In-house Vs. Offshore Software Development: Pros and Cons

Linh Nguyen

Linh Nguyen

In a world that is moving and advancing constantly, technology and innovation are the top two elements every business needs to stay competitive.

In a world that is moving and advancing constantly, technology and innovation are the top two elements every business needs to stay competitive. However, another problem arises as companies are spontaneously changing and adapting to on-going trends: what about costs?

Companies are now starting to look for an alternative solution for their in-house software development team, which is an offshore software development team, or an offshore development center (ODC). Around 80% of the world’s largest 500 companies depend on their offshore development center for all their software development needs. More and more tasks are being outsourced to Latin America, Eastern Europe, and Asia, with China and India as two of the biggest players in the software development outsourcing field.

Yet, another question comes up: Is software outsourcing really the answer for MY business? Well, the answer is: depends. First, let’s look over what in-house software development and offshore software development are, the differences, and the pros and cons of each to figure out the answer most suited for YOUR business.

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In-house Software Development

In-house software development means you have a team of software engineers working in your office. They might be able to work from home, but they can arrive and work on site most of the time for best communication.

To have an in-house software development team, you have to go through the normal process of hiring an employee: interviews, on-boarding, training, and adapting. Your in-house engineers have all the benefits that are provided for all employees including insurances, vacation days, meal plans, etc. according to your company’s standards.

Pros of Having an In-house Software Development Team

Pros of Having an In-house Software Development Team

Business Priority

As the team solely works for the business, its priority is on the business. All your tasks will be prioritized and of highest possible quality based on your hires which are scanned and tested by you before the job is handed out. Tasks are also given out and changed on the spot if needed, at no additional charges. Your team also works alongside with their other colleagues, hence, they can get the best support possible when issues arise.

Cultural Fit

Your team belongs to the company, hence, it will share the company’s culture. Developers that work for your company’s needs will eventually understand and share the same values your company holds. It is also easier for them to communicate and share their concerns if any, and figure out the fastest way to solve all problems. The company’s success is also their success.

Constant Communication

Whether you have to change a function, or moving to a different task, or changing the direction of the whole project - your in-house experts can handle that for you. All issues and adaptations are done constantly without issues. Direct communications also help cease all miscommunications and make the process transparent and thorough. Having the same office hours as the rest of the company also increases efficiency and avoids wasting time.

No Re-Introduction

Having an in-house team means you only have to go over your priorities and values at once, well, per hire, as they will stay with you long term. You don’t need to ice break again, or go through every past project for them to understand your future goals, your current goals, or your past successes. It’s also easier to mix and match tasks as they are more familiar with your company’s needs.

Security

The top concern that all companies have with third parties is security of information. With an in-house team, you know that there is less chance the information is leaking outside of the company. You have more control over what your employees do than IT experts thousands and thousands of miles away. You can also run a background check before every hire, which reduces the chance of information leakage. This is vital especially if your company relies heavily on being the first in the market to succeed.

Cons of Having an In-house Software Development Team

Cons of Having an In-house Software Development Team

High Costs

The main reason why people are turning away from having an in-house development team is because of costs. Especially for the IT industry, experts in the field can cost up to 10 times more compared to hiring an outsourcing team. You also have to consider the cost of office space, taxes, software, hardware, benefits, and more. The company also has to provide training for each employee, as well as making sure that the employee fits in with the culture and is comfortable with the company.

Turnover and Retention

Yes, HR’s nightmare: Turnover and Retention. Since a lot of software experts like to experiment and try new things, the turnover rate is quite high compared to many other professions. This doesn’t help with the fact that a talented software expert is compared to a gold jar and is also sought after by multiple companies. This brings up the time and costs for re-hiring, re-training, and lower efficiency and sometimes, pause of a project.

Limited Talent Pool

If you are located in a high-tech country, the chances are, you are competing with thousands of other companies for human resources. This might be a losing battle, as the costs raise higher and higher for better quality hires. You need to look elsewhere, but where?

Offshore Software Development

On the other hand, offshore software development means that you have an offshore team, most of the time, in another country, to handle all your software needs. When the concept just came out, many people questioned it, but now, it has become an unspoken rule of success. Most offshore projects come out successfully which clear off all previous doubts about offshore equals less quality, or cutting costs and cutting quality

As technology continuously becomes the focus of all trends and developments, offshore software development is shifting from an option to a must. Now decision makers are forced to make a decision that will increase their company’s growth as competitors are switching to offshore software development, and they will fall behind if they are not making the right decision.

Pros of Having an Offshore Software Development Team

Pros of Having an Offshore Software Development Team

Cost flexibility

By hiring experts from another country that usually has lower labor costs, your company can cut down on costs. This does not mean you are underpaying your employees. Some people misunderstand how offshoring works. You are actually paying the right salary, or even better than their normal salary - their labor costs are just much cheaper due to being a different country. This does not affect their quality of life at all. You also should consider other costs related to hiring such as rent, training, rehiring, benefits, etc.

Huge Talent Pool

Outsourcing your software needs means you can reach onto another part of the world, hence, increasing your talent pool. Most of the top offshore software development countries have a high concentration of IT experts, and they are equally skilled and trained compared to any other IT expert, if not more. You also don’t have to deal with any of the HR hassles - your third party partner can do all that for you.

Scalability

Are you trying to hire a team for just one project? You don’t have to worry about the staff after the project is over. If there is a need to expand the size of the team mid-way, that is also not a problem. Having an offshore software development team gets rid of all your scaling troubles, and gives you the time to focus on what you need the most: strategy and goals for your business.

Decrease Time-to-market

Having an offshore software development team means you cut down on hiring and training time, and decrease your time-to-market. In a world where being fast to adapt to the trends is important and vital to success, this is a must for staying competitive. Your offshore team can also work around the clock to fulfill all the requirements and push your product to market early. The team size can also be adjusted depending on your goal and time limit for the project.

Cons of Having an Offshore Software Development Team

Cons of Having an Offshore Software Development Team

Security Risks

You may not feel well-protected as the offshore team might not be affected by security risks as much as you do. Yes they might lose reputation and a lot of money, but the impact will heavily affect your company compared to theirs. You need to have a lot of trust going on between your company and the vendor, and an NDA is needed before starting any project.

Communication Gap

You probably don’t work in the same time zone, and you might have daily meetings, but are they enough? Communication is also one of the top concerns when it comes to outsourcing, and it is justified. Working in the same office doesn’t even stop miscommunications, so imagine working with someone from the other side of the world. You probably only have a few hours of working hours collapsing, and you need to communicate everything properly in those few hours. If there is any problem, it will take awhile to solve and alert both sides.

Quality Management

Since most vendors have several projects going on at once, it is harder for them to concentrate on your project nor give it the highest priority. You might be afraid of your vendor cutting corners, or not keeping up to their end of the deals. That is why companies need constant communication with their vendor and daily report on all on-going tasks.

So, In-house or Offshore?

In-house Vs. Offshore Software Development - Image 2

This question should be answered by you and no one else. Do you think your business would benefit more from having an in-house team, or an offshore center? Do the benefits overweigh the risks?

To make sure you can get the best results for your project if you decide to offshore, make sure to do a proper background check on all your potential vendors, and have a face-to-face meeting with each and everyone of them. If possible, contact their old clients for a testimony. This might not reduce the risk to zero, but it’s worth a try.

If you have any other questions regarding offshore software development, the experts at Orient Software are always ready to answer all your doubts. Send us a quote and get a reply within 1 working day. With 15 years in the market, we can guarantee all your software needs.

Topics: Software Outsourcing