It’s the eternal question: To build your software in-house or hire an external software development company? How do you know what’s right for you? When does it make sense to build in-house?
Depending on your business requirements, available resources, and timeline, you may be sizing up if it’s best to deploy an in-house team to build some needed software or hire an external software development partner. Whether it’s a relatively simple app or mission-critical software, both options have pros and cons.
In this In-House vs External Software Development Guide, we will cover:
The Pros of In-House Software Development
The Cons of In-House Software Development
The Pros of an External Software Developer
The Cons of an External Software Developer
Five Key Decision-Making Considerations
How to Choose a Software Development Partner
Let’s explore the pros and cons of building a software solution in-house vs. hiring an app developer partner.
The Pros of In-House Software Development
There are many advantages to building your app in-house, and these “3 Cs” are among the top:
- Communication. When you opt to develop in-house, your people are often in the same room at any given time, and daily huddles are easy-peasy. Often, in-house communication is a mere matter of turning around to ask a question or provide feedback.
- Capacity. A new IT project can be a tremendous learning experience for the whole team. If you are looking to increase capacity and expertise, working on developing an application can stretch boundaries and build in-house skills and knowledge.
- Cost. From a cost perspective, if you have a dedicated IT team, you’re already paying the salaries; it may be less expensive to have your paid talent work on a project rather than hiring an external app developer.
The Cons of In-House Software Development
While in-house teams have their advantages, there are some drawbacks as well. These include:
- Longer Development Time. Even with a dedicated team, there might be other daily tasks and assigned responsibilities that deter from the project, causing it to take longer to complete than initially estimated.
- Skills Shortage. An in-house team may have a more nuanced understanding of a company’s industry and business model. However, this does not mean they have deeper expertise in building the necessary software. You may have to hire an external partner to get the skills you need.
- Cost Overruns. According to a recent McKinsey study, half of all large IT projects massively blow their budget. The stats reveal that in-house projects cost approximately 45% more than predicted while delivering 56% less value. Ouch.
The Pros of an External Software Developer
If you are looking to develop a new app or other mission-critical software, opting for an external developer has many benefits. These include:
- Focus on the Business, Not on the Build. By partnering with an external team, you are not stretching capacity, so your IT crew can stay out of the weeds and concentrate solely on keeping business operations running smoothly.
- Tap into a Finely Tuned Process. An experienced and reputable app developer will have completed hundreds and hundreds of projects and will have a proven roadmap for the development process, as well as quality assurance and risk mitigation strategies. And, they will be flexible enough to work the way you do, using either Agile or Waterfall principles, depending on your preference.
- Quicker Time to Market. Arguably the most significant aspect of working with an external partner is the ability to scale your team up or down. With a dedicated team — that encompasses both a depth and breadth of experience — working on your project, the software can easily be completed on or ahead of time.
The Cons of an External Software Developer
There are some potential risks when working with an external app developer partner. Primarily, these are:
- Communication Barriers. If you outsource overseas, one of the main reasons that important calls or meetings get postponed (or worse, don’t happen at all) is time zone variances. There is also the chance of misunderstandings due to differences in language.
- Lack of Control. In comparison to working with an in-house team, hiring an external app developer partner necessitates that you give up some level of control. To mitigate this risk, look for a partner who is a good cultural fit and is always transparent about the status of the project.
- Potential Security Risks. Safeguarding sensitive data, business innovations and intellectual property is crucial when considering external software development. It’s important to carefully vet the potential company’s security measures and data protection processes, and have a signed NDA before sharing any internal info.
Five Key Decision-Making Considerations
While building an app in-house might be less expensive and you have more control, assembling a team with the right skillset might be a challenge and more expensive in the long run. If you’re still in a quandary about which option is best for you, here are five factors to consider before making the final decision.
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Who’s on Your Team?
When evaluating your internal team, it’s a good idea to consider available resources and expertise. If you are fortunate enough to have an extensive IT team, you can dedicate specific people to work on a particular project. However, many companies — even larger organizations — do not have this luxury. In most cases, the IT team wears multiple hats, working on many disparate projects at the same time, all while providing internal support.
In addition to looking at the number of people on your team, you also need to consider competencies and expertise. For example, one of the technologies that we commonly use at Whitecap is .NET frameworks, and because we have worked with various versions of .NET we’re always up to date and our developers have a depth of knowledge that’s virtually impossible to get within an organization.
If you don’t have the number of people you need to keep the lights on, or the required skills and expertise, you have two options – hire internally or hire an external partner. However, when factoring in the overall costs beyond just salaries, such as recruitment costs, employee training, benefits, office space and equipment, partnering with an external company can often be comparable or even lower cost compared to internal hiring.
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What’s Your Budget?
Obviously, cost is a major consideration. But it’s not as cut and dry as you may think. In addition to the people costs outlined above, various factors can impact the overall budget, from the project’s complexity to the tech stack and infrastructure required.
Another factor to consider is that by partnering with an external developer, you no longer have to invest in the various development tools required to get the job done. You can also easily access specific resources, like UX design and testing expertise, without the cost of hiring.
To keep costs low, companies are sometimes tempted to reach for an off-the-shelf solution however a custom software application can be much more economical over the long run.
Pro Tip: To help you decide what solution is right for you, and to get budgeting ideas, check out these resources:
Decide Between Off-The-Shelf And Custom Software
Tips for Planning and Budgeting Custom Software Projects
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What’s Your Timeframe?
Getting your idea out into the world in the form of an online app or organization-wide software is no easy task. It’s a constant balancing act of trying to get maximum productivity from limited resources as you race against the clock to deliver on-time. And time is of the essence. A Harvard Business Review article points out that, “On average, companies lose 33% of after-tax profit when products are six months late, as compared with losses of 3.5% when they overspend 50% on product development.”
Sit with that for a moment or two.
The importance of time-to-market simply cannot be emphasized enough, as delays can lead to missed revenue opportunities, lost market share, and decreased customer satisfaction. By working with an external app developer, scaling a team up or down is incredibly easy and fast. With an external partner you avoid the additional recruitment that usually stalls in-house development. This significantly shortens the time-to-market. External development teams often have substantial experience in rapid development cycles, which also accelerates your project’s time-to-market. If you don’t have the luxury of time, an external partner can ensure that you meet your deadlines.
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Are You Vulnerable?
Security is always top of mind in any organization. From hosting options to vulnerability testing, all aspects of security should be considered when taking on an app development project. However, when the project is out of your purview, it can be more difficult to keep tabs on security. If you are considering hiring an external app developer, discuss security measures thoroughly.
Ask about their data protection practices ((ISO 27001, PCI-DSS, etc.) and if they are cognizant of any relevant regulations and compliance measures, such as PIPEDA, HIPAA and others. Set up clear expectations and responsibilities around security and integrate these into your contract.
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Your App is Built. Now What?
Getting your application designed and built is just the first step. Once it launches, there is the inevitable ongoing maintenance, patches, and enhancements. It’s these ongoing updates that ensure the quality and viability of your finished project. If you can’t maintain it, you can cross off long-term success now.
You’ll need to plan and budget for the maintenance of and future tweaks to your new application. It boils down to one question: Does my internal team have capacity for this?
How to Choose a Software Development Partner
So, the decision has been made to hire an external app developer partner, but how do you choose? Here are some things you may want to consider ensuring you have a partner who is the best fit for your organization.
Look at their Work. To get an overview of what the company does, look at their project portfolio. This will help you gauge their experience and capability and will give you a clear understanding of their range of skills and their ability to handle your project’s specific requirements. Be sure to read any case studies on their website and take note of client testimonials and the industries where they have experience.
Read the Reviews, Ask for References. Research your potential software development partner by reading reviews, like Clutch where clients rate software development companies on quality, cost, willingness to refer and scheduling. Ask the external app developers on your shortlist for references and contact them to get the scoop on what it was like to work with the company.
Review Their Process. Reputable app developers have a proven framework to really understand your business needs. While expertise in specific tools, and technologies is necessary to create mission-critical software, it’s not everything. The more questions they ask, the better! If your potential software partner doesn’t take the time to really understand your needs during the discovery process, you might want to move on. The best app developers are true partners rather than simply external vendors.
Check for Cultural Fit. Once you’ve gone through their portfolio, read the client reviews and reviewed their process, there’s still one very important thing ahead of you: checking the cultural alignment. Too often this step is overlooked, but it can be the make-or-break of the relationship. Make sure this new extension to your team communicates well, has a collaborative approach, and seems like a nice bunch of people to work with. Don’t forget to ask questions! How will they update you on progress? If something seems to go sideways, how will the two teams get it back on track? How do you assure software quality? Your potential partner should be able to easily answer these and others. If they cannot, it’s a red flag.
Are You Looking for a Partner?
If you’ve got a software development project you’re considering, you need a partner who can help. We’ve got a proven approach and the expertise leading businesses depend on to develop custom software applications that become core to their companies. Let’s chat.