secureOutsourcing Vs. Insourcing: What’s the Difference?

Outsourcing Vs. Insourcing: What’s the Difference?

6 Oct · 5 min read

Outsourcing Vs. Insourcing: What’s the Difference?

Every company has several roles that can take place in either of the two ways: Insourcing and Outsourcing. Software development determines 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?

In every business, there are both core and non-core jobs involved.  

For some organizations, software development works between core and non-core, and in this way, they outsource a portion of the work and oversee the rest in-house. Programming and IT are fundamental for the smooth running of multiple businesses.  

In more modest organizations, this crossover approach may not be affordable. Hence, they either outsource the whole thing or look for cheaper options.  

What all will it cost?

Since the time outsourcing came into the picture, it has always been about cost. Keeping it in-house can incur the following:  

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

Additionally, the company has to take care of the cost of recruitment, training, bonuses, and expenses. If you are struggling to hire for a role, the chances are high that your competitors are looking to hire for the same skill set as you. It results in increased salaries and other benefits. 

When you outsource, you agree on a fixed, hourly, or daily rate of the contract with the potential adjustments depending on flexible elements of the project/contract. The firm or individual you have partnered with is managing their costs (such as office overheads and pension contributions, etc.) as a percentage of the payment agreed between both parties. 

Why is delivery important?

When it comes to hiring developers, anyone who has been recruited for software roles is very much aware of the competitive landscape. Talent does not come cheap neither does experience. You are competing against big tech firms, other corporates, high-growth start-ups, and development firms. Your company can also be restricted by geography. Most of the new hires come from a commutable distance – in most cases, up to an hour. 

Outsourcing software development allows you to tap into global tech talent. The talent that wouldn’t find your company ordinarily will be suddenly accessible and ready to work with you. The beauty of outsourcing is that you aren’t waiting months for deciding to go ahead with the project and having the team in place to deliver the work. In some cases, you can assemble a skilled team ready to work on a project within two weeks. 

It is important to not waste your time, and keep your costs lower with outsourcing. Outsourcing software development projects can help strengthen other core processes. When you outsource software development to other companies, you avoid overwhelming your in-house developers with work that doesn’t match their skill set further allowing them to focus more on strategic goals. 

What are the skills required?

Putting the right team together depends on the technology stack already in use. Right from how the new application is going to interact and integrate with the stack, or the skills you’ve already got on board. Outsourcing software development is the right solution when you need access to rare technologies. There are over 2000 different programming languages out there and, you can’t hire engineers who know all of them in-house. 

If you are going to outsource software development work to a technology team, you need to start with a clear understanding of the scope and the skills required. Developing the scope must involve the input – if not the direction of – an internal tech leader, who can scope out of the project and bring insights that translates business goals into technology outputs. With these 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?

While outsourcing software development can offer many benefits for a company, it also involves some additional risks that have to be considered. Managing risk is something companies are increasingly aware of when outsourcing. 

Insourcing means that you retain control. You’ve got more control over the quality, over the transfer and movement of data, and over ensuring that compliance standards are maintained. It doesn’t mean that things can’t go wrong.  

Outsourcing is better when you have closely vetted an external provider and are confident that they will deliver the work needed without compromising data security and compliance. If the work being delivered poses little risk to data integrity and the customer experience, then, outsourcing is a sensible and cost-effective approach. 

Control vs. Innovation

Another argument for outsourcing is that external companies can solve problems more effectively. Internal teams soon get bogged down in office politics and internal processes that can slow down innovation. Neither of them is helpful when you are creating innovative software products and solutions. 

Working with external providers reduces the risks associated with internal teams. Outsourcing teams can move faster, innovate quicker, are agile, and come up with solutions those on the inside tend to miss. 

Businesses often think about outsourcing when it comes to cost savings but outsourcing can do more than just lower expenses. As your business grows, outsourcing can be a way to promote innovation, disrupt your industry, and access new skill sets that reposition your company in the market. 

While considering how outsourcing can help you grow, don’t limit yourself to looking at the cost of hiring outside contractors versus handling a task with your current staff. It's important to focus on the value a contractor’s expertise adds to your company. 

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