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The Truth About Outsourcing and Insourcing Your Development – This is Why You Need a Bit of Both

February 21, 2024

The lowdown on outsourcing and insourcing your product development, the benefits and disadvantages of each, why it’s always smarter to invest in both and how to get the best software outsourcing to complement your in-house team

Should you outsource or try build your own team? It’s a hot topic in the software and dev space, which is why we covered it recently in our post on how to build a development team

But if you go and Google a bit around outsourcing and insourcing, you’ll notice a definite “either/or” sentiment online. It’s as if everyone pits the two against each other; most results point to “outsourcing VS insourcing”. As if they’re competing ideas.

But aren’t they really just two sides of the same coin?

Maybe it’s not about choosing

There’s a lot of reason to believe that it’s never a case of having just an in-house team. Even Facebook (Meta) and Google (Alphabet) outsource. Ditto Twitter, Microsoft, Apple – everyone.

Why? Software devs are in huge demand, so they tend to move jobs a lot.

Internationally, the average tenure for a software developer is around 2 years – according to a Hackerlife study of devs in Silicon Valley, and it seems to be the general consensus around the web.

And locally in SA, it’s much the same. In fact, 30% of developers said they’re planning to change roles in the next 12 months, according to OfferZen’s 2023 State of the Software Developer Nation report.

So let’s just unpack the idea of topping up your internal team a bit…

What we mean by outsourcing and insourcing

What is outsourcing

Outsourcing all or part of your development to a software development agency, for example. This can be as big as outsourcing the entire development process of an MVP or product, or just having 1 or 2 extra devs to top up your current team. 

The Pros

  • Experience – agency devs are absolute experts, you get the best of the best.
  • Immediate – no interviewing/waiting required, just call and you have your devs ready to get going.
  • Cost saving – there’s no acquisition cost (advertising position, interviewing, hiring etc.), no additional employee benefits or any of the extra costs that come with hiring. It’s one price and that’s it.
  • Less admin – there’s no IRP5s, tax forms or other admin on outsourced workers.
  • Less risk – if the job’s not done right, the outsourcing company will pay to fix things, depending on your deal with them.

The Cons

  • Might be offsite – an outsourced team won’t necessarily be in your offices, they can work offsite, but you might have at least 1 representative that’s at your offices.

What is insourcing

This is taking the time, resources, effort etc. to build a development team that’s in-house through employment, as we describe in our post on what to know before you start developing an app.

The Pros

  • Onsite – your team works at your site, or as per your choosing/contracts, and you can train and develop people inside your own company.

The Cons

  • Takes a long time – it can take many months, probably years, to build a dream team, during which development is slow or stands still entirely.
  • You carry ALL the risk – if the job’s not done right or your employee doesn’t perform or suddenly quits, you’re on your own.
  • Cost and admin – internal teams are “bums in seats”, meaning you have to pay to not only find them, narrow and select them, but also carry all the associated costs and admin of employing someone (including tax, insurance, benefits, packages etc.). Not to mention their mental health, training and development etc.

Why you probably need a bit of both: outsourcing and insourcing

One of the key success factors of a business is building that internal team, so no matter what you’re always going to be insourcing and developing internally. But, considering all the risk factors, there are compelling reasons to go for a dual approach and strengthen your internal team with outsourced expertise.

1. Hiring developers can be tricky and costly

Remember how we said 30% of SA’s devs intend on changing jobs in the next 12 months? Well, it goes further – 60% of devs have almost no interest in staying somewhere for much longer than 2 years (less than 30% want the stability of a 5-year tenure).

This means your dream team devs are definitely out there somewhere, it’s just so much harder to find them. And you’ll probably have quite a few heartbreaks on the way to getting them. Not to mention, it costs quite a bit for every new hire…

2. Replacing core employees is extremely expensive

Something very few businesses talk about is the actual cost of replacing an employee. It’s not just the loss of productivity (estimated to cost companies over $1.8 trillion per year in the US alone) when someone quits, but the costs of advertising, sourcing, interviewing and shortlisting (usually with HR) – not to mention the time it takes away from managers, department heads and sometimes even senior management (which costs millions, surely!) to comment and approve new hires.

In fact, the Society for Human Resource Management (SHRM) says it probably costs you 6 to 9 months of an employee's salary in hidden costs to replace them. So, to replace a senior dev earning R60k per month probably costs you between R360k and half a million Rand to replace.

That’s why it’s important to keep outsourcing a part of the mix. See how to outsource app development successfully.

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