Hiring an in-house team is a no-brainer, but for some cases, this is not the most cost-effective solution at all. Apart from being more expensive, finding the right specialist to join your team takes much more time than a single day, so insourcing can also be quite lengthy. So instead, businesses tend to outsource their projects, or even just extend their teams to cut costs and fill-in the talent gap to continue working on their projects hassle-free.
Global market of IT outsourcing has reached $92.5 billion by 2021, and it will be worth $397.6 billion by 2025. Cost reduction is the main reason to outsource for 70% of companies, so outsourcing IT experts is a popular practice amongst many businesses.
JatApp has been providing dedicated teams and outsourced software development services for more than 6 years, so we know a thing or two about both insourcing and outsourcing and how they differ. In this article, we share some of our knowledge about insourcing, outsourcing, and will also talk about team augmentation for you to define what matches your project needs the most.
What is the difference between insourcing and outsourcing?
To be on the same page, let’s briefly recap what’s insourcing and outsourcing. Insourcing means that you have an in-house team of developers employed full-time, so your product is developed solely by your organization. As for outsourcing, this approach involves hiring a third party to work on your project. You can look for an outsourcing vendor not only outside your city, but all over the world.
Speaking about what makes the difference between insourcing and outsourcing, take a look at the table below, where we compare in-house vs outsourcing:
Pros and cons of insourcing
As for advantages of insourcing, here are some major benefits that insourcing can bring for your project:
- High level of project engagement. The in-house team remains completely dedicated to your project, and shares your company’s goals and vision. Also, face-to-face communication helps to avoid any misunderstandings related to the project.
- Cultural affinity. One of the benefits of insourcing that shouldn’t be taken for granted. Having an in-house team means that you’re most likely to hire local professionals, who have no cultural gap with you. As a result, your project development will be much more efficient.
- Long-term collaboration. When the work on your project is over, your in-house team can immediately start working on the next one, which eliminates the need for a new hiring campaign.
Aside from clear benefits the in-house team can bring you, there are several pitfalls that you need to consider:
- High expenses. Hiring a local team in-house is usually expensive. You have to spend additional costs on candidate recruitment, as well as pay for the insurance and taxes for each employee.
- Lack of IT professionals. As your hiring campaign is limited, it can be much harder to find professionals with the required level of expertise for your project.
- Onboarding and employee retention. After hiring an engineer, you have to spend additional time on their further onboarding. You also have to think of additional benefits for your team members, so they won’t decide to quit.
- A constant need to upskill and train the team. If you’re going to expand your project or start a new one, your tech team has to gain new skills and knowledge. That is why you’ll have to invest time and money into their upskilling.
When insourcing is a reasonable choice
Insourcing is more reasonable when you need a dedicated team for long-term projects, and you’re ready for higher expenses due to this need. In other cases, hiring an in-house team full-time doesn’t really make sense.
Pros and cons of outsourcing
There are several benefits of outsourcing that motivate businesses to hire IT talent overseas. These advantages include:
- Cost-effective development process. Outsourcing your project to a company from a country overseas is much cheaper than hiring developers in-house. In Ukraine, for example, you can find qualified IT professionals who will deliver the same level of quality for your project at a much lower cost.
- Access to the best talent with knowledge relevant to your project. It is one of the main benefits of outsourcing. Since you search for a team around the world, you have better chances to find people with skills and knowledge that fit your project requirements.
- No extra expenses. You don’t have to worry about additional costs on training, equipment, paid vacations, and such. The outsourcing company takes care of these things on its own.
- No need to spend time on recruitment and onboarding. When you outsource your project, the company you hire will provide you with workers that don’t require additional project onboarding. Still, many companies usually offer you to interview the candidates.
Apart from benefits of outsourcing, there are some disadvantages as well:
- Inability to take full control over the development process. Since you decide to outsource your IT team, they are located far away from your company. It means that you can’t fully control the way the outsourced team works on your project.
- Data security and intellectual property risks. Again, your outsourced team works remotely, so you have to choose the vendor wisely, so that your IP rights and data security won’t be violated.
- Language and cultural gap. IT workers from other countries may not speak English fluently, so communication barriers may appear. Also, a presence of cultural differences can be another reason for potential misunderstandings.
If you want to enjoy all the benefits of outsourcing, you need to look for vendors that are reliable. They must have proven expertise in the industry and positive feedback from their previous customers. You’ll put your project at unnecessary risks, if you deal with an outsourcing partner that can’t prove their reliability.
Let’s take JatApp as an example here. We have 6 years of experience in the IT outsourcing industry and 200+ successfully delivered projects for our foreign clients. One of such projects includes Pre-Quest, a project that was fully outsourced to us. The customer needed a full-cycle development of their product, so we created a new solution from scratch to meet their business needs and followed all the project requirements.
When outsourcing is a better option
Benefits of outsourcing are attractive to companies that require an extra pair of hands to work on their projects. Also, when you have an in-house team, you may delegate certain tasks to the outsourced team, so that the in-house workers could fully focus on the project. Additionally, it is a good option for companies that have a limited budget and don’t want to spend more on hiring an in-house team.
Team augmentation – why is it worth considering?
Another approach to acquiring new talent is team augmentation — a hybrid solution that doesn’t make you choose between insourcing vs outsourcing model. Team augmentation involves best practices of insourcing and outsourcing at the same time. It is an outsourcing strategy of hiring tech experts with the expertise your project lacks to join the in-house team.
How it works
When the company’s project requires certain talent, but they don’t want to spend a lot of resources on the hiring campaign, the team augmentation is the best decision. The business asks the vendor for developers to hire, and the vendor gives the client candidates to join the in-house team and help with the project. As a result, a company can focus their outsourced and in-house workforce on the same project.
In such a way, JatApp has helped Cunio with team expansion for their product. Our client had developed a property management platform and needed to update it for addressing new market needs. While the customer’s tech team had to focus on the development of new functions, they also needed to create a notification microservice for the platform at the same time. JatApp provided the client with a team of backend developers and a project manager to address this challenge. As a result, functionality development and microservice creation didn’t interfere with each other, and the product was smoothly upgraded.
Cunio user interface
Furthermore, JatApp can offer you to hire our professionals as your full-time employees after a year of cooperation with us. This is a very promising practice, as when you have a professional, who has worked with your in-house team and understands your company and business needs, you won’t have to spend any time and resources on the talent recruitment again.
Team augmentation has several benefits that companies consider valuable:
- Flexibility to scale the team. You can scale your team up and down whenever you want. All of the administrative duties for team augmentation are handled by the vendor.
- A vetted developer with the fitting expertise. You get a tech professional fully dedicated to your project, who works directly with your team just like a new in-house employee. However, you don’t have to spend additional costs on equipment, training, paid vacations, and other overheads.
- Team augmentation is more trouble-free. You have all the benefits of outsourcing, but you won’t have to worry about quality control, deadlines, or any problems related to the project delivery. Your in-house team already keeps all things managed, while an outsourced employee contributes their skills and expertise to the project.
There are some cons to mention as well:
- Time-consuming onboarding. Team augmentation is just like hiring a new in-house employee, so you’ll have to spend some additional time on onboarding.
- Language gap. As you’re hiring an IT professional from a foreign country, you have to make sure that their English proficiency is sufficient to join your team.
When team augmentation is the best fit for your project
In case you don’t want to start another long-lasting hiring campaign to find the required talent, you’ve compared pros and cons of outsourcing and still can’t decide whether you should go for it or not, consider team augmentation. This approach is the best if:
- You already have an in-house team and are looking to extend it.
- You need to acquire new talent fast+your time and budget on acquiring a new professional is limited.
- You want to have a fully committed developer, with whom you can communicate as effortlessly as with the rest of the in-house team.
JatApp offers team augmentation services with maximally accurate selection of IT professionals to meet the client’s unique requirements. One of the examples when we offered team augmentation is the Near Miss Reporting app. The customer has a workplace management solution managed by a digital agency from Denmark, and they needed to integrate a mobile application for improving near miss reporting inside the company. The customer’s team lacked tech professionals who specialize in mobile app integration.
Near Miss Reporting App functionality
To address this specific aspect, the customer extended their tech team with our developers who created the mobile app, integrated it with the IBM TRIRIGA reporting system, and developed a web-based dashboard. Our customer benefited by having no need to look for candidates to deal with this challenge, so the problem was solved with a minimum of cost and effort.
How to make the right choice
Based on what’s been told about insourcing, outsourcing, and team augmentation, it’s necessary to take into account the following factors before deciding what approach to select:
- Business needs
- Scope of work
- Project maintenance
- Potential risks
If you need to outsource your project or just extend your current team, JatApp will provide you with experienced IT professionals. We offer team augmentation, as well as can provide you with a remote dedicated development team.
Our company will provide you with the list of the most suitable candidates to join your project. You will remain a final decision-maker on whether to hire the developer or not. You’ll be able to manage our workers just like your in-house team with having complete control over your project and development process. Contact us, if you want our company to provide you with skilled IT experts, as well as to reduce your development costs by up to 60% in comparison to Western markets. We will get in touch with you as soon as possible.