Insourcing and outsourcing are both great ways to fill in the technical gaps of your team for product development. While insourcing can help you retain and reuse talents and resources from within your organization, outsourcing is a great way to save budget and get great deliverables for an affordable price range.
Want to know how well they compare against each other? Let’s compare insourcing vs. outsourcing today and find out! But first, we’ll start with the pros and cons of both.
Pros of Insourcing
1. Higher Quality Control
Insourcing allows you to have a better quality control by ensuring better connectivity with key team members working on the project. Insourcing cuts out the middleman and you can directly collaborate with the team for your inquiries and feedback exchange. This higher scale of freedom helps ensure a higher quality of the finished product.
2. Intellectual Property Protection
Your Intellectual Property (IP) is at less risk of getting leaked to a third-party organization or any malicious actors when you’re insourcing since all the project-relevant data stays within the organization.
3. Better Business Communication
Insourcing enables face-to-face communication since both you and your team members are working on the project by being present on-site. While remote collaborations are highly effective with the right tools and tricks, face-to-face communication is better for boosting business efficiency and establishing seamless communication.
4. Positive Impact On Brand Image
When the internal members of your company are working on your product, they have more loyalty toward the product, and the incentive of higher brand recognition motivates the team further to create a better product.
5. The Team Has Better Agility and Flexibility
Since you’re bringing in team members from different departments of your own business, you can scale your team according to your product development needs anytime. You also have the freedom of assigning their hours and determining their compensation.
Cons of Insourcing
1. Higher Costs
With insourcing, you will have to spend more in terms of capital since you will have to:
- Screen and hire new employees
- Pay their salaries
- Pay for additional benefits
- Additional business overhead like new workspace, new equipment, etc.
2. More Time Consuming
Even when you find the perfect candidate for a job, the onboarding process can take away a lot of time. On top of that, you have to arrange for proper training to get the new employee get used to the work culture and environment of your office.
3. Lack of Work Flexibility
Flexibility allows your teammates to distribute their workload based on project deadlines, remaining resources, or unforeseen delays in deliverables.
To take on a new project, the organization requires additional flexibility so your teams can take on more responsibilities. But when your internal team is already stuck with an objective, it’s not easy to delegate other tasks to them, reducing their flexibility.
4. Additional Headhunting Costs
Hiring an employee through the traditional onboarding method is expensive and time-consuming to begin with. The higher the level of recruitment goes, the more complex the process becomes.
Often, the cost of a specialist can exceed your regular budget, and it can be a concern in the long run.
Pros of Outsourcing
1. Lower Labor Costs With Higher Scalability
Outsourcing allows you to hire team members from countries where the cost of living is lower compared to others. Hiring from such a country allows you to recruit team members at an affordable rate while the pay scale is fair for the team members.
To add to the benefits, the team also comes with high scalability. Meaning, you can bring in or let go of team members any time you want depending on the scope and requirements of your project.
2. Access To Bigger Talent Pool
When offshoring, you’re looking for talent in a world full of professionals residing in hundreds of countries. With such a huge range to choose from, you can find professionals who specialize in niche skills relevant to your industry.
It’s easier to find the right expertise when you have more options to choose from, and it allows you to onboard better professionals for an affordable price rate that can help you stay competitive with bigger organizations.
3. The Deliverables Are Fast-Tracked
Outsourced projects are always strict about time. Since it’s easier to partner with highly experienced developers through outsourcing, outsourcing can help you receive deliverables regardless of how strict the timeline is.
You can also boost productivity for faster completion by having your internal and outsourced teams work on different objectives of the same project.
Another benefit comes from working round the clock. Outsourced employees all come in from different regions with different time zones, and they are constantly working round the clock, and the 24/7 productivity allows for faster project completion.
4. Allows More Focus On Core Business Activities & Business Goals
If the in-house team has to deal with both development and internal business procedures, the team resources are spread thin and none of the objectives are completed efficiently.
With outsourcing, you can hire a dedicated team of developers while the internal team takes care of other core business operations.
5. Reduced Recruitment Time
Outsourcing doesn’t require you to go through an arduous process of onboarding an employee. All you do is choose the right team members with the relevant skills, come to a mutual agreement over signing a contract, and integrate the new team with your internal team.
Cons of Outsourcing
1. Team May Run Into Quality Control Issues
Outsourcing brings in team members from all around the world, and it can create value differences in the development team. Quality Assurance becomes different when the outsourcing team is handling the entire task.
You’re dependent on the outsourced team for the entire task, and the final results may not match your expectations, making it a time-consuming process.
2. Security Concerns May Arise
Data breach is the worst nightmare for any company with a product that deals with client’s data, and outsourcing paves the way for possible data security concerns.
When you’re handing all of your Intellectual Property to the outsourced team for them to work on, you’re depending on the security system of your outsourced team for your data protection.
3. Language Barriers Can Falter Communication
Outsourcing teams have cultural and linguistic differences. Even when everyone speaks English, you can’t expect everyone to have the same level of fluency. As a result, certain terms or information can get lost in translation, and misinterpretations and misunderstandings can become commonplace.
4. The Team May Not Have Industry Expertise
If you don’t do enough research before hiring your team, you might end up with a team that, while being expert developers, doesn’t have any experience relevant to your industry.
Without experience in relevant industry, it’s much tougher to create a product that will appeal to the masses even when highly experienced developers are creating the application.
Insourcing Vs. Outsourcing: Final Comparison
| Parameters | Insourcing | Outsourcing |
| Location of Operation | On-site | Remote |
| Types of Activities | Core business operations such as budgeting, investing, recruitment, etc. | Non-core business activities including IT services, HR activities, content creation, etc. |
| Operational Control | Completely under the control of the management | Control is shared between the client and the vendor |
| Costs | Expensive due to hiring and training costs | Cost-effective, but unexpected additional costs may arise in the future |
| Use Cases | Preferable model when the information related to the project must be kept in-house at any cost | Preferred for saving expenses on non-core business operations |
| Scalability & Flexibility | Low | High |
| Quality Control | High | Mid-Low |
| Knowledge Sharing | Higher due to talent retention within the company | Mid-High, since most of the time outsourcing teams share their expertise with the in-house team |
| Security Risks | Low | Depends on the security compliance and security infrastructure of the vendor |
Which Option Should You Opt For?
1. What Is The Current Top Priority of Your Business?
If the current priority of your business is to save costs, then outsourcing is the best way to go. If you’re planning to keep all information about your project within the organization while retaining all the talents, then you should opt for insourcing instead.
2. How Time-Sensitive Are Your Business Needs?
Businesses often have to maintain a strict deadline for reaching the target market. If your business needs to reach your target audience with a viable product as soon as possible, then outsourcing is a great time-saver. If your project requires work over time and slowly improving itself, insourcing is a preferred choice.
3. How Established Is Your Business?
Small and medium businesses often don’t have enough budget to bring in full-time specialists with high salaries. If you’re a small startup and you need expert advice and supervision for creating your product, outsourcing is the best way to complete your product while saving your budget.
If you’re a large organization that’s aiming towards building and developing an application over time and can retain developers, then insourcing is the way to go.
4. What Is The Nature of The Objectives?
Determine the nature of the objective to determine the suitable model. If your objective is to reform and improve the internal infrastructure to increase the organization’s competitive advantages, insourcing can help you better.
But if your objectives are more operation-oriented in a highly repeatable industry, then outsourcing is a more viable option for getting faster deliverables that can perform certain operations to solve core pain points of your target audience.
5. How Fast Do You Need To Get It Done?
Insourcing is best when there’s no rush and the project is predicted to go on longer. Outsourcing models always uphold the idea of offering faster deliverables within a certain time frame, and it’s the most logical choice if you want to get it done as soon as possible.
To Wrap It All Up
While both insourcing and outsourcing are viable and reasonable sourcing choices, they are entirely situational with their own set of advantages and limitations.
If you’ve read through the entire article and have decided on outsourcing your app development or other operational processes, you should consider partnering with Impala Intech for an awesome project management and development experience.
FAQ
Yes, if not managed properly, insourcing can lead to complacency and resistance to change.
Insourcing generally offers more control over intellectual property, but contracts should address IP concerns in outsourcing.
Economic factors such as exchange rates and labor costs can influence the decision to insource or outsource.
Outsourcing can be more adaptable due to the scalability offered by service providers.
Yes, businesses often reassess their strategies based on changing needs, market conditions, and technological advancements.
