Outsourcing vs In-house Development: Benefits And Drawbacks


For many businesses, relying completely on internal resources to develop a digital product is becoming unviable. Budget restraints, deadline pressures and a lack of skilled resources are all contributing factors. The growing global trend to outsource development to third parties is supported by compelling data.

Unwillingly, we are becoming used to sharing data and collaborating with third parties due to dynamic changes in business strategies imposed on us by global development. We do so to stay competitive and to reach our business goals faster.

If you are contemplating whether in-house or outsourcing development would work better for you, first consider the following:

  • How long will the project last?
  • Is the project your core activity?
  • How long will you need the development team for? (short-term project, ongoing)
  • Will ongoing tasks or changes be required with time?
  • Do you need to start a project quickly?
  • Do you have enough time, resources, and funds?

In this article, we will take a closer look at the benefits and drawbacks of outsourcing vs in-house development. After a thorough evaluation of your product’s specifications, deadlines and budget, the following guidelines can help you to weigh up the benefits and drawbacks of both strategies.


The difference between in-house and outsourced

When a company uses (or hires from scratch) its own developers to design a digital product, it is called in-house development. Many big companies such as Amazon, Uber or Salesforce use their own in-house development team.

When a third party builds a digital product for you, it is called outsourcing. You could view it as leasing human resources from an IT company to perform the work you specify. You pay the vendor contractual value.

Learn more about the importance and the basics of software development.


When and why to use in-house development

Companies in the technology sector who provide services that involve ongoing tasks should have at least one in-house development team to build, run and maintain the product. Businesses that have less budget restraints, want to stay in full control over a project and have experienced and skilled resources can benefit from this model.


Benefits of in-house development


An in-house team has better knowledge of company processes and is motivated to bring better results. In-house developers have a deeper interest in the success of the company they are working for.


Direct communication

Avoid delays in problem solving. Working similar hours in the same time zone allows for direct communication and clarity without language barriers. Face-to-face communication is frictionless and works more smoothly.


Better control

Having a team under one roof makes it easier to exercise control over all stages of a project and to ensure that compliance criteria and quality are met.



In-house developers can respond to changes to requirements quicker. An in-house team can change or add product features much faster.


Alignment with company culture

You can select and hire a team that aligns with your company’s core values. When the team incorporates the company’s goals and culture, it brings better results.


Faster support

Once the product is on the market, some issues may arise (as they always do). In-houses team can provide straightforward and efficient support to customers without any delay.



Some companies trust their own security measures more to protect their intellectual property.


Drawbacks of in-house development


You may end investing a large amount of money, especially in the initial stages of a project. The hidden costs of human resources on the top of the hourly rates of the country where your business operates can eat up your funds to an uncomfortable level, especially if your sales during the development process aren’t performing as expected. Any unexpected delays can stretch your budget to the limits.


High turnover

There is not enough IT talent on the market. The demand highly exceeds the capacity, so developers with broad skillsets can pick and choose the projects and employers they want to work for. They may leave you in a crucial phase of the project and slow down the development process. In addition, replacing the employee with someone who fits your requirements can be a lengthy and expensive process.


Skills shortages/upskilling

You may find that your team is specialized in certain areas and lacks skills in others or is missing the level of experience it needs to keep up the project up-to-speed. You could find yourself hiring staff to fill the skillset or investing in upskilling.


When and why to outsource development

Outsourcing has become hugely popular due to low cost and scalability. Giants like Google, Xerox or Toyota have outsourced their development to third parties. For companies like these, their strategy would likely not be based on budget restraints, so it stands to reason that they have capitalized on the various other benefits, which we will cover as you read on. Outsourcing can be a good choice for companies with tight deadlines, a shortage of IT resources and those wanting to cut costs.

Read more about how outsourcing custom software development can help your business.


Benefits of outsourcing development

Low cost

You can partner with offshore IT companies, where costs may be much lower for the same level of expertise. You also save money as you don’t pay for inactive hours like you would if you paid for an in-house team. According to the Human Capital Benchmarking report, the average hiring cost in the US is $4129.00 and takes 42 days on average. Also, acquisition of hardware and software, licenses etc. must be considered.


Large pool of IT specialists

When you outsource, you have access to a worldwide pool of talent to choose from.


Unlimited technologies

IT companies specialize in outsourcing work with professionals proficient in diverse and advanced technologies, which means that any unique project requirements can be easily met.



You can add more experts to the team to speed up development or make the team smaller if required. As the outsourcing contracts are adjustable, you define the scope and period and upscale or downscale if necessary.


Get started quicker

Save time on recruitment, introduction and training. Outsourced teams are experienced in quick onboarding. Employing outsourced team can cut the development time by weeks.

Read on: Benefits Of Outsourcing Software Development.


Drawbacks of outsourcing development


Some companies are concerned about their intellectual property protection when disclosing their ideas to third parties. To protect your project idea and work, your partner should sign an NDA (non-disclosure agreement). Research the outsourcing company well. Make sure that the outsourcing team has high cyber-security measures in place.



There may be delayed responses due to different time zones, which means no immediate access to developers when urgent issues occur. However, the most competitive providers offer 24/7 access to counteract any geographical or time zones differences. A good outsourcing company will provide you with the tools to track all stages of development in an accurate and transparent way.


Less control

You will have less control over the workflow, so keeping communication high is important so that the quality of the product development will meet your standards and expectations.


Useful tips on how to avoid issues with outsourcing

Luckily, there are some easy ways to mitigate these drawbacks. Here are the best ways to avoid issues when outsourcing software development:

  • Choose from reputable IT outsourcing companies
  • Check the provider’s English proficiency
  • Ask about cyber-security measures
  • Be suspicious if the price is too low - research average hourly rates for the geographic region of the company
  • Check what project tracking and communication tools are used, like JIRA, Vault ERP or Trello.
  • Check references and testimonials
  • Take time to set the terms and conditions of your engagement contract to cover for all eventualities.
  • Sign an NDA
  • Consider time-zones that you can tolerate


Why outsource software development with Rare Crew?

We employ developers with diverse set skills who are knowledgeable in a broad spectrum of technologies. We have offices in Europe, India, the US, and Egypt so that we can cater to multiple geographic regions in different time zones. Our development teams are used to quick onboarding and know all the processes to deliver products at the highest level. Knowing that we have a proven record of 12 years of experience and that renowned clients return to us can put your mind at ease. Our business practice is based on security, transparency, confidentiality, professionalism, and competitive pricing.

Read our testimonials on Clutch or contact us directly to learn more.



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