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In-House vs. Outsource: What Do You Need To Think About in Advance, So As To Not Regret Later?

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#Management 22 may 2023
  • Dmitri Alex

    CBDO EU

Challenge explained

Outsourcing involves hiring an external company to develop software for your business, while in-house development refers to developing software within your own company by hiring and managing your own team of developers. The choice between these options is critical because it impacts the quality, cost, timeline, and required expertise of your software development project. Making the right decision can save you time and money while ensuring that you achieve your business goals. Therefore, it's crucial to consider all factors and choose the best option that aligns with your objectives.

The Factors Needed To Be Considered

Employer Brand Strength for IT Professionals
An employer brand reputation that is not well-established for IT professionals, particularly in non-IT companies, poses several challenges, which can make outsourcing a more viable option:
  1. Attracting top IT talent: A weak reputation makes it harder to attract skilled IT professionals, who prefer companies with better reputations.
  2. Retaining IT talent: Weak employer brand reputation impacts retention, leading to higher turnover rates and increased hiring costs.
  3. Lack of domain expertise: Non-IT companies may struggle to build a strong reputation for IT professionals due to inadequate domain expertise and resources.
  4. Resource allocation: Building a strong reputation requires significant investment, making outsourcing more cost-effective.

Considering these challenges, non-IT companies can benefit from outsourcing development, leveraging external expertise without heavy investments.

Expertise

Expertise is the next factor that contributes to custom software development and can be divided into three distinct sections.
Management of cross-functional team

A cross-functional team is a diverse group of individuals from different disciplines who collaborate on a specific project or goal, leveraging their unique skills and expertise for better problem-solving and innovation.

Creating a cross-functional team is not an easy task, as you need to clearly understand: 1) the functions that must be accomplished during the production process; 2) the workload for each of those functions; and 3) the people you need to hire to allocate those functions to them.

Next, you need to create workflows for the team to produce the right work products, such as documentation, software code, and the final solution. This involves managing time, money, and other resources. That's cross-functional team management, and it's not an easy ride.
Product Management Expertise Diversity
The absence of expertise in diverse product management areas can significantly impact custom software development. Different products, such as marketplaces, mobile apps, and web apps, often have unique user acquisition, onboarding, activation, and retention requirements. Addressing these specific needs requires a suitable skill set, which might be challenging to find in a single individual. An outsourcing company that focuses on product management within its production process can provide access to the necessary expertise, ensuring a well-rounded approach to software development.

If you are confident in your product management expertise, then this factor supports an in-house approach.
Technical Expertise
To accomplish your engineering goals, you will require specific expertise in software engineering, UX/UI design, software architecture, DevOps, etc. Hiring specialists in these fields can be challenging and require experience.

Pricing

When considering the choice between in-house and outsourced custom software development, pricing is a critical factor to consider. Typically, outsourcing is more cost-effective than in-house development, even for high-end software. In such cases, opting for outsourcing may be the better option.
However, if quality is a major concern, an in-house approach may be preferable, especially when developing high-end software. Alternatively, some outsourcing software developers offer dedicated teams that can provide the same quality output as a well-versed in-house team, resulting in top-quality final solutions.

Time to Market

Speed is a critical factor to consider. If you are aiming for quick wins and do not have the time to search, onboard, and organize an in-house team, outsourcing software development is the ideal option. However, if time is not a concern, then opting for in-house development is also an option.

Bureaucracy

The bureaucracy involved in onboarding and managing a full team for in-house work can be substantial. It encompasses general organizational aspects in addition to technical orders, such as managing wages, benefits, taxes, and equipment. Additionally, recruiting and training new team members can be a lengthy process. Therefore, if your HR department lacks the necessary capacity, outsourcing can be a viable option to consider.

The Learning Curve

If it's your first attempt to begin custom software development in-house, the learning curve can be long and steep. This is because there are many factors to consider when developing software, such as technical expertise, management, and process. In-house development requires a lot of investment in terms of time and resources to gain the necessary knowledge and expertise to succeed. This process can take six months, a year, or more to become proficient, especially if your team doesn't have prior experience in software development. However, once your in-house team has gained the necessary knowledge and expertise, it can be a cost-effective and efficient way to develop custom software.

Intellectual Property and Risk to Data Security

In-house development allows for greater control and oversight over the security of the software, as well as the company's internal network and data. It also provides more transparency, with full access to the source code and any security measures implemented. However, maintaining an in-house team with the necessary security expertise can be expensive and time-consuming.
Outsourcing software development can be a cost-effective and efficient option, but it may also pose cybersecurity risks. The outsourced team may not have the same level of control and oversight over the security measures being implemented. That being said, outsourcing can be a secure option if the outsourcing partner is carefully selected and proper communication and documentation are in place.

Conclusion: Making the right choice

To make a decision between outsourcing and in-house development, begin by ranking the factors based on their importance to your business. Next, consider whether there is a reputable outsourcing company nearby that aligns with your priorities. If there isn't, in-house development may be the best choice for you. However, if you find a good match, welcome to a potentially great collaboration! Best of luck!
  • Dmitri Alex

    CBDO EU

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