In-House vs Outsourcing Product Feature Development

April 22, 2022
14 min

Many companies face a dilemma of in-house vs outsourcing product feature development.

Costs, timelines, talent pool, product quality, and other metrics come into play in this confrontation.

This guide will help you realize what is the right model to build your product functionality.

The post features:

  • 10 pros and cons of outsourcing
  • 7 pros and cons of in-house development
  • 6 use cases when to outsource or insource
  • 12 questions to ask when outsourcing to a vendor
  • A comparison matrix of in-house vs outsourcing.

In-House vs Outsourcing: Key Takeaways

In case you want to quickly access the core upshots of the in-house vs outsourcing comparison, we’ve prepared a comparison matrix, which outlines how each model performs by multiple criteria.

 

In-House vs Outsourcing Software Development
CriteriaOutsourcingIn-House
Time to StartLittleMuch
CostsLow-MediumHigh
ScalabilityHighLow
Talent PoolWideNarrow
Time-to-MarketFastSlow
CommunicationMedium-HighHigh
Level of ControlMedium-HighHigh
Product QualityHighHigh
Technical ExpertiseHighHigh
Involvement LevelLow-HighHigh

If you want to know more about the pros and cons of the two options, keep reading the full guide below.

 

10 Pros and Cons of Outsourcing

 

Pro 1: Optimized Budget

IT outsourcing has always been a way to save costs.

Unlike in-house development, outsourcing helps businesses optimize budgets by cutting multiple related expenses.

They include additional salaries, workplace equipment, office rent, and others.

You get the same benefits in outsourcing new features or a functionality block.

Here are some reasons for adopting the cost-effective outsourcing product feature development initiative.

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First, you no longer need to spend time and funds on interviewing candidates.

This means you can save on wages for human resource managers and CTO/tech lead developers.

Second, you don’t need to equip an in-house team with workplaces, stations, devices, etc.

This way, you cut down costs for purchasing and maintaining must-have equipment.

Third, no workplaces – no rental costs.

Commonly, rent is a huge cost driver especially if your office is located in the US, Western Europe, and many other countries.

Fourth, you avoid social payments to an in-house development team once the project is finished.

It’s common to make social payments and compensations to insourced resources even after completing the scope of work.

Outsourcing allows you to pay only for the hours spent on a specific feature or MVP development.

Pro 2: Lessen Burdens of Hiring Talents

Finding a highly skilled professional often becomes a challenge.

The more narrowed experience they have, the harder it would be to succeed.

So, you need to spend weeks or even months looking for a perfect fit for a project and your in-house team.

For example, ManpowerGroup stated that 2 in 3 US tech talents struggled to apply and fill in vacancies in 2020.

The study features that the US-based IT positions enter the list of the top-10 hardest resources to hire.

What’s more, The Bureau of Labor Statistics said the shortage of technical talents in the US will reach 1.2M by 2026.

All these figures make building an entire team of skilled professionals an extremely timely and pricey initiative.

Outsourcing helps you avoid this headache.

Outsource Product or Feature Development

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The core reason is that you simply increase potential locations with powerful IT hubs.

Mostly, agencies can offer multiple talent options with the diverse technical background and expertise you need.

Wait, not sure what technical background you need for the project?

That’s yet another benefit you get by outsourcing.

 

Most commonly, you will communicate with a solution architect or a senior software engineer when discussing your project.

They both perfectly know what hard skills and expertise your project needs.

This way, outsourcing is the way to access a wide talent pool seamlessly.

You no longer need to find, interview, recruit, onboard, and train.

 

Pro 3: Quick Time to Market

Outsourcing helps launch and release your software product fast.

If compared with in-house development, it may become a 2-5x-time booster.

When it comes to building your software, you bump into many challenges.

Hiring, recruiting, office renting, equipping, managing, validating, etc.

On average, software projects take 4-8 months to complete and launch a first release (based on our experience).

In case you’re new to the world of project development, the timeline may increase by 2-5 times.

Wil Schroter, the founder and CEO of Startups.com, says it takes 4 years to convert your startup into a real business.

About 1/3 of that time is dedicated to product development.

So, you can decrease the time-to-market period and launch your product faster with outsourcing.

For sure, sometimes high developer rates are the payment for your fast delivery.

 

Pro 4: High Scalability

Imagine you’re building a product’s functionality right now with an in-house team.

And you realize that you want to implement additional features that require more technical skills that your team lacks.

This way, you most commonly bump into scalability issues and need to focus on finding those resources.

Again, it will take your time and money to scale and add more value to your offering.

With outsourcing, the chances are high to scale without suffering.

 

In case the resources are available, the company will just scale your team with the needed technical specialists.

If there are no resources, the agency will take care of the problem and find the resources on their side.

This means outsourcing helps you scale up way more easily and smoothly.

 

Pro 5: Focus on Product Marketing

Outsourcing mostly helps you focus on many other project activities.

They may include marketing campaigns, sales funnels, acquiring investments, etc.

Depending on your involvement, you have way more time and resources to proceed with project-related activities.

With in-house team development, you still can do the same things, but the project development process will take your time daily.

Though this benefit is a matter of argue, we believe it gives you more freedom compared to in-house development.

 

Con 1: Less Control

Many outsourcing agencies provide less control and management over the project compared to in-house development.

For example, you may have less transparency into how your source code is organized.

However, it doesn’t necessarily work that way.

Today, lots of companies offer flexible engagement models so that you can choose how much involvement and transparency you need.

Let’s take Ascendix as an example.

You can choose from a variety of engagement models including the full team management along with our team leads.

What’s more, you can even collaborate with our US-based PMs and BAs along with managing our outsourced development teams.

So, less control is not the case for the entire outsourcing world.

 

Con 2: Product Quality Issues

Many startups and in-house software development teams interpret outsourcing as lower product quality.

The reason for that is the lack of control.

Sometimes, it’s the real case.

For example, specific outsourcing locations have earned the fame of “fast delivery, but low quality”.

We shared our story and regional challenges we had while outsourcing to 6 locations so that you can explore more details on this topic.

So, if you opt for low developer rates, the chances are high to get a low-quality product.

However, it’s not the case for the whole outsourcing market.

 

Con 3: Code Ownership Problems

The outsourcing market is large and diverse.

There are still many companies that reserve the right to code ownership.

This means the outsourcing company you work with will have the only right to own the source code written.

But it’s a bad practice you should avoid.

 

First, carefully check and sign an NDA and intellectual property protection agreement.

Second, make sure the agreement signs copyright and trademark to your brand.

Third, better contact a legal attorney to help you create and sign proper agreements.

At Ascendix, we always make sure that your code is ‘yours’.

 

Con 4: Time Zone Differences

Quite often, outsourcing leads to different time zones between you and the company.

It may cause difficulties in terms of real-time project discussions.

For example, you’re based in the US, California, while the outsourcing team is in Portugal.

So, you have an 8-hour difference.

It means that you start working while the development teams finish their working day.

 

However, there’s still a solution.

Many outsourcing companies can provide flexible hours so that your project development team starts 2 hours later.

These 2 hours are a great overlapping period to communicate, discuss, and proceed.

What’s more, it’s becoming a common practice that an outsourcing company has several locations throughout Europe.

It allows you to find the most suitable working hours so that you can easily communicate with the project team.

 

Con 5: Decreased Motivation

Outsourcing is sometimes interpreted as a motivation-free industry.

This means that the development team you hire for a project does not have the motivation to deliver extra value and quality.

As we’ve stated above, the outsourcing market is wide and diverse.

It’s the case for those companies who bid on the quantity of delivered projects, not their quality.

Here is our advice on how to choose a quality-oriented outsourcing partner.

 

The more narrowed technical expertise is, the higher are your chances to find real professionals keen on delivering extra value.

So, if you see that the company is specializing in everything from UX design to PropTech software development, there are 2 potential scenarios.

It’s either a large and skillful development company or an agency trying to close multiple technology gaps by bidding on the quantity of their projects.

Outsource Product or Feature Development

We’re here to help. Just fill in the form and we’ll send an estimate.

7 Pros and Cons of In-House Development

 

Pro 1: Excellent Control

An in-house development team is about having super control and management over the whole development process.

Having the project team at your arm’s length, you can change, modify, validate, and make decisions easily and quickly.

There are no time zone differences, allocated meeting time slots, or other delays or challenges.

 

Pro 2: High Motivation

Nobody wants to launch your product and make it successful more than your in-house team.

If done properly, your technical specialists want to deliver as much value and quality as possible.

This keeps them motivated throughout the project development process.

Another powerful motivator is your understanding.

In case your in-house team has any business-related questions, they can get immediate answers from your management team.

The matter is that no one understands the product better than you do.

 

Pro 3: Solid Technical Expertise

For sure, it will take a while to find, hire, onboard, and train your hand-picked talents.

But once you’re all set, you have the excellent technical expertise you need for any project-related activities.

What’s more, you can easily shift developers from one project to another in case you’re planning to launch multiple products.

And here their expertise plays an integral role as well.

First, you don’t need to find and hire talents one more time.

Second, you’re super confident with your technical background and skills.

Third, you know they’re motivated to bring your products to life as they see their clear unique value proposition.

 

Pro 4: Barrier-Free Communication

In most cases, you’ll hire a solid professional having zero language issues to streamline in-team communication.

If so, this will give multiple benefits in the future.

First, in-house team members understand your thoughts and words without any struggles.

Second, the fast and direct communication speeds up project development.

Third, the better communication your in-house team has, the higher their satisfaction, leading to an increase in motivation.

 

Con 1: High Costs

It’s an open secret that building your in-house team is like having a luxury item.

But first, you need to invest much time and funds to get it.

And here come multiple related expenditures that will increase your initial budget.

Additional wages for human resource managers and solution architects are required to hire and recruit professional talents.

Also, you should consider rental costs as your team members will need to have their separate place to work.

And quality workstations with powerful hardware and devices are a must. The better working conditions you offer, the more value and results you can get.

This way, building an in-house software development team becomes a pricey and time-consuming initiative.

But it can bring multiple benefits for your business in the future.

 

Con 2: Long Time to Market

As we discussed above, you need lots of time to build your in-house development team.

In turn, this leads to a long time-to-market period as you should invest weeks or even months in bringing talents together.

This way, you should consider these risks and strongly decide whether you want to launch fast or you have additional months for releasing your product to the market.

 

Con 3: Lack of Versatility

Imagine one or several team members get sick for a long period of time or even leave.

Such situations will negatively affect and stutter the project development process as you’ll need to find and hire new talents or even restructure your team.

Either way, time and cost expenditures are inevitable.

So, building an in-house development team has lots of potential flexibility risks you should consider.

6 Use Cases When to Outsource

Here are the most common use cases that mean it’s a perfect situation for your business to outsource.

 

Want to Complete a One-Time Project

For sure, outsourcing software development is about completing projects, not building your own IT department from scratch.

This means that you mostly won’t need to create a fully-fledged development department if you need to launch and test a short-term project fast.

If you are working on a long-term project that will take lots of qualified resources, building an in-house team is what you need in that case.

So, outsourcing the development of your current project is a great initiative for these reasons:

  • Launch the product as fast as possible
  • Access a wide range of talented professionals easily
  • Start the project development over immediately
  • Save costs.

 

Need to Build Additional Functionality

Quite often, startups already have an in-house development team focused on building the core product.

But businesses usually want to build additional functionality not pulling the core in-house team from their priorities.

If this sounds familiar, outsourcing software development is a common practice.

First, you quickly onboard new developers to build additional features.

Second, you don’t disturb an in-house team and don’t need to restructure the project development process.

 

Want to Build One More Product

Similar to the previous scenario, if you want to launch one more project – outsourcing is what you need.

First, you will need to recruit, onboard, and retain new talents to build one more in-house team for this project.

This will greatly postpone the release date and bring many struggles as well.

Outsourcing is an ideal option here as you can build an outsourced team of resources you currently need.

 

Need to Launch the Product Fast

Outsourcing is known as an accelerator of your project development and launch.

So, if you want to launch fast and avoid recruiting, onboarding, and training activities – outsourcing is at your service.

As we’ve discussed, this model helps you decrease the time-to-market period for multiple reasons.

 

Need Specific Niche Expertise

Even if you have a solid in-house development team, there is no way to cover all specific challenges.

Here comes outsourcing.

It allows you to find a development partner with the required experience in your niche.

For example, real estate software development.

Many companies contact Ascendix for our vivid expertise in this niche among others. So, we help them in a quality and timely fashion.

This way, businesses can save lots of resources on building an exact functionality or product related to the PropTech industry.

 

Have a Large- or Small-Sized Project

Outsourcing is about adapting your real-time needs and scaling accordingly.

For this reason, it’s a great choice when you have a small project with a solid potential or a large business with multiple needs.

In case you have a small project, and it thrives, the outsourcing company will scale up your project team in equal proportion to meet new demands.

First, you can avoid scalability issues like project development pauses and others.

Second, you don’t need to waste resources on scaling your business.

The same works vice versa.

Outsourcing is also a great choice if you have an enterprise-scale business with multiple departments and complex needs.

First, the company will scale down your project resources in case you need to slow down the growth.

Second, you will have no problem with scaling up your project as well in a cost-efficient and timely fashion.

When to Build Your In-House Development Team

 

Have a CTO Onboard

Many companies and startups were founded by a couple of friends – one being tech-savvy and another holding administrative skill – both largely contributing to the realization of their shared idea.

Just take a look at Ascendix.

It was established by 2 life-long college friends with solid backgrounds in the tech and sales industries.

If that’s your case too and you have a tech-savvy person as your business partner, then building your in-house team will be much easier.

 

First, your business partner is probably the only person you can fully trust currently.

This will make the process of in-house team development more transparent.

Second, he/she has a solid technical background which simplifies the process by times.

Your business partner will deal with building a technical team while you can focus on other project-related activities.

They may include marketing campaigns, sales funnels, funding, product discovery, etc.

Third, the chances are high that your business partner will build a great IT ecosystem.

This means this person will build your local technical department from scratch by setting up the right processes and pipelines you see beneficial.

 

This way, having a CTO on board is a great signal to start building your in-house development team.

 

No Budget & Time Limitations

As we’ve discussed, an in-house development team is a very pricey initiative.

But if you want to build a company culture and have no budget constraints, give it a try.

So, if you’re not a funded startup that should be launched fast to validate the idea, it’s a great idea to start with.

It will bring ever-lasting pros to your business along with a solid technical background, excellent communication, and control.

12 Questions to Ask When Outsourcing

Let’s imagine you’ve decided to proceed with outsourcing software development.

But how to choose the right development company and what questions should you ask?

Here is a questionnaire of 12 common questions our clients address to us, and we recommend you start with these too.

 

  1. What’s your company culture and what values do you follow?
  2. How can you prove the value-oriented approach in delivering high-quality projects?
  3. How can you prove specific industry expertise?
  4. Could you show client reviews and their contacts?
  5. What engagement models do you offer?
  6. How would you approach our ever-changing project needs?
  7. Do you offer team versatility in terms of urgent situations?
  8. Do you offer ongoing support once the project is finished?
  9. What metrics do you track to assess project performance?
  10. What types of outsourcing contracts do you provide?
  11. How do you approach product ownership and Intellectual Property Rights (IPR)?
  12. How do you approach data protection? Are you GDPR-compliant?

 

For sure, that’s not the fullest list of questions to ask an outsourcing provider.

But these will help you realize whether the company suits your needs and is worth investing in.

Bottom Line

The goal of this guide is to share all the pros and cons of each project development model.

We hope you’ll find it insightful, and it will help you make the right decision between in-house vs outsourcing software development.

Looking for an outsourcing partner? Just fill in the form and we’ll send an estimate.

Outsource Product or Feature Development

We’re here to help. Just fill in the form and we’ll send an estimate.

FAQ

What is in-house and outsourcing?

Inhouse means building your own technical team locally while outsourcing is about hiring an on-demand team outside your company.

Which is better - outsourcing or insourcing?

Choose outsourcing when you need to build and launch a product fast, access a wide talent pool, save costs, scale easily, be flexible and versatile. Insourcing is a great yet pricey way of building your product internally, but you should have no budget and time constraints to proceed with this model.

What are the advantages and disadvantages of outsourcing?

Advantages of outsourcing include low labor costs, high expertise, high flexibility, versatility, and scalability, access to a wide range of talents, and a short time-to-market period. In turn, the disadvantages of outsourcing are a lower level of control, potential communication issues, possible time zone differences, and a lower motivation of team members.

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