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Insourcing vs Outsourcing in IT Services: Which is the Best Model for Any Industry

Home » Blogs » Insourcing vs Outsourcing in IT Services: Which is the Best Model for Any Industry

Based on your project requirements, size of a company, budget, business strategy, etc you may choose Insourcing or outsourcing model as per your choice. Nowadays, outsourcing is a trend across the globe due to its cost-effective factor and there’s a strong belief that it will keep expanding in the upcoming years.

Few businesses do not prefer to hire a dedicated developer for their project whereas they prefer to save their hiring costs. According to the reports from recent studies, the total outsourcing IT budget has increased from 9.4% in 2018 to 12.7% in 2019 with a $92.5 billion worth market.

These all points don’t prove that in-house development is not fruitful at all because in case of the long-term needs, creating an inbuilt team will always be a better decision.

For a better understanding and whether to choose insourcing or outsourcing for your project, let’s quickly dive into the blog that covers a detailed overview of the pros and cons of having an Insourcing or outsourcing development team for your project, factors that influence the outsourcing, best places to opt for outsourcing your project, and much more.

Table of Contents

Interesting Facts About Outsourcing

Let’s have a look at some stats related to IT outsourcing for 2021:
outsourcing development budget

  • In 2019, the most significant IT outsourcing market share was held by APAC or the Asia Pacific region. It was predicted that the market vendors will get various opportunities to grow in the year 2020-2024. By the end of the year 2021, it is predicted revenue in the division IT Outsourcing to hit US$77,782.0m.
  • Information Technology Outsourcing’s global market size was accounted to be $66.5 billion in the year 2019.
  • It is estimated that the domestic profits of the IT industry might hit US$ 45 billion and US$ 150 billion in FY21 due to export revenue. It is also predicted that India’s IT service market might reach US$ 93 billion in the year 2021 and approximately US$ 98.5 billion by the year 2022.
  • According to the International Data Corporation, Worldwide Semiannual Software Tracker 2H20, it is predicted that the Indian software marketplace may reach US$7.6 billion by the end of the year 2021.
  • As per the International Data Corporation, in the year 2020-2023, the IT services in India might grow at a compound annual growth rate of 8.6%.
  • It is also predicted by the Indian Brand Equity Foundation (IBEF) that the Indian software and IT industry will hit $350 billion by the end of the year 2025.
  • According to the survey conducted by Deloitte, 78% of the respondents believe their outsourcing relationship is good.

Insourcing Model – Advantages & Disadvantages

insourcing model pros and cons

When a company hires a team of experienced software engineers to work on a project, we call it in-house app development. Generally, most companies hire a team of engineers to work on a particular project.

What is Insourcing in Business?

Insourcing or in-house is a technique of hiring staff for working on the tasks on behalf of the company and not giving the work to the outside of the company.
Or bringing a foreign employee into the company for the work at lower wages. Insourcing is brought into play at the interpretative times of competencies and production, to decrease the number in labor, transport, and taxes.

Benefits of Insourcing Model

High Engagement and Cultural fit

It is quite easier for In-House developers to become a part of your organization. They become an integral part of your company by understanding your company’s culture, goals, projects, and aspirations. They are motivated to achieve the best result by focusing on specific needs.

Increased Efficiency and Better Involvement

The in-house development team makes it easier to update project features, make changes, add new features, identify and fix bugs faster.

Cons of Insourcing in Business

Huge Price

Hiring an in-house development team is quite expensive. During the initial stages, funds are required to be invested for hiring developers and to train and develop them according to the standards of your company. You are required to pay insurance fees, seat cost, holidays, PFs, LTAs, etc. of your full-time-in-house employee.

Staff Turnover

Like any other organization, development companies have a very high turnover cost. Training and development of employees for over a year costs a lot to companies and sometimes they choose to leave the organization without paying a replacement, as a result of which the company returns to a class from their recruitment and training process. Hence, the company suffers from the loss of time, energy, and resources which was invested in their employees.

Limited Expertise

In-house employees learn and acquire from projects they have got from your company and also from work experience with any previous organization. You will have to bear the cost of hiring, training, and developing a new employee from the beginning if you wish to have a specific new skill engineer.

Difficult to Recruit Top Talent

It is very difficult to recruit employees for certain projects where both soft-skills and tech-wise skills are required. As we know that there has been a huge expansion in IT Industry which leads to increased competition in hiring the best-suited developers

Low Flexibility

You are required to sign certain agreements while hiring someone for a full-time job that keeps you bound to these people. Employee termination laws differ with different countries but in general, you can’t fire your full-time hired employee just because you have changed the area of your business. Thus, it is very difficult to fire the employee as you will have to pay compensation or go through some tiring retraining process.

Outsourcing Model – Outsourcing Pros & Cons

outsourcing model pros and cons

In the outsourcing app development process, an outside vendor is assigned tasks, and projects are handed to a company in outsourcing. Therefore, outsourcing a project is the right choice as it saves both time and money.

Why Outsourcing is the Best Model for IT Projects

  • Before 2019, the market size for global outsourcing hits $92.5 billion.
  • Approximately 300,000 jobs get outsourced out of the US every year.
  • More than 93% of organizations are thinking of adopting cloud services for the betterment of outsourcing.
  • About 68% of the outsourcing companies are concerned regarding data security and are considering switching to cloud technology.
  • More than 44% of chief intelligence officers say they are now more likely to use outsourcing suppliers than they were just five years ago.
  • For outsourcing IT, saving money is a major motivation.
  • 71% of financial service executives outsource their services.
  • Approximately 83% of financial companies are implementing robotic process automation.
  • Since 2001, more than 560,000 Californians have lost their jobs to China.
  • The financial services outsourcing market is worth over $130 billion all across the world.
  • It was estimated 2 years ago that the global outsourced customer experience market will be worth $75.1 billion.
  • About 24% of small businesses outsource to improve efficiency.

Advantages of Outsourcing Project Management

Cost Reduction

Outsourcing your project helps you to avoid all the extra expenses that were needed to recruit and maintain full-time employees. You can pay the developers for a specific task you hired them for. Thus, you can achieve all your goals within your budget with the help of outsourcing.

Easy Scalability

The size of the team working on your project can be easily altered according to your requirements without having to pay extra. For an in-house team, this becomes difficult because scaling the team means that raising the cost of resume sourcing and hiring a new employee, and firing an employee can lower your team’s morale.

Market Instantly

Sourcing and hiring the right developer makes it easier for you to focus on building and marketing products instantly. Whereas, it needs a lot of time and resources with an in-house development team. Outsourcing will reduce the time to market and will boost up the speed of product launches.

Proven Workflows and Processes

Good software development companies will provide you with a well-experienced team. The team offered would consist of employees who had worked on several projects and had written codes for different situations and requirements. They will have full knowledge of the processes and workflow needed to complete a specific project given to them. You can choose developers according to your project requirements.

Best Developers

Good software development service agencies have reached the best developers present in the market. They will be skilled and have good experience with handling certain projects in the past. So, if you plan to hire the best developers then you can ask for their blind CVs or check developer portfolios posted on the website.

Disadvantages of Outsourcing in IT

Cultural Differences

The cultural difference may arise with your outsource team when you are thinking of partner-up with a software development company from another country. But generally, the IT specialists are fluent in English so you can easily solve this cultural difference issue with the help of communication.

Time-zone Difference

App Development Company may not be flexible regarding the meeting hours due to time zone differences which will result in communication issues. Smooth communication is ensured by the vendors with the help of different solutions, but you need to make sure that you discuss this beforehand.

Factors that Influence Outsource App Development Cost

affecting factors in outsourcing projects

Several factors affect the overall cost of developing software. It is quite difficult to estimate app development costs without considering your project requirements. Let’s have a look at a list of the factors that affect the total development cost:

  • Features and complexity of the app
  • Developer team
  • Cost to outsource app developments from region to region

Features and Complexity

The development time and complexity of the application depend on the features. The cost charged by the outsourcing company will depend on the time taken to add specific features to your application by a developer.

Let’s take an example, a simple homepage for Snapchat will require about 15 hours to develop for unregistered users but for the success of an application, more efforts are needed. And if we upgrade the home page of an app with other features like dashboard, snaps, stories, search engine, etc. it will need around 50 hours to develop. Therefore, depending on the hours the cost will increase.

Development Team

The development team consists of programmers and graphic designers. You can get access to a hub of talent by hiring from an outsourcing software company. The developer team consists of the following:

UI/UX Designers

An attractive design of an application is very essential for the success of an application and gaining more users. The expert UI/UX designers are needed on board to design the structure of an application as per the requirements of the client.

The average salary of UI/UX designers is-

US- $85,499/year

India- $10,499/year

Project Manager

A project manager works as a mediator between the team and the client and manages the designer and developer team. They are responsible for organizing the working process, requirements of the client, developers, designers, and ensuring the software delivery on time.

The average salary of a project manager is:

US- $65,800/year

India- $7,500/year

Android/iOS Developers

Developers are considered the backbone of the entire team. To build a flawless application, experience in the project stack is required and the overall software performance depends on the programmer.

The average salary of Android/iOS developers is:

USA – iOS developers earn about $75/ hour and Android developers earn $60/ hour

India – iOS developers earn $25/ hour and Android developers earn $35/hour.

Cost to Outsource App Development by Regions

Now that you are clear about the factors influencing the overall cost, let’s have a look at the development cost in different regions worldwide.

North America

If you wish to outsource mobile app development then you must know that North America is the most expensive region. The earnings of US developers are more in comparison to others. On average companies may charge between $150-$250/hour. Due to high costs, new companies choose to hire developers that charge low rates.

India

India is the leading outsourcing destination for numerous international clients because of its services provided at reasonable rates. India is full of highly skilled young developers with creativity and unique ideas. The Outsourcing App Development cost in India is $20-$35 per hour. Therefore, hiring an app development outsourcing company from India is the best option to choose and highly advisable.

Western Europe

Since Western Europe has many developers, there might be a possibility of a wide range. The price may vary from $70/hour to $150/hour based on the country.

Eastern Europe

Eastern Europe has the largest tech hubs in the entire world. Most of the entrepreneurs prefer Eastern Europe because they offer a decent amount. The average rate in Eastern Europe is $50-$70 per hour which leads to high development costs.

Best Countries to Outsource your Software and App Development Projects

places to find app development services provider

Your choice may vary depending on several factors such as project requirements, financial implications, etc. let’s have a look at some facts that will help you in choosing the best offshore software development countries.

Ukraine

A wide range of educational opportunities is offered in Ukraine. Free education along with employment in the future is offered by a few companies so that more IT specialists graduate every year.

IT companies in Ukraine focus more on science-based technology advancements with following global trends. Experts in the development team of Ukraine have more interest in Big Data & AI, blockchain, cryptocurrency projects, mobile development, etc.

To lead fintech companies, the specialists enable outsourcing companies to contribute to the better outcome and success of the project.

For outsourcing web development Ukraine is one of the best countries and front-end skills along with Java, Ruby, and PHP programming are well-established areas.

Argentina

Education that is free of cost is offered by Argentina along with a lot of investment in schooling. According to the stats, approximately 70% of university students combine studies with work which relatively makes it easier to find competent staff in any field.

Argentina has many experienced outsourcing companies with expertise in Software and Mobile Development, Cloud Computing, and DevOps.

India

India provides a western approach to education because of historic implications. India focuses more on math-associated studies which facilitate the advancement in technology.

India is considered the best country for application development, be it native or hybrid. Companies are also involved in Microsoft and open-source projects. India is incorporating newer technologies like machine learning, AI, GIS, blockchain, etc.

Poland

In Poland, IT education is in high demand attracting students from all over Europe and graduated around 15,000 students in 2013. Poland excels in usability standards and at high QA. The most used programming language is PHP here, along with Java and .Net. As per the clients’ reviews, software engineers work with ethics and minimum cultural differences.

For the last few years, India has been the best country for outsourcing web development but recently there is a slight shift towards Eastern and Central Europe.

How to Choose the Best Outsource App Development Company?

contact best outsourcing app development company

Here are some points to consider while choosing the best outsource app development company:

Search for a mobile app development company

Finding the right mobile app development company is an essential question here. There are various sources by which you can find it such as via references, social media, etc. You can shortlist the companies that you come across. The geographical location of the company for your project is another important factor to consider. The cost may vary depending on the geographical location.

Check and Find a Good Portfolio

Once you are done with shortlisting your preferred companies, you can now search for a good portfolio. To identify technical expertise, business domain, project theme, etc the portfolio is very essential. Check whether the company has worked in the past on a similar project as the requirements of your business so that you can assess their experience and skills.

Search Existing clients work

Another very essential factor to consider is testimonials. You can get the list of client contacts for confirming the project and technologies. Also, ensure that the company has worked on the projects whose list of client’s projects is provided to you. You can move ahead by looking at the happy client’s reviews.

Ask for app testing

You can ask for testing applications developed in the past and get access. You can take your time to conclude and provide access to your authentic end-user for their opinion as well.

Transparency

Another most important factor to consider is the company’s transparency policy. Also, you can check the company’s product development cycle. Check if an agile methodology is used for crafting an application. This can help in quick development and transparent communication. There must be a system for transparent communication. Chatbot technology is used in addressing fast preliminary questions, executing search requests, complaint resolution, etc. leveraging the power of AI. The company and the clients rely on mutual understanding.

Budget-Friendly Company

Here comes the major factor that is required to be considered is cost. You should do proper research about a company and go for the one that suits your budget. You should have a flexible budget if your project requirements are a bit complicated. Time and location can also be other factors that affect the overall budget. You can outsource your project to the companies that fit your budget. India is the most preferred country for outsourcing your project and Ahmedabad is one of the budget-friendly cities to consider.

Maintenance and Support

You can pick a company that offers support and maintenance services even after the delivery of an application. You can ask the company for a long-term agreement for their services. You can also look forward to if a company is interested in your business and can help you with proper guidance. Summing it up, choosing the right mobile app development services providing company is very essential for the success of your project and you can also build a strong relationship with the business point of view.

Why Echo Innovate IT is the best for Outsourcing App Development?

Echo Innovate IT located in India has highly skilled and qualified developers and offers developers at reasonable hourly rates.

You should definitely outsource your project development to our company because of the following reasons:

  • Our developers and project managers ensure clear communication.
  • In the case of different time zones, our project managers will keep you updated regarding the project accordingly.
  • Our developers use the latest tools and technologies to develop applications and websites that are capable of boosting your business to the next level.

FAQ’s of Insourcing or outsourcing

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Conclusion

Wrapping up this blog, of course, choosing an IT outsourcing model over an insourcing one is a better option for several small and medium-sized corporations. But for making the right choice it is always important to analyze in detail the pros and cons of each model. It is totally up to you to decide between Insourcing or outsourcing depending on your project requirements.

If you have further queries, you can fill in this short contact form and we’ll get back to you within 24 hours.

Kush P

Kush Patel is the Chief Technical Officer and Managing Director of Echo Innovate IT – a software development company. He is responsible for the overall operations of the company and has played a major role in making Echo innovate IT the top-notch IT services provider and transforming it into a globally trusted web and app development company.
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