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Technology startups have several decisions to make when they start building their tech business. One of the most critical decisions, though, is choosing whether you want to have an insourced or an outsourced team, or a combination of the two. You also need to decide which roles can best be outsourced vs. insourced.
Here’s a wrap up of the plusses and minuses of each side of the coin to help you decide when to hire in-house talent and when to trust an outsourced software product development partner.

Pros of Insourcing

Having an in-house team to develop your product has several advantages, such as

Business agility – You own and manage the talent you hire in-house. They are solely committed to working with you. They won’t mind it when you change the operational strategy or take a U-turn on something. Therefore, you don’t need a lot of buy-in from your in-house teams, as much as you do from contractors and freelancers.

Transformation needs in-house talent – To make digital transformation a reality for your startup, you need a team that is committed to you in the long haul.

Fewer cybersecurity threats – In the wake of extreme cybersecurity threats, you are well off trusting your own infrastructure and its security arrangements rather than having to lay your loyalty on someone else’s infrastructure. As a tech startup, you can ensure your employees are guided and limited by strict NDAs, not becoming a risk for your enterprise.

Challenges of Insourcing

While the benefits are fairly obvious, setting up an in-house team is not easy. It can have its own set of challenges such as

Team strategy – Since everything lies on your shoulders, you are responsible for creating a hiring strategy. Which roles should you fill up first? What salaries to offer? Would you want to hire beginners or experts? Mix and match in what ratio? Building a team strategy can easily be the most difficult thing a tech startup owner has to do. With a limited budget, this is a critical factor that could determine your success or the lack of it. According to estimates, the average company spends about $4,000 to hire an employee.

Training and communication – Hand-pick your staff, but then you have to train them on key technologies and tools. Hiring a trainer or enrolling individuals in online training programs can be a significant parameter in your success. You also need to lay down a system for efficient communication within your enterprise. Do you hold monthly meetings? Weekly calls? Install a communication application?

Investments in training/infrastructure – Budgeting could be a huge challenge for you as hiring in-house talent compels you to incur training, infrastructure, and power expenses.

Talent not widely available – If you need specialized talent for your start-up, you might find it hard to find it locally. Since you are a start-up, star candidates might not be willing to move to a different city to get onboard, unless your idea is really groundbreaking.

Challenges of Outsourcing

Considering the challenges with insourcing, companies are tending to rely on outsourcing partners for their product development. But you need to be aware of the following challenges

Inconsistent communication – When tech startups work with remote teams and contractors, they need to establish a system to support consistent communication. The challenges of doing that triple when you hire talent from across boundaries. Therefore, establishing frequent and clear interaction is a struggle when working with outsourced teams.

Cultural differences – Tech startups are small in size and need to function as a single unit. When hiring outsourced talent, you need to ensure there is a cultural fine-tuning to avoid differences. This can be a challenge for tech startups working with cross-cultural teams.

Complex contract negotiations – Contract negotiations with an outsourced product development and consultation team can be complex and time-consuming. It’s not over the top to schedule several weeks to fine-tune a contract, since there is no easy way of defining the scope of work, responsibilities of each party, and putting together a service-level agreement.

Pros of Outsourcing

While acknowledging the challenges with outsourcing, one cannot ignore the several benefits it offers

Hiring agility – Outsourcing can look like an appealing option when you need hiring agility. For example, you may want to hire high-quality talent, but you are not sure if you will need their full bandwidth in the future. Hiring an outsourced team can help you tweak the team size and shape as per the changing business needs – quickly and easily.

Engage specialists at reasonable costs – Specialists that work as your outsourcing partners are likely to charge way less than an in-house team of experts. As a startup with a limited budget, you can easily engage the best in the industry and leverage from their proficiency in various functions. According to a recent study, outsourcing can help companies save 60 percent on overhead costs!

Domain expertise – One of the most significant benefits of outsourcing is access to domain expertise that you get by engaging the partners who are experts in their specific fields. With the help of the right partners, who have worked in the domain and delivered cutting-edge solutions, you can have a unique advantage over your competition.

Processes and methodologies like DevOps and Agile – Often, outsourced product development companies and consulting teams follow the leading processes and methodologies such as DevOps and Agile, bringing modernization to your company out-of-the-box.

Scalability – Another shining benefit of engaging an outsourced team is that you are free to scale up and down as per your unique needs without having to think about the incurred investment in the team. This scalability is of the utmost importance when you want to scale up your startup without a lot of hassle.

End-to-end servicing – An outsourced development team can handle your needs end-to-end. For instance, when you partner with a software development company, you can expect everything from product ideation to testing and maintenance under a single umbrella.
At Pratiti, we have helped several startups realize their innovations faster. We are proud to be the partner of choice for several technology companies for their outsourced product development (OPD) needs.
Let’s connect, and we can discuss how we can help you with our unique blend of domain expertise and technology craftsmanship.

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Nitin Tappe

After successful stint in a corporate role, Nitin is back to what he enjoys most – conceptualizing new software solutions to solve business problems. Nitin is a postgraduate from IIT, Mumbai, India and in his 24 years of career, has played key roles in building a desktop as well as enterprise solutions right from idealization to launch which are adopted by many Fortune 500 companies. As a Founder member of Pratiti Technologies, he is committed to applying his management learning as well as the passion for building new solutions to realize your innovation with certainty.

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