Outsourcing vs Insourcing Software Development

It’s hard to imagine now in the era of social media and messaging platforms, where even email is old-school, but there was a time when the mailroom was essential for business communication. So imagine what kind of raised eyebrows, Peter Dunker’s article titled ‘sell the mailroom’ got when it was published in the WSJ back on the 25th of July, 1989. At the time, most private mailrooms were owned by the company or the building, who used them. Drucker’s suggestion of selling it and using a third party service was probably one of the few allusions to outsourcing at the time.


Gradually, outsourcing became the new normal, but in recent times, we have also seen how more and more organisations are insourcing more and more functions. Let’s get an overview of both and see what fits best for your organisation


Outsourcing Software Development

We’ve witnessed how outsourcing moved from back-office and admin functions, to customer service, and on to the widespread IT outsourcing in software development that we know of today. Outsourcing has not just become the new-normal but is now a major industry in its own right, especially within IT.


Outsourcing your software development project(s) is associated with both increases and decreases of risk to your organisation. If a resource doesn’t meet your expectations, you are finished with them once the contract is up. That said, it’s if you do have issues with the contractors during the project and want to end it. The contract you signed with the other party will prevent you from getting up and leave, at a whim. Breaking a contract early can also be very messy, leading to financial and legal penalties, not to mention the risk of getting yourself a bad name.


Stratistics MRC estimates that the global IT outsourcing market will exceed $481 billion by 2022, with a compounded annual growth rate (CAGR) of 6.2% p.a. An area of international outsourcing that is growing fast is ‘near-shoring’. This is where a company outsources to another country in the same region. For American and Candian companies, this is would be Mexico or other countries nearby. For Europeans, due to inner market offered by the E.U, this is also very common, especially between Western Europe and the former Eastern Bloc. This form of overseas outsourcing has many advantages over longer distance outsourcing solutions.




Near-shoring provides an organisation with more options to choose from when outsourcing, often at competitive rates compared to outsourcing in their home country, without the risks and costs of intercontinental outsourcing, where large differences in time zones make it difficult to collaborate. While outsourcing is growing, some sectors like finance are bucking the trend. These firms instead often look inwards for their recruitment drives, which is known as traditional in-house recruitment.


However, it’s not just the finance companies who should weigh up the pros and cons of insourcing and outsourcing. Every company should review both options if they find themselves looking for a new team to work on a new project. This is especially the case if software plays some role in their business, as this area presents some specific challenges. It really depends on your company, if you can handle these challenges or if a third party is better equipped, so let’s look at how insourcing software development works.


Insourcing Software Development

Having an in-house team of software developers allows you to have the team right next to the rest of the group. Any time a business need arises, you can simply swing over to the software development team instead of having to contact a third-party development team. The fact that the in-house group is on-site also makes it easier to be in alignment with company goals.


In addition, this means the team creating or fixing applications for your company are apart of your company. You don’t have the same worries about security breaches or the team not having your goals in mind. The lack of a third party agenda, should, in theory, make everything run smoother.


However, that does not mean you should start the search for building a new software development team, just yet. To make it worthwhile, you need people you trust and who are motivated to work hard for you. An unproductive team is worse than no team at all.


If you want to keep those loyalties and motivation going in your team, you have to make sure they are happy, especially regarding pay. If you have a larger organisation, you will have larger teams, which means more paycheques to issue. So beware, your dream tech team can get very expensive, very fast. It doesn’t stop there, just by having a team who seems to gel well at the beginning, doesn’t mean they actually will. So be aware, there is an inherited risk by hiring actual staff, with contracts. While you can fire them, you will need to find a replacement, and replacing staff is expensive and time-consuming.


So which one to choose?

The pros and cons of outsourcing vs insourcing software development teams are varied and really depend on each business. For the more risk-averse, using a third party software development house are a good choice. If it doesn’t work out, you’re only stuck with them for one project.


However, a third party will rarely work as close to you and your company as your own in-house team will. Additionally, things like hidden charges, creative differences and other such risks might deter companies from using a third-party software development house.




However, doing plenty of research and choosing the right firm can mitigate these risks. So here are questions to ask before outsourcing to a potential development house you consider working with:

  • Have they implemented similar projects in the past?
  • Who are their current and former clients?
  • Is the firm held in high esteem in their respective markets?
  • Will they assign a dedicated team to manage/implement the project?
  • What is a typical timeline for them?
  • Are they personable and accessible?


If you are not sure, then ask around and check their website for ‘Cases’ about previous work. Many companies, including us at Wiredelta offer this, and you shouldn’t settle for a partner that cannot show strong cases for working with them.


Don’t be afraid to check reviews of the company and compare it to competitors. Additionally, if you contact them, don’t be shy to ask plenty of questions. In addition, you need to be aware and accept limitations placed on you by your budget or technical restrictions.



No doubt, it can be tricky to try and choose the right solution for your company and what it needs. Things to consider include your company size, budget and the average number of projects that require software experts. There no point hiring a whole team for a small number of projects for instance. However, if you are constantly in need of developers, making new contracts with third parties all the time will add up in cost and time.


However, if you decide to go with using a software development house, you came to the right place. Wiredelta is more than your news source for all things tech but is also a web and software development house. Check out our website to find out what we can do for you.

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