Outsourcing Vs. Insourcing: What’s the Difference?

6 Oct · 4 min read

Outsourcing Vs. Insourcing: What’s the Difference?

Every company consists of multiple roles that can take place in either of the two ways: Insourcing and Outsourcing. Software development helps in determining whether internal skills are necessary or achievable outside the organization.  

How to decide on Outsource vs. Insource?

How does the “Core” of the business function?

Every business consists of both core and non-core jobs involved.  Software development works between core and non-core for a few organizations, and in this way, they outsource a portion of the work and oversee the rest in-house. Programming and IT are key fundamentals required for the smooth running of multiple businesses.  The crossover approach may not be affordable in modest organizations. Hence, they believe in outsourcing the whole thing or looking out for cheaper options.  

What all will it cost?

It has always been about the cost since the time outsourcing came into the picture. Keeping it in-house can result in the following:

  • Net compensation
  • Expense and other required government commitments
  • Annuity commitments
  • Office and IT costs

In addition, the corporation must cover the costs of hiring, training, bonuses, and other expenses. If you're having trouble filling a position, there are high chances that your competitors are looking for someone with the same skillset as you. As a result, salaries and other benefits are boosted.

While outsourcing the project, it is the responsibility of the partner organization to manage the overhead costs and pension contributions as a percentage of the payment agreed between both parties. 

Why is delivery important?

 The benefit of outsourcing is that you don't have to wait for months to decide on the project and have the team in place to deliver the work. In most cases, one can assemble a skilled team who can be pushed to work on a project within two weeks. 

It is important to take charge of your time and keep your costs lower with outsourcing. When you outsource software development to other companies, you avoid in-house developers with an overload of work that doesn’t match their skill set further allowing them to focus more on strategic goals. 

What are the skills required?

Outsourcing software development is a viable solution when one needs access to various technologies. If you are going to outsource software development work to a technology team, you need to have a clear vision of the scope and the skills required. Developing the scope must involve the input who can scope out of the project and gather insights that translates business goals into technology outputs. With the relevant insights, you can outsource a team that includes the most relevant and useful skills to deliver the project outputs and the required goals. 

What are the risks involved?

Outsourcing software development can be beneficial for an organization but it also involves some additional risks that have to be considered. Keeping pace with managing risk is one of the essential factors that companies are increasingly aware of while outsourcing. 

Insourcing means you’ve got more control over the quality, the transfer, and movement of data ensuring that compliance standards are equally maintained.  

Outsourcing is better when you have close reliance on an external provider and are confident that they will deliver the work when needed without compromising data security and compliance. If the work being delivered results in a risk to data integrity and the customer experience, then, outsourcing is often considered a sensible and cost-effective approach. 

Control vs. Innovation

Another important factor related to outsourcing is that external companies can solve problems more effectively. Businesses often think about outsourcing when it comes to cost savings but outsourcing can provide them more benefits than just lower expenses. The enormous growth of businesses can be a way to promote innovation, disrupt your industry, and access new skill sets that reposition your company in the market. 


To conclude, it's important to not limit yourself to the cost of hiring outside contractors while considering how outsourcing can lead you to growth, versus handling a task with your current employees. Therefore, it's also important to focus on the value that a contractor's expertise brings to your company. 

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