Imagine this: you have an amazing idea for a new software application. It could be a small, specialized tool for business, or it could be a social media platform that attracts millions of users. Regardless of what kind of application it is, the question is: how are you going to turn your idea into reality?

You’ll need a development team, of course, but more importantly, you’ll need to decide if you’ll have your developers work in-house, or if you’ll outsource them. This decision can make all the difference in the world as to whether your idea will fail or succeed.

Unfortunately, there’s no cut-and-dried way to tell if in-house development or outsourcing is right for you. It all depends on what your objectives and your project requirements are. So let’s take a moment to lay out the advantages and disadvantages of choosing one development path or the other.

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In-House Development: Advantages and Disadvantages

With an in-house development team, you have the opportunity to maximize your software application’s value by having developers who are seamlessly integrated into your organization and can quickly translate changes in scope or strategy into software products or services that are ready to ship.

Companies such as Amazon and Salesforce have made their development teams the key to their success. Specifically, in-house development means:

A team that understands your organizational culture:

Developers who are full-time employees will be more motivated to deliver successful products and services for your organization and will more deeply understand the nuances of how your organization runs.

Direct lines of communication:

Instead of running the risk of losing vital context over email or teleconferencing, conversations with developers can be done more easily and effectively in person.

Quick adaptation to change:

Whether it's resolving bug reports or changing the direction your application is going in, in-house developers can respond swiftly and without wasting time or resources.
Of course, in-house development has its downsides, including:

High costs:

There's no hiding the fact that keeping developers on staff is expensive. Besides salaries, there are also taxes and benefits to be paid, as well as office rents, software licenses, and hardware.

High staff turnover:

Demand for software development talent is high, especially for top-level talent. So you may find employees frequently leaving for better opportunities. This means delays for your projects, as well as the time and expense needed to hire new developers.

Difficulty in acquiring talent:

Related to the above, with good developers in such high demand, you may find it hard to attract the right people for your development team. They need to have the right mix of hard and soft skills, and you need to have the budget to offer them pay at a level they'll accept. Meeting those goals may take longer than you expect.

High costs to reduce payroll:

In many countries, like Germany, Norway, or Sweden, laying off redundant employees can be costly due to legal requirements for providing notice and severance pay. In other countries, such as the United States, it is usually easier to do layoffs, but there can be complications, such as the potential for lawsuits alleging discrimination on the basis of race, gender, or some other protected category.

In short, in-house software development can give you a high-quality team that can deliver excellent results, but the cost, time of hiring and retaining talent can be a source of trouble. That’s why many organizations have turned to outsourcing to meet their development needs.

Outsourcing Development: Advantages and Disadvantages

With outsourcing, an organization turns to an external vendor (domestic or foreign) to deliver their software needs. The reduced costs and effort associated with outsourcing make it an attractive option for organizations looking for a viable software solution.

The advantages of outsourcing include:

Reduced costs:

By seeking outsourced development talent, you can take advantage of the fact that many countries have low costs of living, and thus you can hire qualified developers for less than you would pay in your own country.

Acquiring adequate talent is fast and easy:

The market for outsourced software development is vast, providing specialists in all different kinds of technologies and disciplines. You can hire an experienced team with the skill set you need in a few weeks, as opposed to the months it often takes to hire in-house talent. Moreover, by going through an external vendor, you can add or remove team members as needed, or adjust project timelines as needed, and pay only for the services you use.

Access to expertise carriers:

Usually, outsourcing vendors have some relevant expertise. For example, if you would like to develop a mobile app for a healthcare project, it would be good to find a company with experience in that sector.

Developed R&D processes:

Outsourcing companies have experience in the production process and a record for delivering results. This helps in avoiding mistakes.

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The disadvantages of outsourcing include:

Security risks:

Outsourcing developments means giving up total control over the development process and sharing it with a vendor. If you choose the wrong vendor or fail to negotiate adequate protections for your intellectual property, you run the risk of falling victim to industrial espionage. To avoid this, you have to sign an NDA with the vendor and gather as much information as you can from the Internet about the company and its founders. Also, a lot of security issues can be avoided by investing in the network and security training of your employees.

Communications gap:

Depending on where your vendor is located, you run into difficulties communicating with your development team. You may have to deal with differences in time zones or overcome language barriers. These can be mitigated, however, by scheduling meetings or using tools like email or instant messaging to conduct business.

Besides the advantages and disadvantages of outsourcing, there are two flavors of outsourcing model you should be aware of: to build a product from scratch, or augment your existing staff with remote workers.

Get inspired by our article “Take Advantage of the Dedicated Development Team Model“.

Vendor Builds Product from Scratch

Having a vendor build a software product from scratch is what many people envision when they think of outsourcing. With this type of vendor, you will contact to have a technical solution provided to you, after agreeing to requirements, a budget, and timelines for delivery. The vendor hires the developers, who then work on your project, as well as whatever other projects the vendor may be contracted to deliver.

Team Augmentation

Team augmentation is a kind of hybrid approach, combining elements of outsourcing and in-house development. If you have an existing team of developers on staff but need additional talent, you can use team augmentation to get the talent you need quickly, while letting the vendor handle the administrative details. You can choose the developers who are right for your project, knowing that they will be solely dedicated to your project for as long as you need them to be. The range of available talent is even bigger with team augmentation than with traditional outsourcing. At the same time, you can benefit from the advantages of having in-house developers, as mentioned above, without having to commit as many resources or deal with potential talent shortages in your area.


As you can see, you have many things to consider when hiring a software development team. Either approach — in-house or outsourced — can work, depending on your needs and your constraints. And with team augmentation, your range of options expands even further. Whatever you choose, remember that what matters most is that your software idea gets delivered to the market; so follow whatever path you think will make that a reality.

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