Outsourcing or In-house Product Development: What’s Best for Your Business?

“Should I pick in-house development or outsource product development?”

It is a dilemma that practically every digital business founder faces.

That’s because, despite the fact that IT outsourcing is expected to rise by $98 billion by 2024, there’s no definitive solution to the question.

It is indisputable that more businesses are outsourcing their IT requirements to Ukraine, Poland, and Romania. Ukraine’s IT service sector rose up to be worth $5.7 billion in 2020, more than double of what it was in 2015.

However, just because the IT sourcing market is booming doesn’t imply it’s the best option for you. There are numerous aspects to consider before making a decision which starts with choosing an end-to-end software development company to guide you.

Choosing one over the other will affect your product, organisation, cost, and profitability in the long run. In this article, we’ll throw some light on in-house development vs outsourcing and hopefully help you make an informed decision.

Let’s start with the advantages that both the processes possess and then we will move on to their limitations.

Advantages of Outsourcing and In-house Product Development

Outsource product development

There are a variety of reasons why a company would choose to outsource product design or a specific operation, job, or process. Some of the well-known advantage of outsourcing, for example, are:

• Improved focus on core business activities — Outsourcing allows your company to concentrate on its strengths, allowing your employees to focus on their primary responsibilities and future plan.
• Increased efficiency — Choosing an outsourcing firm that specialises in the process or service you need will help you achieve a more productive, efficient, and frequently higher-quality service.
• Controlled costs — Outsourcing can help you free up funds to invest in other areas of your organisation by lowering costs.
• Increased reach — Outsourcing can provide you with access to capabilities and facilities that would otherwise be unavailable or too expensive.
• Greater competitive advantage — Outsourcing can assist you in leveraging your expertise and talents, as well as your entire supply chain.

Outsourcing can also help your company become more flexible and adaptable, allowing it to react to changing market conditions and problems while saving money and improving service levels.

For example, companies like Google, Basecamp, and Alibaba among others are using an outsource development process.

Moving forward towards in-house product development and what the in-house process has to offer.

In-house development

• Full control over the team — With physical presence, it will be easier for you to monitor work progress and oversee project implementation. You can also train team members in whichever direction you wish, as long as it is consistent with your company’s philosophy.
• Better communication — Face-to-face communication with developers who are working directly with you is far less burdensome and more approachable than outsourcing. This allows you to make changes to the project more quickly, avoid incomprehension-related mistakes, and accelerate project implementation.
• A better understanding of the company’s values ​​- As regular employees, in-house developers are more aware of the company’s needs and values, as well as culturally fit. They also take a new approach to work and respond more quickly as a result of a greater commitment to the project and better communication among all project participants.
• Well-matched team members — When compared to an external contractor, an internal team is frequently more involved. This is due to the fact that such a group is working on behalf of the company to which they belong. As a result, candidate selection takes longer and may lengthen the recruitment process, but it is more thorough and rigorous.

With limited boundaries, access to face-to-face communications, and an understanding of what should be done, in-house development is the easy choice.

For example, companies like Amazon, Salesforce, and Paypal among others are using in-house development process.

Let’s see what are the limitations that sets each of the proces apart.

Drawbacks of Outsourcing and In-house Product Development

Outsource development

Outsourcing is the process of giving a third party direct control over a corporate function or process. As a result, it entails some dangers. Here are some challenges you might face when outsourcing.

• Delivery timeline — sometimes things may fall behind schedule
• Safety and security — the confidentiality might be jeopardised
• Lack of flexibility — integrating change can be a task as the contract is rigid
• Management difficulties — if things change at the outsourcing firm then it could create friction
• Instability — you get equally affected if the outsourcing company faces a financial low due to any reason

In-house development

In spite of the significant advantages, there are some disadvantages too associated with in-house development.

• Huge price — It necessitates a considerable initial investment, particularly in small and large-scale enterprises. If your procedures are poorly organised, you’ll have to spend money even on inactivity. The approach, on the other hand, works effectively in middle-scale projects where the result is a valued resource.
• Staff dismissal — Employee departure is one of the most significant losses in in-house software development, as employees can leave after the company has invested considerable resources in their training. Bringing a fresh member onboard will require reinvesting the time & effort in them.
• Employee departure is one of the most significant hazards in in-house software development. Companies can leave after investing considerable resources in their adaptation, and you’ll need to reinvest in new team members.
• The lack of expertise in different areas — Another common issue with an in-house applicant pool is the lack of diversity. To apply specific skills, you’ll need to hire a specific candidate, which means you’ll have to go through the hiring process again. In the case of project growth, the scenario is similar. You will be responsible for paying insurance, premises, equipment, holidays, and other expenses if the employee works full-time in-house.

In-House + Outsource Product Design: Get The Best of Both Worlds

It’s true that deciding between choosing in-house or implementing outsource product development is difficult. You can, however, find a happy medium by combining both alternatives. You can keep a skeleton crew to handle the project’s fundamental dependencies while outsourcing features that require specialised knowledge.

This allows the vendor to tap into a bigger pool of talent without taking on too many risks. Furthermore, you can reduce fixed expenses and delegate resources with greater flexibility. Choosing the right custom software development company as a partner is crucial when combining in-house and outsource product development.

Summarizing: Looking for a Digital Solutions Partner?

Most businesses design and develop their own products in-house. Market research, conceptual design, product engineering, prototyping, and other services were on the table. They had to either employ workers with experience in each of these critical areas or make do with the people already on the payroll to do all of this. This does not include the additional costs and time required to instal and maintain machines or other tools.

In the current times, outsource product development for a mobile app sorts most of the above issues. The process of contracting a third party to assist firms in developing new goods is known as outsourced product development.

It might range from fine-tuning the initial product concept or design to putting the completed product on the market. Each product development company has its own set of services and expertise to assist clients transform their ideas into reality.

Now that outsourcing is more accessible and dependable, every business owner and innovator should think about employing it instead of an in-house approach. To grasp why outsourcing product development is often preferable to designing everything in-house, consider the several benefits of outsourcing.