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In-House vs. Outsourcing: Winning the Cost-Effectiveness Battle

Have you ever been lost in thought about why such an enormous company as Google relies upon outsourcing services? And why Amazon doesn't? And when would these two counter strategies come to the golden balance?


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HebronSoft Info

3 years ago | 5 min read

Have you ever been lost in thought about why such an enormous company as Google relies upon outsourcing services? And why Amazon doesn't? And when would these two counter strategies come to the golden balance?

Outsourcing and insourcing: The rationale behind leaders choices

Let's start at the end. The answer to the last question is close to 'never' as every enterprise addresses its unique business requirements and is driven by sometimes sacred and secret motivation to outsource or not. Amazon, for example, avoids cooperating with a third-party vendor because they consider it undesirable to share the company's development processes.

Google, on the contrary, successfully implements outsourcing strategies by delegating a scope of responsible tasks, like IT infrastructure management, software development and maintenance, and some other important IT services to external vendors. According to Statista, Google's revenue amounted to $113 billion in 2019 and reached $41 billion in Q1 2020 which proves that the enterprise goes perfectly in line with a principle 'does what they’re best at and outsources the rest.

For an impressive conglomerate, cost-effectiveness may not be pivotal, however, middle- and small-sized companies prove to be more price-oriented. Though two years ago Outsourcing Portal International named less focus on cutting cost to be a number one trend during 2019, in general, cost reduction remains the top reason for outsourcing.(source)

What makes outsourcing financially attractive to SMBs?

To find an answer, here’re some facts and sources speaking for themselves.
- The global market of outsourcing revenue doubled during the last decade and amounted to around $ 92 billion in 2019 with a predicted $98 billion in 2020-2024.
- More than 90 % of the U.S. working population is open to freelance or temporary jobs.
- People witness the shift in outsourcing destinations: Europe presents a massive talent pool - more than 6 million highly competitive professional developers for a reasonable hourly price.
- 56 % of companies prefer to outsource application development to third parties.
- 74 % of CFOs had to move a part of their in-house workers to permanent remote positions as a result of the continuing coronavirus pandemic.

Why businesses opt for outsourcing software development

The following are some ways how to optimize your budgeting strategies with a trusted outsourced software development company.

Stay Concentrated

No matter what business sector you are engaged in, sooner or later you encounter software services that are out of your general competence. At this point, the company's decision divides into managing new obligations alone or delegating them to a remote provider.
Both methods may result in cost fluctuations. As not all companies are ready to onboard new specialists, they initially try to broaden the responsibilities of the existing crew. If the in-house team's attention is split into more segments, multitasking inevitably leads to lower quality of maintenance, frequent mistakes and general disbalance. Hiring an outsourced team is a piece of cake when a company is ready to entrust a part of responsible though minor back-end obligations onto a third party and get more concentrated on the corporate atmosphere and specific business niche.

Regular Payroll

This factor is considered to be the most reasonable one when speaking about outsourcing financial effectiveness, mainly because the in-house team typically costs a fortune. The statistics show that full-time employees tend to earn 58 % more than distant sources of labor. The cooperation with an outsourced development company implies one-off payment for a specific bunch of functions (commonly, for actual hours worked) and when the task is complete you may resolve whether to address this software vendor's assistance in case of necessity again or say goodbye forever.

On the contrary, sustaining an in-house team turns out to be financially tiresome in terms of fixed expenses on different types of insurances, family and medical leaves, overtime compensations, paid vacations, educational and retirement benefits, etc. What’s more, the remuneration must be paid to all hired developers on a regular basis even to temporary or part-time specialists.

Administrative Responsibilities

The term 'in-house' literally means the building where you should locate your team. It's not a secret that every full-time employee cannot but think about how much time and money they spend on getting to the office, whether it is hot or cold there and where they can have lunch. Of course, these are some basic needs, but as a boss you should think of providing the accommodation, rent cost, comfortable working conditions, hardware quantity and quality, software services and so on that inevitably increase a general monthly bill.

In comparison, hiring a remote team deprive you of such a financial burden. For example, your outsourced software developers' location is not dependable on yours and may not be connected to any specific physical place. The present choice opportunities allow all-sized enterprises to opt for any outsourcing vendor around the globe. From the financial point of view, you may choose any country with the most favorable economic situation: a number of developing countries have lower taxes and lower economic levels thus salary rates of local developers can please your expectations. Moreover, an outsourced software development vendor is responsible for updating its hardware and timely scaling for faster project delivery.

Staff Turnover

When it comes to team management, many employers keep headache pills in stock. Dealing with people is never easy and commonly involves much effort and great expenses. If your goal is to build a long-term commitment with your staff, if you want to have your own team of trusted workers, if you seek quick and direct access to your team, opt for in-house. In this case, you can create a unique family loyal to the company's business insights but get ready to control not only their work. The process of finding, interviewing, recruiting, testing, educating just one candidate takes months and in case of losing an expert (it happens all the time in the IT sphere as top on-demand specialists tend to change job positions once per several years) everything starts all over again.

To close a vacant position is time-consuming and in terms of business, time is money. Obviously, it's better to rely upon remote crew that opens unlimited hiring opportunities. Your company can get free from recruiting issues and decrease costs by outsourcing a certified tight-knit cohesive team. As a bonus, you dive into the global talent pool where the best licensed IT specialists, like software engineers, project managers, UX/UI designers, business analytics, etc., are already fished for you.

Conclusions
An outsourcing model looks to be way more cost-efficient than insourcing. And it holds true for both one-time tasks and long-terms projects that are beyond your professional skillset. A proficient outsourcing company requires no additional expenses while laser-focusing on software development tasks you set before them. No distracting factors and onboarding periods.

Here at HebronSoft, we do value our customers, and perfectly know how to save your time and budget. Just contact us, so we can help estimate your project.

https://hebronsoft.com/blog/in-house-vs-outsourcing-team


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HebronSoft is a software engineering company. We focus on technology and providing ways in which your business can run more efficiently, resulting in reduced costs and increased profits.


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