To Out-Source or To Develop Software In-House

Overview

CTOs of companies are often faced with the dilemma of this moot question! Is it a better option to develop software in-house or get the development outsourced to a Software Services Vendor?

The answer nevertheless is not a straight one. It finally trickles down to several factors – The priorities of the company, the skill set and competencies of resources required and available within, the time to market, scalability, intellectual property i.e. IP ownership, and needless to say, costs. Let us discuss these factors in detail and do a cost-benefit analysis of both business strategies, to help CTOs make a well-informed, balanced, and correct decision.

The global outsourcing market size has seen a steady increase from 2000 to 2019. In 2019, according to estimates, the global outsourcing market amounted to 92.5 billion U.S. dollars. India, due to its highly skilled and reliable manpower is the Global Outsourcing hub since the Y2K era.  Outsourcing is an attractive proposition for any company eyeing cost savings and scalability of resources with diverse skill sets – a key for Agile Software development. Also, the transition from in-house DevOps to an external Software vendor, being a one-time activity, can be easily achieved with minimal ‘transition risk’ methodologies like Business and Concept familiarization, knowledge transfer, granting infrastructure, and tools access, etc. However, it is an extremely critical step to ensure successful project delivery.

USE CASE - IN-HOUSE APPLICATION DEVELOPMENT

Key Benefits

 

Requirements defined and understood better.

The need for the app or product is conceptualized, originated, and identified by the company. So, the company knows and is in a better position to articulate and define the exact requirements. This is key to kick-starting any Software development project.

 

Resource Commitment and Cultural fit

Typically, there are high levels of commitment, integration, interaction, and engagement of resources in-house. Consequently, there is a better cultural fit of resources in-house than contractors of an outsourced agency. This augurs well for better co-ordination and seamless Software App development.

 

Effective, Efficient, and Fluid Communication.

Typically communication is the cornerstone of any process, especially software development. Here, in-house development undoubtedly scores better over outsourcing.

 

Agile  Software  Development.

Software or apps requiring swift and repeated refactoring or re-build are better suited for in-house development since in-house resources can be easily molded or swapped to increase software development agility

Team Integration.

Team synergies and bonding between members of in-house Teams are generally higher, with both formal meetings & informal social interaction. In comparison, integrating external software vendors is a constant challenge, since in-house resources have a sense of belonging to the company and can be trained to focus on common company goals. This can be effectively tapped and leveraged for quality and timely project delivery.

Drawbacks

 

Team Building costs.

Building competent teams from scratch often have a lead time of 3 to 6 months. While their salaries may appear cheaper than contractor charges, there are several hidden costs including overheads relating to Infrastructure, HR, Insurance, termination, and end-of-services benefits. These substantially add to the ‘Total cost of software ownership’ for the company, and are often under-estimated.

 

Cost Escalation.

Project cost escalation is a common drawback in in-house development. This could arise due to unforeseen and hidden costs such as hiring employees with a mismatched skillset, improper software tool selection, technology obsolescence, etc. which may not be anticipated initially.

 

Lack of IT Expertise or Skillset.

Software development projects are highly dependent on resources with deep expertise, competencies, and the right skill set – which may not be available in-house. This is often the reason for unsuccessful or delayed projects.

 

Higher Staff Turnover.

Software Projects are affected by high levels of Staff Turnover, due to work dissatisfaction, poor morale, and motivation, besides attractive remuneration available elsewhere. This consequently has a major negative impact on project delivery.

Scalability challenges in the hiring process.

A lot of times it has been found that the Human Resource team of the company is not able to scale up the hiring and resourcing needs of in-house development. Reasons could vary from lack of availability of unique skill sets, lack of employability of prospective candidates, to budgetary constraints. 

Time to Market.

Easy as it may sound, ‘Just in Time’ is the most challenging mantra to follow. Swift and timely deployment of the software app or product gives the company an edge over competitors and leads to greater customer conversion and ‘early-bird’ adoptions. Conversely, any delays in the quick turnaround could potentially result in loss of customers and resultant revenue too!  This is the most critical component to measure project success or failure.

Conclusion

In-house development can be adopted when there is greater scalability of skilled resources, the flexibility of time to market, and lower cost constraints. 

USE CASE - OUTSOURCING APPLICATION DEVELOPMENT

Key Benefits

 

IT Expertise with the right Skillset.

An external vendor often has deep IT expertise, competencies, coupled with the right skill set, since they are expected to be specialist software experts, whose immense and in-depth knowledge is their biggest asset.

 

Scalable Staff Augmentation.

An outsourced software vendor has the flexibility to ramp up, deploy, and ramp down team size rapidly. This especially helps counter unanticipated Staff Turnover and ensures adequate resource capacity and scalability at all times, during the project.

Reduced Time to Market.

This is one of the best rewards of outsourcing app development, which if effectively leveraged, ensures quicker project turnaround, and fits neatly into a ‘Just in Time’ model. This propels sales, increases profitability, and ensures immense customer satisfaction, conversion, and retention, besides keeping competitors at bay. Outsourcing can surely provide this ‘early-bird’ advantage.

Cost Reduction.

Cost Control & reduction is one area where outsourcing can truly contribute to, without compromising on quality, since the project is in the safe hands of IT experts. The HR Team doesn’t have to spend valuable effort, time, and money in lengthy hiring & training processes, slack management, and skill upgrades for resources. This results in lower investment and better ROI for projects.

Improved Business Focus.

Software and app development is a highly dynamic field. AI/ML and chatbots have metamorphosized the entire Software landscape. These, while necessary, distort and divert the focus from the core business of most companies. Outsourcing is truly a ‘game-changer’ which reinstates ‘Business Focus’ with the companies no longer required to worry about project resourcing, and instead concentrate on their core business and competence.

Conclusion

While at the outset outsourcing may not appear to be a natural choice, CTOs undoubtedly prefer it, due to its inherent advantages of resource and skill set optimization, flexibility, scalability, and cost savings. 

SAMPLE SCENARIOS FOR OUTSOURCING APPLICATION DEVELOPMENT

As discussed earlier, a cost-benefit analysis will provide the right answers to in-house v/s outsourcing software and app development.

Now, let us examine some sample scenarios most suitable for outsourcing.

  • During the initial conceptualization process of product e.g. ‘Product development as a service’ requirements.
  •  When the reduced time to market is a key influencing factor e.g. ‘Proof of Concept as a service’ requirement.
  • When the required skillsets are not available in-house.
  • When Cost constraints pose a major challenge.

OTHER FACTORS FOR CONSIDERATION

IP - Intellectual Property Ownership

This ultimate ownership of IP can sometimes become a pain point between the outsourcing company and external software vendor. Appropriate clarity and legal documentation could address this issue early on, and facilitate a smooth outcome, avoiding unnecessary future disputes. This should preferably be done, before project commencement.

Time Zone Differences

Times zones overlap or otherwise can be beneficial or detrimental to project progress and timely delivery. In these days of 24x7x365 development and maintenance mandates, these Time Zone differences are sometimes extremely critical to project success or failure

OUTSOURCING TO HYBROWLABS

Why Hybrowlabs?

 

 

Have you or your company been constantly challenged with skillset gaps, higher app development, and maintenance costs or lack of internal IT Expertise?

 

Has your time to market suffered, leading to customer and business losses?

Look no further. 

 

Make Hybrowlabs your trusted partner for all your software and app development needs!

The Bleeding-Edge Hybrowlabs advantage!

Established in Pune, India in 2013 by Technocrat Mr. Chinmay Kulkarni is a customer-centric software and applications development company that delivers the highest quality of software project deliverables at competitive rates with both Fixed bid and Time & Material Models suited and customized to your unique situation and requirements. We have deep expertise in Software development tools like Java, Python, etc. besides competencies in database design for Oracle, NoSQL, Cloud computing, AI/ ML, Data Mining, Deep Learning, and other cutting-edge technologies.

PEOPLE, PROCESSES, QUALITY AND COST REDUCTION

Hybrowlabs is an ‘Equal Opportunity Employer’ with stringent employee selection criteria & processes and has a talent pool of highly motivated and committed software professionals. They undergo rigorous technical & non-technical training and cultural sensitization, before project deployment. Project Leadership, Ownership, and Employee growth are highly encouraged with continuous learning, controlled experimentation, R&D, role rotation, challenges, celebrations, etc. Software development methodologies and QA/QC processes are perfected, deployed, and leveraged to roll out a bug-free end-user experience. This emphasis on Quality also results in lower software maintenance costs and reduced pain points. This is the primary reason for Hybrowlab’s satisfied and growing global customer base.

Be our esteemed customer and enjoy the true benefits of outsourcing!

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