What is Better for Your Business: In-house Development vs. Outsourcing

Every year, the technological landscape grows more intricate, and the demands of major corporations continue to expand. To stay abreast of advancements, certain enterprises opt to establish in-house development teams, while others choose to outsource their development needs.

Stfalcon IT company is confident that both ways can be a profitable solution. In selecting the optimal choice, it's crucial to consider the objectives and overarching business strategy, alongside the particulars and subject matter of the project.

Yulia Kondratyuk , CBDO Stfalcon, and Oleksandr Zozulya , CTO Stfalcon, spoke about the global trends in the market, the needs of big companies, and the advantages and disadvantages of both in-house development and outsourcing.

What Large Companies Choose in 2024

According to Zippia statistics, large international companies are the biggest supporters of outsourcing . Among the companies on the Forbes Global 2000 list, the vast majority - 92% - outsource IT operations , according to ISG Research. This enables businesses to conserve the time and resources typically demanded by development, directing their focus instead toward their core tasks and competencies.

The trend of IT outsourcing has remained consistent in recent years, affirming the ongoing growth of this industry. As per Statista, the global software outsourcing market, valued at $430 billion in 2023, is projected to reach $512.50 billion in 2024.

Gartner forecasts an 11.8% increase in IT services spending in Europe and an 8.7% global rise in 2024, reaching $1.5 trillion. This surge is partly attributed to understaffing in IT departments and companies' aspirations to enhance organizational efficiency and optimization through investment.

According to Oleksandr Zozulia, CTO at Stfalcon, IT development services are in demand by both companies without internal IT departments and those with such teams but lacking expertise, available resources, or ample experience for project implementation. Frequently, large enterprises face stringent deadlines and seek recommendations for the timely development of specific functionalities.

"Simultaneously, outsourcing may not suit every situation. There have been instances where, during negotiations, we discerned that forming an in-house development team would be the optimal choice for the client. Both outsourcing and internal development entail distinct advantages and disadvantages, necessitating careful consideration and a tailored decision for each business," says Yulia Kondratyuk.

Outsourcing: Speed and Scalability

Deloitte identifies the primary motives for outsourcing as cost reduction, concentration on core business activities, addressing scalability issues, accommodating staff shortages, and fulfilling various other business requirements.

For a company lacking expertise in technical recruitment, establishing an in-house development team poses considerable difficulty and risk. The recruitment process encompasses numerous associated tasks, such as onboarding, provisioning hardware, software, and licenses, arranging benefits packages, and providing legal and accounting support. These endeavors result in substantial overhead costs, demanding significant investments of both time and money.

"If a company isn't involved in software development and doesn't anticipate undertaking a substantial number of projects, it's advisable to outsource some of the work. This approach grants the company access to skilled developers and well-established processes. Moreover, should one engineer unexpectedly depart from the project, the vendor can promptly find a replacement. This allows the client to avoid delving into technical or personnel intricacies, enabling them to concentrate on the project's outcome and its integration within their business," explains Oleksandr Zozulia.

Another crucial aspect of top-tier development is the team's expertise and cohesiveness. To achieve this, the team should have executed several successful projects within a specific domain, thereby acquiring specialized knowledge and experience.

For example, Stfalcon has been developing custom web services and mobile applications for logistics, transportation, travel, delivery, healthcare, and fintech projects for 14 years. Following numerous projects, the company becomes well-versed in the various standards, pitfalls, and common errors within these industries. This enables them to assist clients in navigating from concept to fruition, minimizing unnecessary expenses, and identifying avenues for optimizing specific solutions.

"We dedicate a distinct portion of our projects to enhancing the efficiency of our clients' business processes. For instance, we developed software for a logistics company, enabling the optimization of staff work schedules across branches. Additionally, our solution for a heavy industry firm aids in saving time and fuel by optimizing courier delivery routes," says Oleksandr Zozulia.

He underscores that timing is frequently critical for large businesses when it comes to project completion. Outsourcing facilitates swift initiation, a feat that would prove challenging if one were to establish an in-house development team entirely from the ground up.

In-house Development: Control and Security

Several large companies, such as OLX, lifecell, Vodafone, NOVUS, Eldorado, OKKO, and BlaBlaCar, prefer to work with outsourcing companies. Organizations such as Uklon, Kyivstar, Rozetka, MEGOGO, EVA, and PrivatBank are developing their own software development teams. Recently, companies that are not related to the IT industry but need to implement or support certain IT products follow the same path.

"Occasionally, a project necessitates specialized developer skills or adherence to stringent security protocols, particularly when handling sensitive data. For instance, this might be mandated by the project's investors. In such scenarios, it is prudent to cultivate in-house expertise to mitigate reliance on third parties and minimize the risk of information leakage," says Yulia Kondratiuk.

At times, a project requires specific developer skills or strict adherence to security protocols, especially when dealing with sensitive data—a requirement that could stem from the project's investors. In such situations, fostering in-house expertise becomes wise to reduce dependence on external parties and lower the potential for information leakage.

Another scenario arises concerning project support. If the primary concern is the swift response to incidents that may arise during service operation, and the workload doesn't justify engaging the development team full-time, establishing an in-house support system emerges as the optimal choice. This approach substantially streamlines support budgets and enables complete control over staff scheduling, ensuring round-the-clock coverage.

Hybrid Approach: Flexibility and Experience Exchange

Even if a company opts to establish an internal IT team, it may still choose to outsource certain functions concurrently. Take Google, for instance, which develops essential products in-house while entrusting non-core tasks like administration and IT operations to vendors, recognizing the impossibility of handling all tasks internally.

"Among our clientele, we have companies that favor a hybrid development model. Typically, these are sizable enterprises with their IT departments but often deficient in internal engineers, expertise, and time. Hence, they opt to outsource a portion of their development tasks to us," says Oleksandr Zozulia.

He believes that the hybrid approach amalgamates the benefits of both in-house teams and outsourcing. This strategy affords clients the chance to gain a fresh perspective on development and compare the speed and quality of their in-house team's work with that of outsourced teams, enabling them to draw informed conclusions.

This collaboration also facilitates the exchange of expertise among developers. Outsourced development teams typically operate at a quicker pace and boast a broader range of experience in utilizing various technologies, unlike product teams. Stfalcon has had cases where clients' in-house teams have adopted some of their approaches and started using them in their own practice.

"Furthermore, a significant advantage for the client is the option to avoid expanding the in-house team's size when faced with temporary workload spikes. This approach enables the company to eliminate additional costs linked to recruiting, hiring, and retaining new employees, while still accomplishing its business objectives with the assistance of an outsourced team," adds Stfalcon CTO.

How to Make an Informed Decision

If a business comprehends the reasons behind the necessity for an in-house development team, it's logical to invest in its establishment. Alternatively, for scenarios where a company requires one-off IT services, aims to streamline costs, or prefers not to stray from its core specialization, outsourcing becomes a viable option to contemplate.

"Building your team can be a time-consuming process that spans several years. If swift results are required, I believe outsourcing is the only viable option. This reflects the essence of the economy: assigning specific tasks to contractors rather than developing in-house expertise," says Oleksandr Zozulya.

Yulia Kondratyuk warns that it is important to choose a service company carefully . She cites examples of clients choosing other vendors because of cheaper prices and a quicker promised deadline, and then returning to Stfalcon. Therefore, it's advisable not to pursue unrealistic estimates. Instead, prioritizing quality service will be crucial for fostering successful long-term collaboration.

Stfalcon has experience in software development cooperation with different businesses: both enterprise and medium-sized companies. Large enterprises typically rely on their in-house teams for development but frequently require supplemental resources. In this case, Stfalcon offers outstaffing cooperation, strengthening the client's team with developers with the appropriate expertise.

Medium-sized companies are inclined towards outsourcing. Armed with ideas and funds, they seek comprehensive implementation and expertise, spanning from research and development to the release of a finished product.

"When engaging with such clients, we initiate a Discovery phase before commencing development. This phase enables us to test and outline the idea and prepare documentation to guide the project's progression. Our development approach is founded on flexible management methodologies, ensuring our clients retain control over the project at every stage and achieve the highest quality outcomes," says CBDO Stfalcon.

A combination of outsourcing and outstaffing is frequently employed when collaborating with a single client. The optimal cooperation approach is selected for each client individually, tailored to their specific business objectives.

The Stfalcon team is ready to share its experience in developing and launching your business. In the company's portfolio you can find more than 325 completed projects, and the rating on Clutch, the leading platform for ratings and reviews of the world's leading IT service providers, reaches 4.9. Therefore, if you are interested in getting advice from an expert team, finding out the cost of your project, or ordering development, let's get to know each other better .

Originally published at Stfalcon.com