In-house vs outsourcing vs freelance software development – which option will drive your business forward?

Building an IT team is challenging on many levels. The gigantic shortage of employees (estimated 85.2 million vacancies in 2030), the low unemployment rate in the IT sector, and long recruitment times per employee (52 days on average) hinder running projects smoothly.

To ease your workload and create a reliable team, you can use one of three strategies: freelancers, in-house and outsourced specialists. How do you know which option will work best for your business? Dive into our article and explore the pros and cons of all three team-building strategies.

Outsourcing IT – a holistic solution for your business

In IT outsourcing, you entrust the entire development project or its parts to an external company that finds specialists with the right skills and rates that fit within your budget. One of the most convenient and beneficial outsourcing strategies is expanding your in-house team with additional specialists, known as team augmentation. A flexible number of programmers or engineers join the in-house team and support it in pushing the project to a successful end.

Advantages of IT outsourcing

IT staff augmentation services provide easy access to a myriad of experts. Your team defines the requirements, and an external company handles the IT recruitment process, finding people with matching skills. In general, hiring takes no more than a few weeks, and new developers can join the project immediately. Staff augmentation is a budget-friendly model because you only pay for the work done by external staff. Also, you can flexibly scale your team up and down if necessary.

Disadvantages of IT outsourcing

Outsourcing services have their challenges, but these do not outweigh the advantages. Initially, it may seem that working with external specialists means less control over the project and that the responsibility transfer will reduce the project quality. However, experienced staff aug companies have structured working methodologies and management processes that prevent chaos.

Working with an external software development company can also raise security concerns. Temporary employees from different locations will be working with the same resources as the in-house team, increasing the exposure of sensitive data. However, professional outsourcing companies have established proven communication protocols and risk management strategies that minimise the risk of data leaks to almost zero.

In-house development team – the reinforcement of your company’s IT department

Building an in-house development team involves hiring developers with specific skills exclusively for your company. With a close-knit group of specialists able to handle diverse tasks, you can plan and execute long-term projects.

Pros of in-house team

If you want your developers to be involved in the company culture, hiring in-house employees is the best option. An internal team also means a lower risk of information leakage, as everyone will perform their tasks according to company procedures. You can comfortably manage every stage of development and always know what stage the project is at.

Cons of an in-house team

Maintaining a group of in-house specialists is certainly the most expensive option. Each employee must receive a salary and insurance regardless of performing work now.

Enhancing the in-house software development team also absorbs significant costs. It takes several months and isn’t always successful. When you want to downsize your team, the contracts that bind you will not allow you to do it immediately.

IT freelancer – an independent specialist

Working with a freelancer is similar to the staff augmentation outsourcing model, but, in this case, there is no outsourcing partner between your company and the developer. A freelancer is completely independent and often specialises in one or more areas.

Upsides of IT freelancers

It's easy to find a freelancer. Just browse the adverts on dedicated portals for gig workers to find people with matching skills and rates in a few hours. Freelancers' salaries are usually attractive and beneficial for one-off or short-term projects. A freelancer partnership can be agreed upon for any period and ends on the day the project is completed.

Downsides of IT freelancers

A freelancer's portfolio may delight you, as these professionals regularly upgrade their skills to stay attractive in the job market. However, the best ones may have many clients at the same time, which can harm their efficiency. Your project may become less of a priority for them than other tasks. An inexperienced freelancer may abandon your project overnight and cut contact, which creates problems not only in maintaining continuity of work but also in protecting the confidentiality of your project.

Things that can stop you from choosing the right path. Overcoming challenges

Do you know why software development projects fail? One of the reasons is choosing the wrong people for the project. Relying on current employees can be devastating. Don't assume that the backend specialist will handle the front end as well or that the junior will be able to carry the senior's tasks.

We understand that, despite the clear pros and cons of each option, you may have additional concerns about expanding your team. That is why we break down the most relevant ones below.

Extensive costs

Hiring in-house staff is the most expensive option. Costs include salaries, benefits, equipment, training and recruitment. The investment in in-house team members is long-term, but it doesn't pay off every time.

Freelancers have attractive rates made up solely of a charge for their work. However, if a project starts to exceed the original arrangement, the freelancer may increase their base rate or start charging extra for side tasks.

Outsourcing isn't the cheapest option, but in the long run, it offers significant cost savings. Your company saves on recruitment, training, office space, equipment and employee benefits by paying only for the work of the outsourcing team. Plus, the right outsourcing partner instantly replaces unsuitable employees with others, reducing losses and project delays.

Long recruitment process

Building an in-house team is long and costly. Recruitment involves many stages, and before it is complete, the project is stuck. Furthermore, you can have problems with finding top talent in the local community because all the suitable professionals are working on other projects.

Finding a freelancer takes a couple of hours to a few days. You can choose the right people based only on their portfolio or ask them to do a short recruitment task. However, despite the easy availability of freelancers, you may not hire the right person the first time.

Outsourcing offers access to a wide talent pool. Many specialists are available immediately, and it takes a maximum of a few weeks to find new developers. Many outsourcing companies check not only the technical skills of candidates but also their fit with your company's culture.

Competency mismatch

When your in-house specialists work on projects with a similar technology stack, their competence probably does not extend further than the technologies used in your company. Therefore, when you want to migrate to a modern software solution or create a product on a niche technology, you must hire more people.

You will easily find freelancers with the competencies that match the requirements of your project. The same benefits will give you relying on outsourcing services. Many outsourcing providers specialise in acquiring developers from specific technologies or for certain industries.

Data protection

When you handle projects in-house, the security of company data is generally not endangered. All employees follow internal procedures, while you control who has access to critical information.

If you hire a freelancer or outsourcing development specialists, controlling security needs more attention. Both the freelancer and the outsourcing provider should sign confidentiality agreements with your company. You should check your future outsourcing partner's security practices and references from previous clients.

Which cooperation model will be the best for your business?

Well, it depends. There is no one answer to whether a freelancer vs outsourcing vs in-house software development team is the better choice. So much depends on your company's needs, budget, time and risk tolerance for each solution. You can also opt for a hybrid solution, i.e. having in-house resources, and complement this with outsourcing an extra team or independent freelancers.

Wrapping up

Whatever decision you make, you should start with an in-depth analysis of the needs, resources and objectives your company wants to achieve. If your initial decision won't bring you success, you can always change your strategy. Be flexible and adapt your approach to drive your business, not burden it.

If you would like to learn more about the benefits of the outsourcing approach, HappyTeam specialists will answer all your questions. Get in touch and schedule a meeting with us!