After deciding to build software or other applications, the following questions may arise: How should the development progress be organized? Is it best to develop in-house or to outsource the whole process/parts of the process?

These are difficult decisions. This article created by our team at TMS focuses on the main advantages and disadvantages of in-house development vs outsourcing.

In-House Software Development

This may seem a basic explanation, but in-house software development is the one that is done entirely by the company that will also use it.

In-house development is also known as insourcing. It requires that essential software development expertise is available within the organization. Everyone working on the project is employed by that company and no external help is needed. The terms ‘in-house’ and ‘insourcing’ also include the use of other resources that are available within the organization.

An in-house team is usually not immediately available, and building one takes time and effort. Yet, with the right knowledge and management skills, it can be successful and uncover a hardworking, committed team. It is an investment for the future. Whenever a new project comes up, the right people and experience will be instantly available.

Many expert software developers offer their services on the market. Hiring the best ones there may seem the most desirable option, but a large team made up of the biggest talents is costly.

Advantages of In-House

Cultural Fit

An in-house team of developers is more familiar with the needs and style of the company. Therefore, they pay more attention to detail, are motivated to achieve optimum results, and strive for the best product.

No Language or Cultural Boundaries

Often, a team of professionals is composed of people from the same area,; the advantage being that they share a common cultural background and speak the same language. Communication and collaboration are much easier when cultural and language barriers are absent.

Quick Changes

With an in-house team, it is easier to make changes to a project. New features can be added as the product starts to evolve. Discussions about technical details and project progress are easily facilitated, which helps to resolve bugs more efficiently.


The involvement of the team results in attention to the technical details that matter most to the company, allowing fast customizability.

Optimal Team Structure

An in-house development team allows you to select the right members for a balanced group, and a committed team usually stays intact.

This requires more time and effort in recruitment. However, it is worth the effort as the new employees are more likely to make a valuable addition to the development team.

Disadvantages of In-House

High Cost

The cost of gathering and maintaining a development team requires consideration.r Having an in-house group of developers is much more expensive than working together with an external service provider. Salaries are the most obvious cost. Still, the total cost is also made up of hardware, software, rent, and taxes. In the human resource department, benefits, sick days, and training also need to be considered.

The Lack of Expertise in Different Areas

A specialized project requires members with a particular skill set. If that skillset is missing in the team, a new candidate must be sought. This situation can also occur when the project is changed or expanded. An extra employee brings many costs, both in terms of time and money, and involves new equipment, holidays, and insurance fees.

Staff Turnover

Staff Turnover

The average software developer changes jobs quite often. There is high demand in the market for skilled and talented developers. The result is that many companies offer higher salaries and better conditions. An inconstant team presents its challenges. Maintaining the team involves time and money, as new talent needs to be attracted and fitted to the team. This slows down the development process or could even bring it to a standstill.

Overload of IT-resources

Developing a software application is usually not the main business of the company. Such a project can put a huge strain on the in-house IT-resources. Work overload leads to dissatisfied employees and poor project results.

Time Intensive

To attract employees, a job offer must be posted and candidates need to respond, be selected, and interviewed. On top of that, new employees need to receive training, attend meetings, define goals, etc.

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Outsourced Software Development

Outsourced Software Development

A task or entire project can be outsourced. In that case, the work is performed by an external organization, for example, a specialized company. The idea behind it is to save time and money.

Saving costs is not the only reason for outsourcing software development. Applications are becoming increasingly complex and require more specialized projects. It is often more advantageous to contract a specialized company than to build such a team in-house. This helps maintain the organization optimized, without the distractions of a complicated project. Ultimately, the product will be developed faster and at a budget.

Advantages of Outsourcing

Price-Wise Expertise

External development teams usually have experience and skill in the field. When new issues arise as the project progresses, there is no need to acquire new members because the expertise is already available. So, when executed well, the team will reach their goal faster and with less expense.

Fast Scaling Up and Down

The team can easily be expanded or decreased whenever it is necessary, without a lengthy hiring process or a painful firing procedure. This brings stability and a good reputation for the organization.

Fast Time-to-Market

An external team has the resources ready to build the required team immediately. There is no need for the extensive process of assembling a team. On average, it takes around two or three months to recruit a skilled developer. This time can be spent on the actual developing process instead. The time-to-market of the product is greatly decreased.

Proven Workflows

Proven Workflows

Outsourced providers have experienced teams who have worked together for many applications. If they have had the opportunity to cooperate before, they can collaborate and establish an efficient workflow, which benefits productivity and code quality.

Many different professionals are needed for a software development project, including developers, quality assurance engineers, scrum masters or project managers, and UX/UI designers.

Top Talent

Software development agencies are in a position to hire the best IT specialists. When one of these outsourcing partners is hired, this group of unique talent and expertise becomes available to the hiring company. The skills of these developers have been proven in previous projects.

Even if a specialist is not directly involved in the project, they can still offer their knowledge and advice to others in the company. This is an enormous advantage to the company without paying extra.

Improved Cash Flow

An in-house team needs to be paid at the end of each month.  However, if the current financial situation does not permit this trusted monthly payment, the in-house team becomes a costly concern. When hiring an external company, payment dates can be negotiated if necessary. This is a great boost to the company’s cash flow.

Disadvantages of Outsourcing

Inaccurate Communication

Most project communication is not in person, rather by written electronic means, such as email or Slack. These types of impersonal communication do not have the same effect and can result in miscommunication or misunderstandings.

Transparency and Security Risks

Transparency and Security Risks

Miscommunication can lead to a lack of trust. Trust is vital for an outsourced development project. Of course, this will not always be the case and depends much on the contractor and developer. Choosing the right partner is a crucial step. Both parties must agree on acknowledging, meeting schedules, and reporting in a way that satisfies everyone’s needs and desires.

Unsupported Code

Becoming dependent on the contractor for maintenance can be a pitfall of outsourcing. The contractor’s services are necessary for producing high-quality code. Nevertheless, the contracting company should have the possibility of working with the code themselves. A trustworthy partner and clear agreements are key.

When to Outsource Software Development

Outsourcing vs insourcing has become increasingly common and this trend is likely to continue.

As described above, finding development talent is not easy. Time and money are factors that limit the kind of talent available. Outsourcing saves a lot of money on administrative costs (equipment, rent, software licenses, etc.). This allows a company to develop its product at a lower price. Outsourcing can also give access to talents in other countries.

It is no wonder then that many businesses choose to outsource for specific tasks, even entire projects.

A shift in reasons for outsourcing is also apparent. In the past, it was mainly for economic reasons. Whereas now it gives companies access to top development talent. This is important because applications are becoming more complex and in need of advanced technology.

In-House Development Vs Outsourcing: What Is Your Best Option?

So, in-house development vs outsourcing? Both outsourcing and in-house software development have strengths and weaknesses. Considering all the factors, outsourcing a development project is often the smartest choice. App development is highly specialized and a well-developed application will attract more customers.

Innovation is essential. Therefore, having that innovative edge will give a clear advantage in the market. Global access to the top experts and talents in the field at any moment is possible through outsourcing.

Looking for a development partner?

If you’re looking for a technology partner, development team augmentation, or just a company for your software&app development initiatives, consider TMS.

TMS is a software and digital company in Belgrade, Serbia. We develop innovative and modern software.

A few examples include premium booking software Trafft, MedTech apps like MR Prepare, or MarTech/AdTech apps like the Advise Media Suite, among other great software examples.

Check out our services and also some of the work we’ve done for our clients. Who knows, maybe we’ll form a successful relationship.

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If you enjoyed reading this article on in-house development vs outsourcing, you should check out this one about nearshoring.

We also wrote about a few related subjects like outsourcing to Serbia, Outstaffing, outsourcing failures, best countries for outsourcing and outsourcing to India.