In-house Development vs. Software Outsourcing: Pros and Cons

When most people think of corporate outsourcing, they think of low-skill positions like call center employees. However, outsourcing involves much more than basic customer service. Even the biggest and most well-known corporations have been outsourcing software development for the past two decades. Because of the rapidly changing nature of technology, it is vital that modern management has the flexibility to aggressively pursue their next big venture without committing to a large, permanent staff of internal software developers.

However, despite the rise of software outsourcing, internal software development teams still remain essential. The goal of the modern manager is to find a balance between these two resources. Static, internal teams help ensure continuity in long-term development, establish a unique company culture, and reduce turnaround time for minor projects, while outsourced developers can help augment your staff during big projects, give management freedom to pursue new ideas, and bring a fresh perspective to your team.

What is Software Outsourcing

Software Outsourcing involves hiring one or more temporary, outside contractors to augment a company’s technology development staff. Building a new application or program from scratch involves an incredible amount of time, money, and specialized experience. Internal software developers are typically generalists, who have a serviceable amount of knowledge about most issues within the field. However, large-scale new projects often require specialized skills that are both difficult to find and only needed at key points in the development process. By using these hyper-specialized engineers only when necessary, you can use this costly resource sparingly while still adding the extra expertise your team requires.

In-House Development

An in-house technical team is a wonderful asset for companies with consistent development needs. These in-house employees typically have a wide, albeit shallow, understanding of the programming process and can help provide continuity from project to project, while also ensuring the company’s values and branding are present in each new piece of software. These software engineers are also incredibly important once after the initial product rollout since their familiarity with their company’s technology will help them address customer concerns and fix bugs quickly. However, they cannot be expected to complete complex, long-term development projects without outside expertise and additional manpower.


By far the most important benefit provided by in-house development teams is the ability to create a small, closely-knit group of employees that understand the company culture and business goals, have an in-depth knowledge of the company’s current technology, and have a professional and emotional attachment to the company and their technology’s success. Just as importantly, internal development employees help ensure that the core staff is there for the duration of a long-term development project and guarantee that companies retain institutional knowledge even as projects and contractors come and go.


Despite the importance of having a solid internal development team, these full-time employees are limited in their ability to complete innovative development work. A generalist developer is an outstanding permanent resource for a company, but new, ambitious projects require specialized knowledge that can only be found with experienced, high-cost external developers. It may cost well in excess of $150,000 a year to hire this level of specialized talent; however, these experts are usually only needed during limited steps of the development process.

In addition, the process of hiring and growing your external team is incredibly time-consuming and frustrating–with no guarantee of success. It can be incredibly frustrating to find out that the promising new hire is actually not a great fit and the hiring process must start over.

Software Outsourcing

As companies have begun to realize just how important a strong technical staff is to succeed in the modern economy, the competition for tech workers and software developers, in particular, has heated up. Many companies have begun outsourcing development to avoid competition for tech talent; however, software outsourcing comes with its own unique set of advantages and disadvantages.


Offshore software development outsourcing is one of the best ways to introduce flexibility and increased capacity into a development team without breaking the budget. Software developers located outside of the United States are typically less expensive than American employees, despite their identical skill sets and education levels. This means that a departmental budget goes much further, allowing companies to hire the most sought-after developers for a fraction of the price.

Furthermore, external staff augmentation allows companies to fill a new role immediately, rather than waiting a month and a half or more to hire and onboard a new full-time employee ( Finally, bringing in an outside pair of eyes can help expose flaws and improve the quality of a final product.


While software outsourcing services provide a range of impressive benefits for managers looking to expand their capabilities while keeping costs down, the use of outside contractors does come with some drawbacks. One of the main problems stems from a lack of long-term commitment from outside workers. If a business is starting work on a long-term development project, it is vital that they keep their team together and not lose valuable team members to other opportunities. The best way to avoid this challenge is by choosing an outsourcing company that establishes a previously agreed upon contract and offers competitive pay and benefits to its employees.

In addition, outsourced development’s main drawback is the fact that most of these companies are located across the globe in South and East Asia. This makes communication difficult since contractors are often asleep during U.S. business hours. One of the ways to solve this problem is by working with nearshore outsourcing firms. By working with software developers in the Western Hemisphere, American business owners can ensure that their entire development team is working and collaborating together at the same time.