Software development: in-house or outsourced?

Software development

Creating a software product is very similar to building a house. This is responsible, multi-stage and requires expertise. And at the initial stage, the question always arises: do it yourself or invite software outsourcing company? If the result is important in a short time and there is no time to study technologies, organize work processes and control, the best solution would be to invite a working team. So in development, high quality in a short time can be provided by an outsourced software development team.

Why outsourcing is more effective than a software development department?

Let’s analyze this issue using the example of “Company A”. “Company A” plans to create its own software product in a short time. The company is engaged in pharmacological business and there is one system administrator from IT-specialists in the state.

Question: what is more rational for “Company A” – to organize a development department or to seek help from a contractor?

Let’s assume that “Company A” decides to organize its own development department. To do this, it is necessary to calculate several variables: the rent of additional jobs and the cost of their maintenance (X), the wages of developers (Y), the purchase of equipment and software (Z). Let’s take the average values ​​for the market.

1. Calculate the costs for the team:

Team: 3 backend developers, 1 frontend developer, 2 mobile developers (android and ios), project manager, tester, DevOps engineer and head of department (technical director). In total – 10 people. It is such a team that can ensure proper quality.

Rent of additional workplaces + costs for their maintenance (per 1 employee per month) – 15,000

Total: Х = 150,000 (rub/month)

The salary of specialists is 100,000 rubles per month (on average).

Y= 1,000,000 (rub/month)

Purchase of equipment and software – 50,000 for 1 workplace.

Z = 500,000 (rub)

2. Add to these components indirect costs (taxes, bonuses, insurance) and we get that the cost of maintaining the development department of “Company A” will be at least 16 million rubles in the first year.

P.S.: calculations do not claim to be 100% accurate

But there is another variable that we did not consider – the time (T) to find strong staff and organize processes within the development department. And perhaps this is the decisive factor. It is impossible to calculate for sure how long it will take to assemble a well-coordinated team, ready to systematically and quickly perform tasks. It may take a couple of months or a couple of years.

Besides, are you familiar with the term “underutilization of engineering personnel”? This indicator means the workload ratio of employees with tasks during working hours. Underutilization cannot be equal to zero – any full-time employee is forced to solve organizational issues, undergo training, and so on during the working day. And the higher the underutilization of the engineers of the development department, the more expensive it will cost the employer. Unlike a full-time development department, an outsourcer can manage the underutilization of its specialists and redistribute resources for numerous projects. This works because the employees of the outsourcing company have time to work with their colleagues while working on other projects, which allows them to work more flexibly and efficiently.

To summarize:

1. Creating a software development department in a company is a resource-intensive process. A remote team will cost less: not so high salaries (you can contact companies in the regions), there is no expense for depreciation of jobs.

2. One of the good ideas is to use platforms that can bring you a perfect specialist-project match. also can help with it – to find high-quality remote developers with relevant skills: to find a front-end developer with deep knowledge of CSS, phyton developers with a level of senior, ios developer programmers, and other experts from this field.  

3. It is objectively impossible to create your own development department and release a product in a short time (3 months to a year). In this case, it will take more time to launch the process, not the product.

4. The outsourcing team of developers ( works more efficiently, more smoothly and faster than the office team – they manage the underutilization of specialists more efficiently, and thanks to the built-in internal system they can flexibly replace staff. Plus, there is a difference in the project and process approach. When people are sharpened on a project approach, working in the same context, they begin to burn out. People from teams that are engaged in outsourcing are more likely to focus on development in different projects from different industries.

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