In-House Developers Vs. Outsourced Developers: Which is Best for Your Business?

Since the pandemic, U.S. businesses acclimated to more flexible IT models are now more robust and irrepressible. It allowed them to bring new levels of adaptability into the years ahead for a more steady-state transition.

By the second half of 2021, local U.S. software development job salaries increased significantly, resulting in companies considering outsourced developers. Though the global market also undergoes software developer rate hikes, overseas outsourcing rates remain remarkably lower. Also, considering the growing shortage of skilled developers versus the increasing demand for talented and affordable developers, the trend of overseas outsourcing will continue to grow in the coming years.

As per the data from Accelerance, the growing majority of companies (60%, compared to 56% the year before) currently outsource at least part of their application development. With IT organizations picking up the pace, software outsourcing is projected to be on a 10-year growth roll through 2025.

So, once you decide to build new software or application, determine what type of software developers you need to hire. Which one is best for your business – in-house or outsourced software developers?

There are various factors to consider before the final selection. In this blog, we will discuss the pros & cons of hiring an in-house and an overseas developer to help you make an informed decision.

In-house developers: Pros & Cons

There are countless examples where companies prefer hiring in-house developers. Like anything else, an in-house development team also has pros and cons.

Pros

You can opt for hiring in-house developers for the following reasons-

• Full control: The in-house team is available on-site, and you can train the team with your company’s software development process. You get complete control over the product development process and other team resources.
• Cultural fit: In-house developers can easily coordinate with your company culture and better understand project requirements. When the developers work closely with other stakeholders, they feel more motivated to achieve the best results and add more value to the company.
• Effective communication: Being in the office and having the same working hours make communication more effective among in-house team members. Direct conversations and quick collaborations help avoid misinterpretation and boost cogency in project delivery.
• Quick fix: In-house software developers require a minimum time to address project issues, add new features, discuss their technical background, and fix bugs faster due to faster and more effective communication channels.

Cons

Besides all the benefits, in-house developers also have some drawbacks, such as –

• Time-consuming: Keeping the shortage of qualified developers in mind, finding highly talented candidates, and convincing them to join your company may be laborious. Undoubtedly, you want your in-house developer to be exemplary from technical and cultural perspectives, but finding skilled developers takes time. Moreover, your attention may divert from core issues to non-core ones in search of the right developer with the required expertise.
• High cost: It is evident that hiring in-house developers in developed countries is much more expensive than outsourcing overseas. Additional expenses with in-house hiring include office space, system set-up, training, onboarding, etc.
• Low retention rate: Experienced and qualified developers are always in demand. Hence, they get more opportunities and often tend to switch companies with better opportunities. As a result, you may face challenges with timely project delivery and missed project deadlines.
• Limited reach to tech talents: The soaring IT market creates overwhelming demand for tech professionals with excellent skill sets. But companies need to hire skilled developers who also fit into the budget. However, finding affordable developers experienced in different tech stacks in the local market is challenging.

Outsourced developers: Pros & Cons

Nowadays, many companies outsource software development services to cut costs, save time, and find competent staff. As per the Business Wire report, the global IT outsourcing market size was assessed at $413.80 billion in 2021, $440.41 billion in 2022, and is anticipated to grow at a CAGR of 6.68% to reach $610.12 billion by 2027.

Here’s a quick look at the advantages and disadvantages of outsourced developers.

Pros

Outsourcing software development has some unquestionable benefits, which makes it popular among top organizations.

• Cost-effective: Outsourcing cuts down several expenditures, including recruitment, onboarding, office set-up, infrastructure, and training. Companies can hire freelancers and pay them only for their contributions to the project. You can also scale up or down the team as per the project needs and avoid additional expenses.
• Access to global talent pool: Outsourcing software development enables you to access the planetary pool of highly skilled candidates. Your search is not confined to the local vicinity, and you can hire the best developers worldwide.
• No long-term burden: Outsourcing overseas allows you to make project-specific hires without any long-term commitment.
• Faster to market: Outsourcing not only helps with affordable hiring but also saves time in technical recruitment efforts. An outsourcing contractor can connect you with pre-vetted professionals who can immediately participate in the development process, resulting in faster project delivery.

Cons

Despite significant benefits, outsourcing development services also have a few drawbacks, including –

• Potential miscommunication: There are chances of miscommunication as outsourced teams use communication channels such as Email, Slack, Meet, Zoom, or any other means, instead of face-to-face communication. Also, the overseas developers work in different time zones and are not native English speakers, which often leads to potential misunderstandings.
• Security risks: With outsourcing, you can’t keep complete control over the development process and might feel hesitant while sharing sensitive information. Therefore, you must ensure proper communication before signing the contract and sign an NDA (Non-Disclosure Agreement) to protect your product idea and code rights.
• Payroll & tax complications: When you hire developers overseas, you need to know a set of laws and rules to understand the payroll & tax systems in the outsourcing country. But, there are ways to pay developers overseas while abiding by international labor laws.

In-house developers vs. outsourced developers – Which one is suitable for your project?

Following the advantages and disadvantages of hiring in-house and overseas outsourced developers, you might know what makes sense for your project. Now, let’s dive deeper into the details.

When to hire an in-house developer?

Consider these situations to hire in-house developers for your project.

●      Complete control over the project

Hiring an in-house developer is more suitable when you wish to control your project completely. Since outsourcing a project means sharing authority with the outsourced team, you might not have a clear insight into how the outsourced team conducts the assignment.

●      Do not have a specified goal.

If you are not thoroughly apparent at the start of the project with the goal you want to achieve, in-house teams are better to help you figure out things as the project progresses.

●      Long-term, ongoing support is required.

Some long-term projects require ongoing support like bug fixes, security, maintenance, updates, etc. Ideally, the in-house team is familiar with the requirements and can help new in-house hires get up to speed.

●      Handling sensitive information

There might be situations when you need to keep specific information within your company. There may be some secret business strategy or sensitive customer data. Therefore, it is safe to keep the information stored and protected with in-house developers.

When to hire an outsourced developer?

Outsourced software developers are clear winners at certain times. You may consider outsourcing your software development project overseas in the following situations.

●      Large-scale, short-term need

There might be situations when you need to accomplish large-scale tasks in minimum time. If the project can’t wait for in-house developers to intervene once they are free, short-term engineering team scale-up may help you the best. Once the job is done, you can scale down the team and avoid extra expenses.

●      Turnaround times

There may be some tasks distracting your core development team from their top priorities and causing delays in marketing the project. It’s the right time to consider outsourced software developers or freelancers for quick project delivery.

●      Need help with rare tech stack or clearing bottlenecks?

There might be situations when you need someone skilled in rare tech stacks to accomplish specific project requirements. Finding the right developers in the local market may be difficult, time-consuming, and expensive. Therefore, hiring the best talent from the planetary pool is more reasonable and affordable.

●      Clear idea of scope & requirements

Once you are clear about the scope and requirements of your project and need to scale fast to achieve a goal, scale up your engineering team with outsourced developers. It allows the core team to focus on ongoing tasks and ensures you do not need to burden with extra expenses when the job is done. But both parties should sign a contract to ensure they agree on the scope, responsibilities, deadline, and budget.

A quick comparison: In-house developer & outsourced developer

Since both software developer hiring has certain advantages and disadvantages, there is no hard and fast rule. It solely depends on your software development requirements and goals to choose whether to hire an in-house developer or outsource the project to an overseas developer.

To help you more with the decision, here’s a quick comparison between these two hiring approaches –

Features to Consider	Hiring In-House Developer	Outsourcing Overseas
Talent Pool	Local/Narrow	Global/Wide
Cost	High	Low
Communication	Easy/Seamless	Timezone Difference/Delayed
Speed	Slow	Faster to market
Scaling	Challenging	Easy up/down scaling
Ideal for	Long-term/On-going projects	Large-scale projects
Staff Turnover	High	Low

Conclusion

Whether you should hire in-house developers or outsource development overseas totally depends on the requirements. It can be a hybrid approach too. If the project managers can efficiently convey technical requirements, analyze code, manage teams, and deal with the critical aspects of hiring outsourced developers, employing a hybrid team can be the most satisfactory approach.

If you’re looking for a software developer but are still confused, asking these questions would help:

• What do I expect from the developer?
• How much effort can I put into searching for candidates?
• Am I able to write a comprehensive technical job description and screen top talents?
• How effectively can I collaborate and give feedback to ensure successful project delivery?
• Where does my budget fit into the hiring process?

Answering these questions will help you understand which option is best for your business. Also, ask your associate entrepreneurs to know about their experiences with outsourced software developers. It will help you gather different perspectives on best practices and make the final decision.

Author’s Bio

Sukanya Bose is a professional content writer with expertise in delivering well-researched, long-form content spanning various industry verticals. When not researching new ideas or writing, she might be found cooking special dishes, spending quality time with her fur babies, plants, family, and friends, or traveling to the hills.