In-House Developers vs. Outsourcing: Making the Right Choice

When deciding on how to develop your project, there are generally three approaches to consider:

  1. Building and expanding an in-house development team.
  2. Outsourcing the entire development process to a software development company.
  3. Combining both approaches to expedite the project or introduce new elements.

Inhouse software development vs outsourcing? The choice largely depends on the specifics of your project, its location, and your objectives.

Sometimes, forming an in-house team is the preferable option, and that’s perfectly valid. In other scenarios, outsourcing can effectively address numerous challenges.

Let’s delve into critical aspects of this decision-making process, presenting different perspectives and key considerations for each. By the end of each section, you’ll find summary points and a suggested winner for that category. Reflect on each aspect in relation to your project.

Time to Recruit

Several studies highlight that recruiting a new developer can be time-consuming and costly.

Is it then worthwhile to hire a new employee? Looking into the details:

  1. A DevSkiller study indicates it takes about 43 days to fill a position in the U.S., on average.
  2. The Sparks Group (2018, U.S.) found it takes approximately 51 days to fill an IT role, requiring 24 qualified candidates and 15 interviews per hire.
  3. The Society for Human Resource Management (2016) notes the global average time to fill any position is 42 days, with engineering roles taking an average of 59 days.
  4. Statista’s March 2019 research aligns with these findings, reporting an average of 42 days to fill an IT industry position globally.

Each of these points offers insight into the recruitment timeline, crucial for deciding between in-house and outsourcing options.

Recruitment Expenses for New Employees

The financial aspect of hiring new employees is significant. Referring to Glassdoor’s analysis, the average cost for a company in the United States to recruit a new employee is around $4,000. The Human Capital Benchmarking Report echoes this, citing an average cost-per-hire of $4,129 in the U.S.

 

These recruitment costs encompass various factors:

  • Expenses related to the HR team, both external and internal, including costs associated with conducting interviews and managing the recruitment process.
  • Fees for job boards and other recruitment platforms.
  • Costs involved in training and onboarding new staff.

The State of Software Development 2020 report highlights that finding and hiring talent is the second-largest challenge faced by managers in the sector. This difficulty in sourcing skilled workforce has been a persistent issue across the industry for several years.

Outsourcing Option

Determining how long it takes to find a suitable outsourcing provider can vary widely.

Typically, companies initiate the process by identifying a handful of top candidates. The selection phase usually involves several discussions with the most promising options. If there’s a strong drive to move quickly, this process could take as little as a week, though it often spans several weeks due to the significance of the decision.

The primary investment in seeking an outsourcing provider is time, dedicated to research and meetings. Unlike in-house recruitment, there are no direct costs associated with workplace integration or training. However, the expense of transferring knowledge should be considered.

When external developers are brought in, there’s a need for a period of knowledge transfer before they can contribute effectively. This transition cost typically amounts to about 2-3% of the total project cost, a factor that’s relevant to both outsourcing and in-house hiring.

Overall, outsourcing tends https://www.sombrainc.com/blog/outsourcing-models-types to allow for a faster project start and less upfront expenditure compared to the process of hiring and integrating new in-house staff.

Flexibility and Speed: In-House Development vs. Outsourcing

Initiating a new project can be challenging with an in-house team, especially if they are already committed to other tasks for the upcoming months.

Furthermore, the adaptability of an in-house team is somewhat restricted. Expanding the team size requires time for recruitment and onboarding. Conversely, downsizing an in-house team can be a tough process, often involving the difficult decision to let go of colleagues.

Key takeaway: The flexibility and speed of starting development with an in-house team are inherently limited.

On the other hand, with outsourcing, once you’ve decided to commence development and have selected an agency, you can quickly establish a contract. The ability to scale the team up or down is more flexible, almost akin to an on-demand service.

While adjustments in team size can sometimes be immediate or take a few weeks, outsourcing is generally a quicker and more cost-effective approach.

This represents a clear advantage of outsourcing, particularly when time is of the essence and immediate project commencement is necessary. Moreover, developers are often hesitant to join short-term or unstable projects, which further complicates rapid hiring for such tasks.