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Outsource vs In-House Software Development: Talents and OPEX comparison

  • Rating — 5 (2 voices)
  • by Tony
  • Updated on April 24, 2018
  • Read —
    4-5 minutes
outsourcing vs in-house

We’ve already made praises to the Ukrainian development market. But in this article, we’d like to examine outsourcing from two different perspectives: Costs and Talents.

From the first glance, it seems to be a trivial question: outsourcing is obviously a cheaper way for software development. But it turns out that many customers who have decided to outsource the project don’t quite understand their wins and how to make the most out of it.

Now, let’s hit the road!

  1. Hiring Costs
  2. Salaries
  3. Short-Term Projects Specifics
  4. Talents
  5. Time to Market
  6. Bottom Line

Costs

First, let’s consider ongoing costs of employing an in-house team.

Recruitment

In 2015 the average cost for a new hire in the U.S. was $4 000! So keep in mind that recruitment costs will add up quickly as you will try to find top talents for your team.

  • Job Ads – all professional networking websites, job boards, LinkedIn and Facebook ask money for their services;
  • Screening Resumes – this involves the time you spend on resumes review and screening;
  • Interviewing Candidates – do you have a necessary knowledge to determine whether the candidate has the skills you’re looking for;
  • Background Checks;
  • Onboarding & Training;

In addition, ask yourself a simple question: What happens if your new hire doesn’t work out? 41% of US companies said the average costs of bad hire was $25 000. And 25% of companies lost over $50 000.

Salaries

software-developer-salaries-USIn-house salaries can vary based on the number of employees and project’s budget. This kind of expenses will stay even if you’ll choose to outsource software development. But the main disadvantage of in-house development is that you will get less proficient employees for the budget you have comparing to outsource development.

It must be acknowledged that in-house teams don’t hire employees with a high level of expertise. Usually, companies require the candidate to know a little bit about everything, which sometimes doesn’t allow them to take a holistic approach.

Hiring an in-house team that would equal to an outsourcing development partner could cost over $1 000 000 annually.

OPEX

Depending on your location a mid to senior level developer has an average salary of about $90 000 per year. By using contracting you can save as much as $50 per year. Here’s a breakdown of additional operational costs you’ll have to face.

  • Office space or rent.
  • Medical insurance.
  • Day-offs & Training days.
  • Electronics and furniture.
  • Snacks and beverages for a kitchen space.

Short-Term Projects Specifics

If we’re talking about software development there is a number of specialists that are involved in the project only for a short period of time. For example, DevOps, Admin, Software Architect, Web Designer. Those are critical players, but you’ll require their help only for a short period of time like 2 weeks or 2 months max.

By outsourcing software development you basically hire the team of top-notch professional but pay each of them only for a period of time they are actually involved in the project.

Talents

Many in-house development teams are required to wear many hats getting spread too thin and not allowing them to stay agile to changing trends and execute several projects simultaneously.

Offshore partner contributes a highly skilled resource at a much-reduced rate.

In-house developers usually specialize in only a few areas like writing code for the back end. But what about GUI, or app development (iOS, Android). An outsourcing development company have access to top talent in every field.

Moreover, your Project Manager will be able to optimize expenses by choosing the most suitable specialists for the project, based on the budget and technological requirements. For instance, your PM can put additional manpower if some unforeseeable difficulties arise.

Or he can just ask a senior programmer to spend extra hours in order to refine important parts of the code, instead of hiring him full-time.  

Time to Market

Next, the access to human resources gives you the ability to minimize time to market. For example, you might want to beat your competitors and enter the market faster thus showing that you’re the leading innovator.

The outsourcing lets you scale your team quickly and add programmers on the go without raising the hiring costs. Outsourcing will allow you to put as many developers you need to meet whatever time frame works best for you.

By outsourcing your software development needs you can concentrate your time and manpower on other business requirements. It just allows you to look at the big picture, and build your strategy. In addition, you can use the knowledge of business developer that works on your project during the specification stage.

Bottom Line

Hiring an outsourcing partner gives you a significant cut in expenses, but what’s more important is how you’ll use this extra money. We advise you to use this monetary advantage to get a team of experienced software professionals, rather than blindly chasing the money and look for the cheapest outsourcing partner possible.

Always keep in mind, you already saved A LOT by going offshore. Now is the right time to choose the best variant possible in terms of quality and proficiency. For example, you can start with testing our expertise.

 

Tony Sol is the business development manager of GBKSOFT, overseeing the production of all writings for both internal blog and external platforms. He is technical-driven person always looking for new benefits of merging business and software.


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