From the get-go, I can tell you that there is no straightforward answer. While many businesses value product development as one of its core competencies, others are certain that getting out to the market ASAP is always the main priority. In order to meet the fast-paced demand of the current market, there are many factors you will have to keep in mind.
In any case, you want your product to be high-quality, cost-efficient, and able to launch quickly. Both in-house and outsourced teams are capable of achieving this, but the unique characteristics of every project make it hard to recommend one approach over the other. Can your startup afford to outsource development through an IT partner? Is it a smart investment? Let’s find out.
The In-House Team Paradigm
In-house teams used to be the go-to solution for software products around the world. Building your own team of employees and having full control over their assignments was certainly an attractive offer for the traditional startup CEO. Even today, whenever a small company has the required budget and the know-how, in-house teams are the preferred method—at least for the most part.
Why is this? Well, there are three main reasons: employee access, personal involvement, and company culture. Throughout the years, having IT experts on the payroll meant being able to quickly identify and resolve issues. These people could also have direct contact with other employees and company activities, making it possible to seed passion and loyalty.
Moreover, IT employees would have a pretty good understanding of company ethics, goals, and cultural peculiarities—all of which could take some time to explain to outsiders.
Each of these benefits has its own downside, though. The truth is that in-house teams are just inherently expensive. And even if your company can afford to pay salaries for a large-enough IT team and all the labor costs that come attached to it, the current challenges of attracting and retaining IT talent can catch you off-guard.
The limited versatility of local teams is also an issue. Modern software developers are specialized by niche, which can vary from any language and technology available on the market. Maintaining a fully-loaded team on the payroll and investing in their skills development can be either too hard or inapplicable for most start-ups.
Although all of this can be a bit discouraging, businesses that opt for the in-house road have a very clear purpose: control every single detail and security aspect of their project. With the right people by your side, the unique and outstanding product you dream of is just at the tip of your fingers.
The Outsourcing Perspective
If you are thinking of outsourcing as the “risky” option for product development, you couldn’t be more wrong. Every day, more and more companies are working with software outsourcing companies for practically every type of project.
The numbers speak for themselves: by the end of 2019, the enterprise software market is projected to reach $427 billion USD, up 7.1% from $399 billion in 2018. Platforms like Alibaba, Google, Slack, and Skype wouldn’t be what they are today without outsourced development.
So what would make outsourcing attractive for startups? Simply put, its cost-efficiency. Even if development cost is not your main concern, money matters, especially if you are starting from square one. Outsourcing is often considered as the best method to reduce operational expenses related to employee attrition. Through it, any start-up is able to bypass the traditional hiring process and get immediate access to a fully-equipped expert team of IT professionals.
This also means that there are actually fewer risks for your project. Whenever in-house teams have to focus on day-to-day tasks and also work on a development process, corners are bound to be cut. Software outsourcing companies provide service level agreements (SLA) that state clear deadlines and outcomes for the project, leaving no room for shortcomings of any kind.
For startups, the main benefit of outsourcing is probably the tech expertise IT partners provide. Software products go through several time-consuming stages, and running into complications is unavoidable. If you want to hit the market faster and with a better product, there is no better way than to do so with the help of trained teams of world-class professionals.
Of course, there are limitations. Sometimes communication restrictions can get in the way, as a result of time-zone differences and poor fluency in your preferred language. Similarly, your startup’s culture has a chance of not “clicking” with an IT provider workflow. No entrepreneur wants to feel like losing control over their project, but outsourcing companies tend to work fast and steady when it comes to development. It is easy to fall a bit behind on that process.
Other than that, you may have to go the extra mile to prevent intellectual property and hidden fees issues. As long as you work with a reputable vendor and have everything in writing, there should be no problems at all. Always ask for references and NDAs if you must.
Running a startup comes with a lot of tricky decisions, and this is just one more of them. Both in-house and outsourced services have their pros and cons, so if you are still not sure of which way to go I encourage you to continue diving deeper into the topic. There is a very interesting concept known as the outsourcing decision tree which can help you a lot.
The more you know about both approaches, the greater your chance for success. Best of luck!