Why is it Cheaper to Pay More? The Real Cost of Hiring vs Outsourcing in Software Development

March 29, 2021

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Outsourcing is no longer synonymous with cheap. When we compare an hourly rate, often it’s cheaper to hire an in-house developer than to outsource one. So why IT outsourcing is it still worth spending money? The devil is in the details. It turns out that an in-house team of developers costs more than just a salary. Let’s look at the real cost of hiring a developer and other challenges connected to it and check if outsourcing is a more beneficial solution for your company.


You will learn:

  1. Hiring vs. Outsourcing
  2. The In-house Development Team Will Cost you More 
  3. Recruitment Process and Onboarding Takes Time and Money
  4. Building a Team Is Not That Easy
  5. IT Talent Market Is a Tough One
  6. Flexibility and Ability to Scale the Team Are Important
  7. Sometimes It’s Crucial to Start Fast
  8. And Why Not to Choose the Cheapest Outsourcing Offer?
  9. Final Thoughts: Is it Cheaper to Pay More?


Hiring vs. Outsourcing

Hiring an in-house team of developers has a few obvious advantages and a lower hourly rate is not the only one. You know your developers better and have bigger control over the quality of the product developed. It seems to be easier to assure yourself that developers understand your vision and monitor if everything is going in the right direction. 

On the other hand, these factors can also be covered in outsourcing – but only if you find the right, honest and professional software house to cooperate with. Let’s find out what some significant challenges connected to hiring are and discover how outsourcing can solve these problems.


The In-house Development Team Will Cost You More

The actual salary is the apparent cost of hiring a developer. How high should it be? It all depends on your location. You need to pay your developers a competitive price because it’s a competitive market. But salary is not the only cost connected to hiring a developer. New employees need office space, supplies, hardware, software, and tools. There are substantial one-time expenses but also fees you need to pay every month, for example, licenses for programming and project management tools, which are not cheap, especially if your team counts several people. Your employees will also count on some perks, like performance bonuses, health programs or discounts to sports facilities. You need to pay for public medical insurance, social insurance, and also pay taxes.

During the whole year, there are a few paid holidays during which your employees won’t work, but you’re going to have to pay them. They can also call sick leave or go on maternity leave, and there won’t be any replacement. It’s similar in the case of paid vacation. Then, they will need some time to get back into the proper workflow. 

How does it look like in the case of outsourcing? Although an hourly rate may be higher, you don’t need to worry about any additional costs – that’s all on a vendor. You gain full control over expenses and can focus on your business while deriving from the knowledge of experts.


Recruitment Process and Onboarding Takes Time and Money

When you try to complete an in-house team of developers, you or your HR team need to spend some time on the recruitment process. Then, there are also interviews, that can take a long time. After you hire new employees, the onboarding stage will also take some time. You’ll need to spend money on training and building a good team. Again, you pay, and the development process hasn’t started yet.

In the case of outsourcing, you hire an external team, and the most significant HR challenge is to find the right software house to cooperate with. You shouldn’t look at the price only. Remember, that the quality of your product is crucial. Look for a partner that understands your vision, offers high quality, rapid development, and excellent project management. Check “10 questions you should ask your potential software outsourcing provider” because asking the right questions is the best way to pick a relevant software house for your project. Finding a perfect outsourcing partner surely takes some time and effort, but obviously finding good employees takes more.


Building a Team Is Not That Easy

You need to find a perfect team of skilled developers that have the knowledge and experience in the technology you need and fit your project requirements. And it’s not easy to find people with relevant skills to achieve your product, business, and organizational goals. What is more, some time has to pass before your in-house team becomes highly efficient. Before that, they will work slower. If you decide to outsource, you immediately get a great team ready to work at the highest productivity level.

The team also needs a Project Manager, someone who will organize everything and track the progress. In the case of building an in-house team, you’ll have to hire an extra employee or dedicate your time to manage everything. Your developers may have strong technical skills, but they will still need to know how to adapt the product to your target audience and organize work. A good software outsourcing provider has it all settled, and the Project Manager is assigned to every project.


IT Talent Market Is a Tough One

Employees rotate, change jobs a lot, get better offers. The IT market is competitive. Your employees may also find another job offers over time. That will have a negative impact on your team, especially if nobody can easily pick work from a released developer. That problem does not exist in outsourcing, because a company you outsource to has everything organized. You don’t have to worry about absences or releases, because your outsourcing partner will have the replacement covered.

What is more, if you live in an area of multiple huge IT companies, the most talented developers probably already work there. You may be able to hire medium-skilled developers. In the case of outsourcing, you can have the best ones from a chosen location. You benefit not only from their talent but also from their experience. The right software house will advise you on the scope of your project, business direction, technologies.


Flexibility and Ability to Scale the Team Are Important

And what about scaling the team? Your requirements may change with time. You may decide that you need your product to be finished faster, or you want some more features so that additional developers will be required. With outsourcing scaling up the team is easy, especially if you choose the right software house. An additional developer can be assigned to your project immediately.

On the other hand, you should also be aware of the fact that you won’t need every one of your developers after the product release. If you go with MVP first, your demand will be reduced, but after some time you may need developers to deliver updates or develop additional features. In the case of outsourcing, you get developers in the scope you need, for a limited time only. After developing MVP, you can adjust the size of the team to your needs.


Sometimes It’s Crucial to Start Fast

There are many aspects of hiring that affect the fact of you launching later. You need to spend time on the recruitment process and then on onboarding. Then, if you won’t hire a project manager, the development won’t run smoothly. Every time your employees get sick or go on vacation, you lose precious time and don’t get any closer to have your product developed. In the case of outsourcing, you set a date and do not worry about anything. The development starts immediately. Finally, your product appears on the market sooner.


And Why Not to Choose the Cheapest Outsourcing Offer?

When choosing a software house to outsource your product development, you don’t want to go for the cheapest offer. That way you risk getting inexperienced developers or interns that won’t be able to deliver your product on time, and there will also be problems with quality. That software house may also assign developers to several projects at the same time, so they won’t be able to focus on your product. There may also be problems with communication, project management (the cheapest teams often work without a project manager), outdated technologies, or poor design which directly affects bad User Experience and the fail of your product.

To receive all the benefits connected to outsourcing, you need to choose your partner carefully. Only that kind of approach will let you finally cut costs, receive the highest level of productivity and the best product. Remember, that poor UX, bugs, and outdated technologies will result in a failed launch, and it will be hard to regain your customers after that. 


Final Thoughts: Is it Cheaper to Pay More?

When the software you create is the core of your company’s activity, and you want to sell it further, it may be better to invest in building an in-house team. And many companies have created a successful one! Everything depends on your business strategy, goals, time, and money. If you need a team of developers for some determined task only, even to create a mobile app that will be the core of your startup, outsourcing may be a better solution. 

When you analyze the benefits of IT outsourcing vs. hiring your own team, you should compare all the factors mentioned above. As you already found out, there are many not-so-obvious costs of hiring a developer and also a few issues connected to it. With outsourcing, you get a team fast and can start building your product. You can scale the exterior team when you need it, and you have a project manager who keeps everything organized (good software houses organize work with Agile methodology and Scrum framework, enabling you to easily communicate with the development team – that is how we do it at Appstronauts). Finally, it turns out that what seems to be cheaper doesn’t need to be that in the long run. In most cases, outsourcing is not only more beneficial but also, ultimately, it’s a cheaper and safer solution. Analyze your own case and make a decision based on that.

Looking for an app development outsourcing partner that provides excellent skills and quality combined with a reasonable price? You’re in the right place! Send us a short description of your idea to hello@appstronauts.co. Our experienced developers will be thrilled to help you with turning your idea into a perfect app. Check our previous project on Clutch for more Appstronauts details.

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