A Comparative Analysis of In-house Vs Outsourced Product Development

Recent globalization and technological advances have made it easier than ever for businesses to connect and work together. In addition, a growing number of companies are becoming more specialized in the attempt to carve out their niche and distinguish themselves in a crowded marketplace.

As a result, IT outsourcing, which is already a frequent choice for many organizations, is even more popular than in the past. According to a 2015 report from intelligence firm Research and Markets, the IT outsourcing market will grow worldwide by an average of 5.84 percent every year.
Some of the top reasons startups consider using outsourcing include:

  • The high cost of experienced in-house developers
  • Tough project schedules
  • Lack of domain knowledge
  • Use of technically complicated software systems

While there are clear benefits (and challenges) of outsourcing, you’ll need to decide on your own whether using in-house or outsourced developers is the right option for your startup. Here’s a comparative analysis of the two development practices.

The Benefits of In-House and Outsourced Product Development

In-House Product Development

  • Stability: Maintaining an in-house team means your software development projects will probably be more stable. In-house developers are much less likely to quit on you halfway through the project or to misinterpret a critical project requirement.
  • Reliability: Building an in-house team means you can hire and train employees to fit your specific business needs over time. This can pay dividends in the long run in terms of better product quality.
  • Control: Doing development in-house gives you complete oversight and control of how the project is conducted. You can specify everything from the programming languages and libraries used to the type of software development methodology.
  • Faster resolution: Because developers and “clients” are in the same office or company, it’s easier to be on the same page. This means that the turnaround time from identifying to resolving an issue is typically much faster.

Outsourced Product Development

  • Lower costs: Because you don’t have to pay full-time wages to outsourced developers, the cost of outsourcing a project is generally lower than the cost of developing that same project in-house.
  • Domain expertise: Software development grows more complicated every year as new languages, ideas and frameworks emerge. Outsourcing allows you to contract with IT professionals to get exactly the knowledge and expertise you need.
  • Less burden: Using outsourced talent for areas that you don’t know well frees up time and effort for your in-house team to concentrate on their own core competencies.
  • Scalability: There’s no limit (except your budget) to the number of outsourcing teams you can work with. For example, if you need to speed up the pace of the project, you can use another outsourcing company to help with some of the work.

The Challenges of In-House and Outsourced Product Development

In-House Product Development

  • Larger investment: Doing development in-house requires you to have up-to-date software and hardware, so you’ll have to make technology purchases on a regular basis.
  • Greater cost: In-house developers are full-time employees who need you to provide them with salaries and benefits. If you require specialized knowledge from domain experts, you’ll have to pay a high price to bring them on your team.
  • Slower development: Because your in-house team will remain fairly constant throughout the project, you’re stuck with the developers you already have. This can be a problem if you begin to fall behind on your milestones.

Outsourced Product Development

  • Cultural issues: From language barriers to different time zones and professional attitudes, working with an outsourced development team can create a number of obstacles to optimal collaboration.
  • Privacy: Hiring outsourced developers means that you may have to place your confidential data in the hands of a third party, which can present legal or regulatory issues.
  • Risk: Working with an outsourced development team, especially one you don’t know well, always entails a greater amount of risk; missed deadlines and poor-quality work are more likely to happen.
  • Dependence: If you can’t perform tasks like support and maintenance yourself, you’re forced to be dependent on the outsourcing organization to provide these services. This can be an issue if the team is no longer willing or able to do so, and you’ll have to scramble for other options.

Comparison of In-House and Outsourced Development

  • Resource Quality: The winner here depends on your objectives. Outsourcing can help you work with domain experts not available within your organization, but in-house development will build a stronger long-term internal team.
  • Cost Benefit: Outsourcing probably has the slight edge here, depending on which companies you work with. In many cases, the product can be built for significantly less money with a quality that’s on par with in-house development.
  • Time: As previously mentioned, outsourcing can save on time if you contract with multiple companies to speed up the process. However, it also introduces the possibility of delays.
  • Final Product Quality: In most cases, in-house development results in a higher product quality because you have complete visibility and control over the project from beginning to end.


Again, it’s important to emphasize that there’s no one right answer when it comes to in-house vs. outsourced app development. If your startup is in the early stages, for example, then you may prefer to outsource because your technical team isn’t yet as strong as you would like. If you’re in the growth stage, on the other hand, then you may want to build your team for in-house development. Making the right choice for your startup will require a careful and honest assessment of your business needs and objectives.