The Difference Between In-House and Outsourcing Web Development

Evus Tech
Evus Tech
Jan 30, 2017 · 11 min read

Deciding between hiring in-house developers or outsourcing your mobile or web development is a tough decision.

There are many factors to compare and consider, but by focusing on the right factors it will make your decision much easier.

Before you make a decision to go one way or the other, you need to understand the true risks and advantages associated with each.

Let’s walk through the considerations.

Organize your comparison with these 3 factors…

  • Risks
  • Advantages
  • Costs

We’ll break down these three factors, using the same scale, to weigh the options for each.

Risks: In-House vs. Outsourcing

On both sides of the fence, you’ve got some basic risks. First, if you’re not a tech pro, there’s a risk in trusting folks who claim to be pros. Then you’ve got the risk of hiring viable talent, managing employees, and employee turnover. Most importantly, there’s the risk of the overall success of your product. As with most things in business, there are advantages and disadvantages to both options.

Let’s take a look at the main risks associated with in-house developers first.

Risks With Hiring In-House Developers

When you employ a group of in-house developers, you acquire all of the risk in terms of their abilities. So the most obvious question is…

…do you even know how to hire tech talent?

That’s pretty much a prerequisite to hiring in-house. If you don’t, you will need help from someone who does or you’ll be taking a huge risk in that you’ll recognize the right talent when you see it.

Do you know what skill sets are needed?

Having access to a pool of pros, with current and evolving skill sets, will undoubtedly help your company thrive. But what skill sets are required to build the product and manage it to completion and execute after launch? How many resources are needed to develop native apps or engineer relevant software? Which alternatives will deliver the skill sets to provide the level of services you will need — both now and in the future?

During the 1990’s, plenty of forward-thinking companies managed to stay fairly relevant by staffing one or two IT professionals. And when those guys weren’t playing Minesweeper, they were successfully staying ahead of the tech curve. Today, it takes an IT village to raise up an online and mobile success that meets the needs of the masses.

The typical resources required, to develop a successful app business include:

  • iOS developer
  • Android developer
  • Back-end developer (server-side)
  • Interactive designer
  • Front-end (web) developer
  • Project manager
  • Product manager (this could be you, could be someone else on your team)
  • Business analyst (you’re building a business here, not just an app)
  • App store optimization (ASO) expert
  • App marketing expert (could also be an ASO expert)
  • and quite possibly a data scientist

Unless you’re picking from the clearance aisle, these folks ain’t cheap. You might think there’s no way you’ll need all of these people but we’ve rarely seen (less than 1%) a successful app business without all of these disciplines involved.

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Assuming you’ve got some candidates, you’ll be responsible for training, planning, ongoing product evaluation, feedback loops, re-development — everything. And, as you might guess, managing a team of tech gurus isn’t the easiest task — particularly if you’re not proficient in the IT field.

Turnover is another risk you can’t ignore.

According to PayScale, the tech field has the lowest average tenure rate of any other field. When using in-house talent, be aware that another tech company may come calling — and one of your, previously loyal, app developers might jump ship. With an in-house IT operation, you accept the likely risk of attrition. Onboarding another tech genius can put your entire project on hold — threatening the viability of a live product.

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As for the overall success of the product, the risk does fall entirely on you and of course the team you hire — assuming you hired the right team.

Risks with Outsourcing your Development

When choosing to hire an outside development firm your main risks include:

  • the firm going out of business
  • not being able to deliver the right product
  • they take your money and disappear
  • it ends up costing you way more than anticipated

In other words…

…your risk is in hiring the right firm, with the right people, with the right process.

Therefor, you have to know what you’re looking for and what questions to ask to ensure you hire the right firm.

  • Is it a start-up dev shop?
  • Does the firm have grievous complaints with the Better Business Bureau or horrible Yelp! reviews?
  • Was the group unable or unwilling to provide you with a recent portfolio?
  • Have they built similar apps or similar components to yours?
  • How is the quality of their work?
  • Will they help you build the business or just the product?
  • Did they only provide you with a one-page bid?

If you’re considering a tech firm, and you don’t get the right answer to any of these questions, there’s a plausible risk that ‘Shady Eddie’s App Developers’ may not be in business very long.

When it comes to outsourcing software development, app creation, or web development — choose an established firm, that has a top-notch reputation and understands the business of software. Then you won’t be stuck, trying to breathe life into a partially complete software project, when a fly-by-night tech firm fails to deliver.

Advantages: in-house vs outsourcing

We’ve scared you with risks but what about the advantages? Surely there are distinct advantages to each option. Yes, you are correct. Let’s review them…

Advantages to an In-House Team

Once you’ve established your in-house crew, you’ve got them in the palm of your hand. You’re the boss. However laborsome it may be to attain, develop, and manage IT talent, having some seasoned pros in your home court, is one sizable advantage to an in-house operation.

This means you have a greater ability to create a culture around your product and your business. A team that is only focused on one product, one mission, all in alignment toward a common goal.

Although a good development firm will keep you continuously involved in the process, when your team in in-house, you have full ownership and control over every aspect of the product as well as the knowledge gained while developing it. So you are aware of every detail, every bit of progress made, and every set back along the way. You don’t have to trust that delivery dates will be hit as you will know if your team will make them or miss them. This generally gives you greater visibility into the progress.

Advantages to Outsourcing your development

The most coveted advantage to outsourcing software development is, by far, the availability and scalability of the powerhouse skills concentrated in a proven tech development firm. The skills that can provide business acumen, data science, design, programming, and ongoing enhancements of the product and business, represent the immense value of outsourcing an experienced third party and trusting them to nurture your baby.

With an outside firm, you’re not carrying the skill risk.

A proven tech firm will have more than enough talent to understand and execute your project well. And the experts on staff will be available to you, as needed. It isn’t a question of “Who do I hire to help my company progress into the IoT market?” Instead, you reach out to the tech firm, and it will put the right person on the job. You pay the firm to do the heavy lifting and to take on the resource risks.

Provided you’re with a solid tech firm, the risk of your overall product delivery is minimal. A proven development company will assume the risk of the development and production of your project. They’ll keep you at the helm from pre-planning to launch. Then, they’ll make ongoing resources available to ensure your redevelopment needs are covered.

Turnover of employees is also a risk you won’t absorb. In the event of turnover, a good tech development firm will keep you informed of its intentions and work quickly to make things right. But a great tech development firm will have redundancies in place to ensure there is no hiccup in the production, development, or retooling of your project. If you’re working with the right outsourcing group, turnover and employee development is rarely something you’ll have to consider.

Successful apps take much more than good software development.

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An app development company, that’s worth its weight, will understand that and have the process and skills necessary and work to ensure the long-term sustainability of your product.

Cost: In-House vs. Outsourcing

A steep bottom line exists on both sides of the scale. How much will it really cost for your company to hire a firm to develop your software or app vs. in-house IT staffers for the project? How much, in total, should you expect to shell out for quality web development or the creation of your first native app? What are the true costs of hiring in-house?

Let’s find out…

The Cost of Hiring In-House Developers

A good developer is well worth his or her salary. But, as we’ve covered, you’ll need more than just one good worker. Hopefully, with a few posts on craigslist, you’ll find all of the necessary talent to handle the resource needs of your company. Then take a look at the chart below to review average annual salaries of the IT professionals you’ll need for quality web development (2016 average salaries, courtesy of glassdoor.com).

Average Tech SalariesTitleSalaryiOS Developer$85,000Android Developer$84,562Back-End Developer$116,808Designer$67,281Project Manager$91,440Data Scientist$91,440

When you add up the average salaries, for each player on the team, you’re looking at more than $500,000 per year. It’s true that some groups may be able get by with a bare-bones operation (no designer, the project manager is your mom, and you skip the data scientist). If you bypass the sparkle and settle for a minor-league app development crew, it’ll put you in the ballpark of around $300,000 per year for salaries alone. Neither equation takes into account equipment, personnel management, licensure, or office space — that’ll be another chunk of change.

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Just looking for employees of this caliber isn’t always cheap. If you don’t find the right people on the free job sites, expect to pay one of the larger, more well known, employment sites to post job ads. Or, take the traditional route, and hire an IT recruiter. Add in a signing bonus, monthly health insurance, dental insurance, paid holidays and sick days, worker’s comp insurance, payroll taxes, continuing education and training. Hiring a talented, in-house tech operation is costly. And it isn’t finite.

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Once you’ve hired and groomed the IT Dream Team, it may be troublesome to scale-down your workforce, when your needs aren’t as intense as they were during launch week. IT pros are people too — not just software developers. They have families to feed and they generally aren’t looking for temporary work. By staffing in-house developers, you’re electing to incur all of the overhead all of the time, with no guarantee of product success.

The Cost of Outsourcing Your Development

Trusting a tech firm and signing on the dotted line can raise the blood pressure, for sure. Outsourcing may be a lot less expensive than owning an IT department, but it it’s still a huge investment. And if you hired the wrong firm in the past and have been taken for a ride by an IT group who has promised big and come up short, you may have a bad taste in your mouth.

While there are many poorly run dev shops out there, the reality is a good solid firm will be worth every penny you spend with them. You will get years of knowledge and expertise that you simply won’t have and can’t afford to bring in-house in the early stages of your company.

But what will it cost to hire a development firm?

A typical development firm will charge an hourly rate for the hours they estimate it to take their resources to build your product. They may have a couple different rates for different disciplines or skill levels depending on their model. They will add these numbers together, apply a buffer, and come out with a cost. Typical app development agency rates range from $100 — $250 per hour.

App costs vary greatly depending on the size of the development firm and, of course, the complexity of your project.

  • Large firms: $250,000 — $1,000,000+
  • Medium firms: $150,000 — $450,000
  • Small firms: $50,000 — $150,000

According to the report by Kinvey, on average, organizations spend around $270k to develop an app.

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Final Considerations

There are plenty of companies that really don’t need to outsource their technology needs. They can cash-flow an in-house IT department with ease and they have enough expertise and technology related work to justify paying an IT crew, annually.

For other companies, there may not be a need to hire, train, develop and, direct an in-house, IT department. For those businesses, and in particular, startups, a reliable and experienced third party is an undeniable asset. Businesses who want to swim with the big fish in the evolving rapids of technological change have to find solutions that fit their budgets and their true business needs.

If you’re a startup, it may make a ton of sense to hire and leverage the collective expertise of an outside firm to get your business on the right path and to allow you to focus on other areas of the business. Then, as you grow, you slowly hire in-house talent and take your development in-house.

At the end of the day, you’re developing a business not just an app. Keep reminding yourself of that. In the early stages you should make every effort to minimize your risks while maximizing your opportunity. If this means hiring an experienced, business-minded firm then find the best one you can afford. If this means recruiting and hiring an in-house team, then make sure you know how to hire the right people, make sure you know your costs, and follow that path. Weigh your risks and make an educated decision that’s right for your new business.

Evus Tech

Written by

Evus Tech

Evus Technologies is a startup studio co-creating businesses with entrepreneurs and corporations to open new markets through emerging technologies.

Evus Tech

Written by

Evus Tech

Evus Technologies is a startup studio co-creating businesses with entrepreneurs and corporations to open new markets through emerging technologies.

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