involves the time you spend on reviewing CVs and screening;
• Interviewing – do you have the necessary knowledge to determine whether the candidate has the skills you’re looking for;
• Background assessment;
• Onboarding & training.

In addition, ask yourself a simple question: What happens if your new hire doesn’t work out? 

41% of US companies said the average cost of a wrong hire was $25 000. And 25% of companies lost over $50 000.

In the case of an outsourcing development team, it is usually a close-knit squad that has already had the experience working on the same projects together. So there is no need to spend time looking for the required specialists as the chosen technical partner has to upvote you with all the necessary information about the developers, their experience, level of skills, etc.

Outsourcing development requires payment only for hours used working on your particular project, no more no less than that. As your software solution is completed, your cooperation is considered over which means you needn’t pay salaries all year round as in the in-house team model.

Salary review

In-house salaries can vary based on the number of employees and the project’s budget. This kind of expense will stay even if you choose to outsource software development. But the main disadvantage of the in-house development is that you will get less proficient employees for the budget comparable to the outsourcing development.

It must be acknowledged that in-house teams don’t hire employees with a high level of expertise. Usually, companies require the candidate to know a little bit about everything which doesn’t allow them to take a holistic approach sometimes.

The salaries of outsourcing developers mostly depend on the location of the software development company of your choice. Eastern European software companies offer almost the lowest rates in the world with the quality of the top-notch services, For instance, the Ukrainian outsourcing rates start from $35 per hour when in other European countries they start from $50.

Hiring an in-house team would be equal to outsourcing it to a development partner and could cost over $1 000 000 annually.

OPEX

Depending on your location, a mid to senior-level developer has an average salary of about $90 000 per year.  Here’s a breakdown of additional operational costs you’ll have to face.

• Office space or rent;
• Medical insurance;
• Day-offs & training days;
• Electronics and furniture;
• Snacks and beverages for a kitchen space.

Short-Term Projects Specifics

If we’re talking about software development, there is a number of specialists that can be involved in the project even for a short period of time. For example, DevOps developers, admins, software architects, web designers. Those are critical players, but you’ll require their help only for a short period of time like 2 weeks or 2 months max.

By outsourcing software development, you basically hire a team of top-notch professionals but pay each of them only for a period of time they are actually involved in the project. Eventually, you receive all the needed resources to build your solution but you do not overpay.

In-house vs outsourcing tech talents 

Many in-house development teams are required to wear many hats without a possibility to stay agile to changing trends and execute several projects simultaneously. Offshore partners contribute highly skilled resources at a much-reduced rate. The outsourcing development team involves only those developers who are acquainted with the required technologies for your project. In-house developers usually specialize in only a few areas like writing code for the back end. But what about GUI, or app development (iOS, Android)?

An outsourcing development company has access to top talent in every field and is able to provide you with all needed specialists who are aware of what to do. Moreover, your project manager will be able to optimize expenses by choosing the most suitable specialists for the project, based on the budget and technological requirements. For instance, your PM can bring in additional manpower if some unforeseeable difficulties arise. Or he can just ask a senior programmer to spend extra hours in order to refine important parts of the code, instead of hiring him full-time.  

Ability to scale up the team

Next, access to human resources gives you the ability to minimize time to market. For example, you might want to beat your competitors and enter the market faster thus showing that you’re the leading innovator.

Outsourcing lets you scale your team quickly and add programmers on the go without raising the hiring costs. Outsourcing will allow you to put as many developers as you need to meet whatever time frameworks the best for you. By outsourcing your software development needs, you can concentrate your time and manpower on other business requirements. It just allows you to look at the big picture, and build your strategy. In addition, you can use the knowledge of a business developer that works on your project during the discovery stage.

Pros and cons of the in-house development 

Nevertheless, in-house development has a range of benefits which we would like to discuss further. 

Besides, the in-house development team also has several disadvantages. Software product development doesn’t last eternity. However, by hiring in-house developers, you have to provide them with the work all year round in order to pay them salaries, enhance skill growth, and so on. In addition, in-house developers have quite a narrow specialization and poor knowledge of all potentially needed technologies for improving your product.

Pros and cons of the outsourcing development 

Despite the fact that outsourcing development may seem risky and complicated to you, we would like to prove to you that an outsourcing development team is a much more convenient and profitable team model compared to the in-house development team.

Tips on choosing an outsourcing development team 

We cannot guarantee that all outsourcing development teams are great and reliable. However, we decided to provide you with tips on how to select the outscoring development company and not to fail in the end on your cooperation. Before signing the contracts, we advise you to pay attention to the following things:

• Check the previous experience of the company you are willing to select – learn the portfolio, domain industries, read reviews from their clients on Clutch and Goodfirms, contact these clients if you have such an opportunity; 
• Ask about the document package and ensure its transparency, especially of those parts that include NDA;
• Don`t fall for the low rates: your project will fail if the skills of the development team are just as low as their rates.

At Altamira, we vouch for the quality of outsourcing services we provide for our customers. We do not just build software but deal with the issues of our clients, help them set their priorities, and create a top-notch application that will be a solution to all the initially revealed problems. 

FAQ

Bottom Line

Hiring an outsourcing partner gives you a significant cut in expenses, but what’s more important is how you’ll use this extra money. We advise you to use this monetary advantage to get a team of experienced software professionals, rather than blindly chasing the money and look for the cheapest outsourcing partner possible. Always keep in mind, you already saved a lot by going offshore. Now is the right time to choose the best variant possible in terms of quality and proficiency.