The decision to choose either the in-house or outsource software development model is crucial for any business. It can affect everything from costs and timelines to control and quality. It's important to weigh both insourcing vs outsourcing pros and cons before deciding. In-house software development allows for more control and customization but can be more costly and time-consuming. On the other hand, outsourcing can be more cost-effective but may need more control and customization offered by in-house development.

This article compares in-house software development with outsourcing to help you make an informed decision. The discussion will include pricing considerations, key advantages and disadvantages of each model, and tips on choosing the right cooperation model.

Overview of the in-house software development model

In-house software development is a model of creating and maintaining applications built, tested, and maintained by an organization’s internal team. Compared to outsourcing software development, the in-house model offers organizations the ability to control their projects from start to finish, as well as access to company resources. Moreover, in-house development allows for better communication and collaboration between the development team and other departments within the company.

This approach, however, has its range of disadvantages and challenges as well. One of the main disadvantages is that it can be more costly than outsourcing. The company must invest in the necessary personnel, equipment, and infrastructure to maintain the development process. This development model can also be more time-consuming than outsourcing, as the company has to build and manage the development team independently.

Overview of the outsourcing software development model

Outsourcing software development is an increasingly popular model for businesses looking to access a larger talent pool, reduce costs, and speed up the development process.

One of the key advantages of outsourcing software development is accessing a wider talent pool. It can include experienced developers with specialized skillsets in specific technologies or platforms, which may not be available within the company or the local market. Additionally, outsourcing can help companies save money by optimizing labor costs and accessing cost-efficient development options.

There are, however, some potential risks associated with outsourcing software development. Client-vendor communication issues can result in delays or misunderstandings about project requirements. Additionally, companies may have less control over their project when working with an external provider than if they managed it themselves.

Outsourcing offers businesses many benefits when they need specialized skillsets that are not readily available within their organization or local market. Experienced professionals with an understanding of current trends in technology, such as Artificial Intelligence (AI) and blockchain, can be found without the need for extensive training time or resources devoted solely to finding these professionals locally.

software development in-house vs outsourcing comparison

Cost comparison

In-house and outsourcing models have their advantages and disadvantages when it comes to cost.

  • The in-house software development model requires a company to hire developers and build an internal team of experts to handle the entire software development process. Since all costs associated with labor, overhead, and maintenance are handled internally, you can control the quality of work and manage your budget more effectively. The drawbacks of this model include higher upfront costs due to hiring expenses and potential delays caused by insufficient resources or technical expertise.
  • In an outsourcing model, specific software development tasks or projects are contracted out rather than built within an in-house team. This approach allows companies to hire experienced professionals without delivering comprehensive HR and administrative support and following dozens of other contractual obligations. Moreover, most outsourcing providers already have established systems, so there is no need to invest in additional infrastructure, reducing the overall costs associated with software development. Communication between teams may be hindered by language barriers or different working hours depending on the time zone.

Compared to in-house development, outsourcing software development can be more cost-effective. Assessing how outsourcing can be transformative for your organization is crucial to make an informed decision. Our next step will be to discuss some real-life benefits of outsourcing that have helped dozens of companies to reach their business goals.

Real-life benefits of outsourcing software development

To understand how clients can benefit from outsourcing certain aspects of their business operations, taking a look at a few case studies is a must. Here are a few examples of how the N-iX team has delivered value to its customers by taking the lead in solving their challenges.

The N-iX team partnered with WBS TRAINING, a large provider of training services with 1,500 specialists and 40+ years of experience on the market. The business challenge was to optimize its operations and deliver a better user experience by redesigning and rebuilding its legacy monolithic learning management system. Our team has approached the challenge by designing the microservices architecture and building a learning management system. As a result, N-iX managed to:

  • Streamline operations by rewriting the legacy solution and successfully building a unified system with improved performance;
  • Expand the system flexibility by designing and implementing the microservices architecture;
  • Increase employee productivity and streamline the user experience by implementing single sign-on technologies.

Read more: Building microservices-based solutions to enhance user experience and productivity in education

Another example of how outsourcing can leverage business capacities is the cooperation between the N-iX team and a leading global audio streaming platform. It provides various services, from live radio stations to podcasts, music streaming, news coverage, and sports game broadcasting. The main objective of this project was to improve the service quality of their audio streaming platform. By dedicating a development team, N-iX has helped the client to refactor, proceed with cloud migration, and implement Alexa features. As a result of cooperation between the companies, the client gained a range of substantial benefits, such as:

  • Reduced expenses and increased scalability by migrating the on-premise data center to the Cloud and moving the platform infrastructure from Windows to Linux;
  • Enhanced performance and user experience by enabling the platform to handle high amounts of requests at peak times without delay in content delivery;
  • Improved platform usability across various connected devices by adding new features.

Read more: Improving the performance of a large audio streaming platform

One more example of the benefits of outsourcing an expert team is the partnership between N-iX and a global provider of managed cloud services. This company offers personalized white-glove Cloud hosting solutions. The main objective was to make generating monthly service reports for their clients more cost-effective. The process required lots of manual work and a paid third-party tool. With that in mind, the N-iX team migrated the on-premise infrastructure from MS SQL Server to a unified data warehouse we built on GCP. Also, our team has been engaged in optimizing operations, automating manual processes, and cutting costs. In particular, our solution allowed the client to:

  • Optimize costs by migrating from MS SQL Server to GCP, alongside decommissioning 20 servers;
  • Streamline data collection, management, and accessibility by centralizing and unifying all data in Google Cloud;
  • Reducing expenses by automating the Monthly Service Reviews generation that consumed nearly 17,000 working hours per year and required an expensive third-party tool.

Read more: Automation, cloud migration, and cost optimization for a global tech company

How to choose a suitable outsourcing cooperation model? 

Also, reviewing various available outsourcing models is crucial when choosing a suitable approach. In particular, the following graph describes the differences and key features of the extended team, management team, and custom solution development. Consult with it to make up your mind on what model fits your requirements the most.

how to choose in-house development vs outsourcing model

FAQs to in-house software development vs outsourcing

What is the difference between in-house and outsourcing?

In-house software development involves a company hiring its staff to develop and maintain its IT systems. The company must invest in training, recruitment, and infrastructure costs. Outsourcing is when a company contracts an external provider to provide IT services instead of relying on internal resources. It can be more cost-effective as it eliminates the need for additional staffing or investments in hardware and software. Additionally, outsourcing allows companies access to specialized expertise that may not be available internally. Outsourcing can help reduce time-to-market by enabling companies to focus on core competencies while leaving complex tasks such as software development up to experienced professionals.

Which is better: outsourcing or in-house?

The answer to this question depends on the specific needs of a company. Outsourcing can be beneficial when accessing specialized skills and expertise and reducing costs associated with hiring in-house staff. However, outsourcing also carries risks, such as a lack of control over quality assurance and potential security issues. In-house teams may offer more control but require more significant investment in resources and training. Ultimately, the best approach for any organization will depend on its unique circumstances and goals.

Final remarks

When it comes to in-house software development vs outsourcing, there are a variety of factors that need to be taken into consideration. The cost comparison between the two models is an essential factor and should be weighed against the pros and cons of each model. Ultimately, you can decide which option is right for your business by understanding the differences between in-house software development and outsourcing.

Take advantage of our comprehensive IT outsourcing services, and let us help you make the best decision for your business. Our experienced software development team at N-iX is dedicated to creating tailored solutions that will meet all your needs. The development team delivers cost-effective, reliable, and secure solutions that can save you time and money while allowing you to focus on what matters most – growing your business.

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Why choose N-iX as your outsourcing partner?

  • N-iX is a trusted global tech company with 21+ years of experience in custom software development and technology consulting;
  • The N-iX team has 2,200+ skilled tech professionals that can tackle business challenges in healthcare, fintech, telecommunications, agriculture, and dozens of other domains;
  • The teams at N-iX are well-versed in Data Analytics, Big Data, Cloud solutions, Embedded & IoT, AI, ML & Data Science, and Digital Transformation;
  • The vendor’s portfolio includes projects delivered for cleverbridge, Lebara, Gogo, Ringier, and a range of Fortune 500 companies;
  • The company adheres to international industry standards, such as ISO 27001, ISO 9001, ISO 27001:2013, GDPR, and PCI/DSS;
  • N-iX is a global software development service company with offices and development centers across Europe and the US.