Blackbelt - Insource vs. outsource software development

Choosing between insourcing or outsourcing software development is a tough decision for many businesses, especially startups and SMBs. Supporters of outsourcing say it allows you to focus on the more strategic aspects of your business.

In contrast, insourcing supporters will argue that they can control and take more responsibility for their projects. Before choosing the best software development option, you should clearly understand what insourcing and outsourcing mean. This blog will look at the pros and cons of insourced and outsourced software development, highlighting what each offers.

What is software development outsourcing?

Software development outsourcing is the assignment of specific projects to people or groups outside your company. You delegate tasks related to custom software development to a specialized development company. In other words, you temporarily contract people or a team from an external organization to join your internal project. You or your outsourcing partner assembles this team from IT professionals or freelancers. This will save you time and money. In theory, this is the best option as you can choose from many experts worldwide. 

Pros of outsourcing

When you decide to outsource, you don't need to go through the hiring process, and you will have a well-rounded and experienced team of developers to work on your project. Finding the ideal software development company to work with is key. A good outsourcing partner will become part of your team, and all doors of communication will be as wide open as if they were in your office.

Other benefits of outsourcing:

  • ● Outsourcing is more cost effective than in-house development because the cost of onboarding and training contractors is much lower.
  • ● You can gather all the necessary skills and experience without going through a lengthy selection process.
  • ● It gives you access to a large talent pool without the risk of trying to hire talents that others are also fighting for.
  • ● Launching a project is quicker: you can go from the green light to getting started in as little as two weeks.
  • ● The team can be scaled up on-demand.
  • ● Compliance and regulatory requirements can be managed using audits, contracts, and trusted platforms for controlling developers.
  • ● Well-managed budget.
  • ● Faster delivery time and fewer staffing problems. 


Cons of outsourcing

Some disadvantages of outsourcing may include prioritization, communication issues, hidden costs, and varied quality. The best way to combat these challenges is to analyze each potential software development company you've considered thoroughly. (Our previous blog offers recommendations for this.) One of the biggest pitfalls companies have with software outsourcing is settling on a company before doing their homework.

Additional risks of outsourcing:

  • ● Product and service quality issues may arise.
  • ● Control over the development team and process is limited.
  • ● Security risk because data safety and privacy cannot be guaranteed.
  • ● Communication problems may arise due to distance, language or cultural barriers.



Insourced or in-house software development:

Insourced or in-house software development means software designed and developed by professionals of the company. The deal here is that you can start in-house development from scratch. You can fill each role with people with the necessary skills and experience. Although very expensive, in-house developers are committed to fully controlling your project. Internal development requires hiring full-time employees for the job. You must go through the recruitment, interview and onboarding processes to build your own IT team. 

Pros of insourcing

Having in-house software developers allow you to have your own team within the company. If a business need arises, you just simply walk into their office instead of having to contact a third-party provider. As the in-house group serves as your team, aligning with the changing company goals and priorities is easier.

Additional benefits of insourcing:

  • ● More engagement and face-to-face communication with the team.
  • ● Sufficient control, coordination, and leadership of the team.
  • ● No pressure from other project deadlines; the team can devote its full attention and commitment to your custom project.
  • ● Little to no language barrier between team members from a similar culture.
  • ● The team can build exceptional technical expertise with efficient debugging, maintenance and support capabilities. 

Cons of insourcing

These are the same old challenges every business face when it comes to realizing something new in-house: 1) time constraints averting your team from gaining the necessary skills, 2) unseen expenses popping up unexpectedly as you move forward, 3) resource shortages forcing you to make painful infrastructural investments, and 4) quality shortcuts preventing full project realization just to meet deadlines. Navigating through these issues is one of the main reasons why many business owners choose outsourcing at the end of the day.

Additional risks of insourcing:

  • ● In-house development costs are higher because you must finance infrastructure costs, wages, other employee benefits, and training costs.

  • ● You may have difficulties finding skilled IT professionals necessary for the project.
  • ● The hiring and onboarding process can take a long time.
  • ● There is a risk of losing your good developers due to more attractive offers from other companies.
  • ● You are responsible for the regular training and updating of your development team.

Key differences:

Let’s look at a comparison table highlighting key insourcing and outsourcing differences.


Overhead expenses, constant salaries, and other benefits are costly

Geographical rate differences and a bigger talent pool makes it cost-effective

Privacy and data safety is guaranteed 

Data security can be assured by contracts and standards. 

High-quality product or work

The quality of product or work varies

Limited set of tools, technology, and resources 

Extensive set of resources, experts, and technology stack available

The procedures are strict and less flexible

Framework is more flexible and adaptive.


Which strategy to choose?

Insourcing or outsourcing software development projects are both viable options. Organizations’ choice depends on various considerations, including development costs, required skills, and organizational culture. While insourcing offers more control and customization, outsourcing is more scalable and cost-effective. Insourcing might be better when the project covers a core business function, and for one or more reasons (security risks, compliance, company culture, etc.), you need to keep it in-house. Outsourcing is better when you develop a non-core function and want to benefit from lower costs, modern solutions or there is fierce competition for talents (as is the case with software developers). In addition, outsourcing software development projects allow growth through technology innovation while simultaneously reducing risks and increasing profit. Again, in this case, finding a reliable software development partner is the key to your success.

Download our Budapest Nearshoring ebook to get know why it's worth outsourcing your softwaredevelopment team to a Hungarian nearshoring partner:


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Blackbelt - Insource vs. outsource software development

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