Pros and Cons of In-house Software Development vs Outsourcing

January 25, 2023


Tech jobs nearly doubled in the start of 2022, while the number of applicants has decreased by 25%. Along with the digital transformation and demand for data-driven business strategy, many companies have been struggling to find talents to fill their software development teams. To deal with this shortage of manpower, companies are turning to outsourcing. How does this approach affect the quality of software? If you’re wondering if outsourcing is the best path for your company, this article will discuss the pros and cons of in-house and outsourced software development. 

Pros of Software Development Outsourcing

Reduce Cost

If you live in the USA or Western Europe, the prices for developing quality software are quite high. If you're working with a software development firm, they'll bear the costs for their employees, and if you're working with a freelancer, they cover their own costs. The lower cost is probably the biggest benefit of outsourcing for most companies.

Less Effort Spent Finding, Hiring, and Managing Employees

The contractor will take care of finding the most suitable candidates, which means it will save you countless hours of creating job ads, scheduling interviews, or meeting several candidates face-to-face or via Google Meets. The hassle of hiring employees will not be your problem anymore but the only challenge there may lie in having to constantly communicate with the project manager on the side of the developer.

Quick Start of Work

Outsourced development has a larger pool of human resources and can start working immediately after they signed the contract. If you’re in a time crunch, finding an outsourced team will be faster than having in-house developed software.

Quick Access to High-Quality Talents Anywhere

If you are located in a smaller country, sometimes the whole national talent pool won’t have the exact specialist you are looking for. It can be easier to find an outsourced development team or certain specialists in another country than hiring people and having in-house developed software. Outsourced development allows you to go beyond what the market of a single location offers.

Cons of Software Development Outsourcing

Short-Term Commitment

Most outsourcing firms act like a one time vendor, meaning once the job is done and they get paid, they move on to another project. You may have to sign a new contract with the firm you outsourced to if you feel like you need to extend to get additional services. 

Communication Problems

Miscommunications can occur especially with remote working situations as you’re dealing with time differences. If your software team is working while the rest of your company is sleeping, you'll miss out on the opportunity for real-time collaboration, which can significantly slow the progress of your project. Another potential drawback is language barriers and different cultural norms that can cause confusion.

Risk of Leaking Important Data

There is always potential risk of data leakage when working with a third party, therefore it is crucial to look for reliable contractors with a good reputation and many positive reviews. One thing to remember when working with a third party is to make an NDA contract with clear rules about data confidentiality and leakage risks for outsourced development.  

Choosing the Wrong Firm

Sometimes, choosing the right IT company to outsource can be very tricky, especially if you’re outsourcing for the first time. If you are not careful enough and did not do thorough research, you may end up choosing the wrong company to handle your project. 

Pros of In-house Software Development

Internal expertise

Over the course, your team members are left to fend for themselves and, as a result, make many mistakes. At the same time, they learn from those mistakes and develop their expertise. No one knows your product better than your own team members who've been helping to build your company.

Quick Bug Fixes

The outsourced development team can be busy with another project as they might have taken on multiple projects. When you have an in-house development team, it is much easier to come running to them with the words “our site is down” and have the developers immediately get down to work. They all have a common goal, all their efforts and expertise will be directed towards the success of your project.

Transparent Communication

Your team is made up of people you've picked yourself. You're able to choose people for each position based on their skills and qualifications. Offline communication within an in-house software development team speaking your native language is simple and straightforward. 

Team Engagement

Software development requires a lot of internal team communication as it is a  very collaborative and iterative process. Your team is used to working together every day and are already accustomed to your workplace culture and procedures. In addition, corporate events, and team building improves corporate culture and team cohesion, which directly affects the mood of the teammates and their involvement in their work.

Cons of In-house Software Development


The cost of building an in-house team is high and software developers aren’t cheap. The cost of hiring your own team is often much higher than the cost of outsourcing your software development. It takes more than one good software developer to have a team. Most teams usually have at least one of these experts:

  • Android Developer
  • iOS Developer
  • Back-end Developer
  • Designer
  • Project Manager
  • Data Scientist

Hidden Costs

There are other expenses besides salaries, such as sick leaves, vacations, insurance, pension contributions, and taxes. Other than that, each employee should be given a laptop, a monitor, a desk, and a chair. Don’t forget about the office space where all of this can be comfortably placed, too. 

Staff churn

Even if you manage to put together a perfect team, there's a good chance one or more of them will leave during the project. When that happens, progress may come to a halt while you try to find replacements. This urgent hiring process is even more expensive than traditional hiring, and it will add to the cost and time it takes to complete your project.


As you can see, there are a lot of things to consider when choosing between in-house software development and outsourcing. So should you outsource or build a team of software developers in-house? In case you choose to outsource, it’s time for another difficult decision: the choice of a reliable contractor. One of the most important criteria here is the company’s expertise. Clade Technology  has extensive experience in various industries and custom software development projects. In case you want to know more about it, contact us to get a free consultation and discuss your dream project.