Companies really have three options when it comes to getting work done: They can handle everything in-house, they can manage vendors to do the work or they can have a mix of the two with a capable in-house team that uses contractors or agencies for various support tasks. Most of the time, we work in the latter two situations, but inevitably this question always comes up: “Should I bring this in-house?”

Depending on the project, I have three responses:

1. I ask if they are feeling ok, because I think they’ve lost their mind.
2. I agree whole heartedly and help with the search.
3. Or I open excel and start doing some math.

The most obvious way to start answering this question is with the numbers. The minimum team needed to produce a truly sellable product in my mind is three, a project lead, a developer and a designer. In round numbers that’s $300K minimum for a year of salary and benefits. After computers, services, training and overhead you are probably looking more in the $450K range. And this is a yearly cost, so the work will need to be sustainable over the long term. If you consider a typical agency blended rate of $150/hr, then 3 employees for a year is the same as 3000 hours of agency time. That is a decent amount of time to solidify most small to medium product builds. However, that amount of time and budget will fly away if it is used on the wrong type of work.

With typical costs of in-house employees in mind, let’s look at what type of work is better suited for the different options.

Jobs that should be handled in-house:

Regular Maintenance and Ongoing Development

Most long-term items, like maintenance, minor feature enhancements, and design updates are much better suited for an in-house team. It is a simple fact that using an agency for small jobs costs a ton more than it should. Even I have a hard time telling someone that a simple task is going to cost 3–4 times more than having an internal resource do it, but it is all about economies of scale. Agencies have the same overhead for most jobs, so anything small that can be done in-house should be.

Monitoring & Reporting

Likewise, any kind of regular metric monitoring, performance monitoring and customer feedback should be handled by internal staff. These tend to require a lot of time and can be expensive if you’re paying hourly. That said, it is nice to get outside perspective on this one from time to time to ensure that you are keeping current and not overlooking something because of habit.

Systems Work

Another big area that is better suited for internal staff is systems work. Though getting support for setup is sometimes needed, the speed and monitoring that infrastructures require demands that someone in-house has the knowledge, responsibility and experience to keep everything running, secure and backed up.

Jobs that should be outsourced:

One-Offs (Just the Big Ones)

One-off projects, that are medium to large in scale, make a lot of sense to outsource regardless of if you already have a competent team in place. We find that asking an internal team to tackle a new project means a much longer build time and sacrificing some individuals’ current responsibilities. We also find that these projects, when done in-house, don’t get the luxury of having a lot of different people with different expertises looking at the job as a whole.

New Terrain (Or Highly-Specialized Terrain)

New endeavors that are outside the comfort zone of current staff are also great to outsource. Getting into live streaming, developing mobile apps, complex pricing engines or variable landing pages, for example, can benefit from a specialized team. These items, at least for the first iteration, should be looked at with the fresh eyes of a team who knows the terrain.

Startups (But Only Those Who Have an Idea Baked)

Many startups who have passed the early stages and are ready to produce a stable and scalable product can benefit greatly from an outside development team. The costs can be fixed, the timeframes tightened and the breadth of knowledge expanded for the build. I will stress here that the idea must be baked, as having an agency start and then pivot 20 times during the build can cost a ton of cash.

One additional item to consider when making a decision to NOT use internal staff is company morale. The fastest way to lose people in this industry is to never let them try new things. It is why hiring great and innovative developers, designers and product managers at a small to medium size company with one or two products is extremely hard. Pay and workload only go so far and variety is a huge benefit to the curious mind.

So map it out, look at the variables and see if you are using your agencies efficiently or if it is time to start staffing up. (But don’t forget about us entirely!)

tl;dr Considering the minimum dev team costs $450K per year to have internal, outsourcing should be used for big projects, new projects that you’re not comfortable with and startups that have their ideas baked and ready to build. In-sourcing should be considered when growth and maintenance, systems/infrastructure management and monitoring/measurement and optimization are the primary objectives.