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Building software: in-house development, outsourcing, or customizing off-the-shelf solutions – which path to choose?

By April 11, 2024Services
in-house development, outsourcing, or customizing an off-the-shelf solution

Oftentimes, businesses encounter the daunting challenge of integrating new software into their operations. Their goal? To not only optimize workflows but also elevate service delivery and surpass competitors. Yet, before progress can be made, they face a major decision. Should they build bespoke software in-house, outsource the task to external experts, or instead, embrace the efficiency of off-the-shelf solutions, tailored and augmented with the assistance of their providers?

In this article, you’ll discover the advantages and disadvantages of each solution. You’ll also assess whether you’ve thoroughly considered all relevant factors, with a special focus on understanding the full scope of costs involved.

Pros and cons of in-house software development

Imagine this scenario: your company needs a robust system to streamline employee task management. If you operate in the IT industry or boast a sizable internal IT department, why not consider building such a solution in-house? Why expend valuable time and resources searching for an external vendor? This approach offers numerous benefits. Let’s delve deeper into what they entail.

Advantages of in-house software development

  • Swift initiation: Simply announce the project, assemble the right team, outline requirements, set deadlines, and you’re off! However, is it truly that straightforward? Let’s delve deeper to find out.
  • Full control and flexibility: With an in-house IT team, you wield full control over your product’s development. Adaptations can be made swiftly without contract renegotiations or additional fees.
  • Efficient communication: Internal colleagues bring a shared familiarity and prior collaboration, reducing hurdles in establishing effective communication. This fosters a smoother workflow, aligned with the company’s culture.
  • Enhanced data security: Sensitive information remains within the company’s confines, reducing the risk of breaches and ensuring tighter security measures.
  • Skill development: Developing a new system presents a prime opportunity to expand internal competencies. Employees can grow their skill sets, offering long-term benefits for future projects.
  • Good understanding of the business: In-house teams boast intimate knowledge of the organization, departmental workings, and overarching business strategies. This enables tailored software development that aligns closely with user needs and business processes.
inhouse development

Disadvantages of in-house software development

While building software in-house offers advantages, it also comes with significant drawbacks. It’s essential to thoroughly analyze these before reaching a decision.

  • Expertise gap: Companies often lack the specialized knowledge required to develop cutting-edge solutions internally. Outsourcing to experts ensures access to the latest technologies and extensive experience.
  • High HR costs: Maintaining an in-house development team entails substantial expenses, including salaries, training, and recruitment of new talents.
  • Knowledge loss risk: Employee turnover can lead to the loss of valuable expertise, especially if future projects fail to engage the team effectively.
  • Project delays: Building a team and developing necessary competencies can be time-consuming, potentially leading to implementation delays.
in house cons
  • Limited innovation: Closed corporate environments may stifle innovation by limiting exposure to new ideas and perspectives.
  • Technological debt: Ensuring software remains up-to-date requires ongoing effort, including occasional rewrites to maintain compatibility with evolving technologies.

Pros and cons of outsourcing software development

Advantages of outsourcing software development

For companies lacking specific skills or experience in a particular field, outsourcing to an external provider often emerges as the preferred choice. This ensures the system they invest in maintains high-quality standards.

What are the key benefits of leveraging external expertise for software development?

  • Expertise: Software development companies bring to the table extensive knowledge, experience, and specialized skill sets, continuously honing their expertise in specific domains and staying ahead of industry trends. With well-established systems for software development and implementation, they cover every aspect from requirement definition to the successful launch of functional solutions. Additionally, they provide comprehensive post-implementation support, including user training, ensuring the delivery of valuable, high-quality software.
  • Accelerated implementation. Collaboration with an external provider allows for setting precise implementation deadlines, which the company is contractually obligated to meet. With immediate access to necessary expertise and competencies, the subcontractor can swiftly initiate the development process, eliminating delays associated with assembling the right team.
  • Innovation and fresh perspectives: Engaging with an external company offers an opportunity to explore novel approaches to longstanding challenges and gain fresh insights—a feat often challenging within organizations entrenched in established procedures and practices. This infusion of new perspectives fosters innovation and enhances the functionality of the solution.
  • Costs: When weighing the decision to outsource or develop software in-house, cost analysis emerges as a critical factor. Contrary to the misconception that outsourcing constitutes an excessive financial burden, a meticulous assessment of expenses often reveals it as a favorable option. Beyond expediting project delivery and enjoying the benefits of a functional system sooner, outsourcing optimizes the utilization of company staff time. It’s essential to evaluate whether delegating specialists to a new project inadvertently delays other equally crucial tasks.
  • Maintenance and support: Software vendors offer ongoing support, including bug fixes, necessary system updates, and further expansion. This alleviates the need to allocate internal resources to yet another system’s maintenance.

Addressing the disadvantages of outsourcing

While outsourcing presents numerous benefits, it also comes with its share of drawbacks. Recognizing these shortcomings and balancing them against the advantages is essential. Let’s explore these challenges and discuss strategies to mitigate them. What are these drawbacks?

  • Lack of full control: Collaborating with an external provider means relinquishing some degree of control over project proceedings. Introducing changes post-acceptance of a system version often entails additional costs. However, this doesn’t equate to a complete loss of control or an end product falling short of expectations. Establishing a cooperative framework that aligns with both parties’ needs is crucial. Employing project management methodologies structured to minimize such risks can be invaluable.
  • Risk of poor quality: Misplaced priorities, communication gaps, and unclear requirements pose a risk of delivering a solution below expectations. Yet, this risk exists in both in-house and outsourced development. It can be mitigated by clearly defining expectations, establishing robust communication channels, and closely monitoring progress. Additionally, external suppliers are incentivized to deliver quality work to bolster their reputation and attract future clients.
  • Difficulties with system integration. Challenges in integrating a new system with existing software can impede the realization of its benefits. However, thorough supplier selection and initial project requirement definition typically address this obstacle. By proactively addressing integration concerns during the project’s inception, companies can streamline implementation and maximize system effectiveness.

The third option: turnkey solutions tailored to individual customer needs

Having explored the pros and cons of in-house development and outsourcing, the question remains: Should you opt for an external provider or leverage internal resources to build your solution? Which offers greater benefits and profitability?

However, there’s another alternative to consider.

Consider the appealing prospect of selecting a pre-built solution that partially meets your needs and then expanding it through customization to achieve full alignment.

Many software developers readily embrace this option, as it strikes a balance between creating a solution entirely from scratch in-house and outsourcing the task to an external company.

One significant advantage of this approach is the ability to test the off-the-shelf solution to ensure it meets your basic requirements and is user-friendly.


Additionally, solution providers offer continuous updates to enhance data security and implement new improvements, often based on user feedback and specific system requirements. This ensures access to a thoroughly tested solution, which can be further customized to suit your unique needs.

Opting for an off-the-shelf solution distributes the costs of development and ongoing maintenance across numerous users, with your expenses primarily focused on extensions.

Moreover, it’s highly probable that the solution will already satisfy approximately 80% of your requirements upon purchase, enabling rapid benefits realization. Any missing functionalities can be supplemented later, and there’s flexibility to align your company’s processes with the purchased solution.

Maintenance and service assurance are also paramount. It’s the responsibility of the third-party supplier to ensure seamless system operation, manage updates, and address any technological debt, even for customized solutions.

This principle holds true even for systems built on older technologies, where sourcing specialists with the requisite skill set for smooth operation may pose challenges.


The ultimate decision to build software in-house or outsource depends on your company’s specific circumstances, policies, vision, and available resources. However, it’s worth noting that contrary to common belief, building software in-house may not always be the most cost-effective solution.

A compelling alternative, taking into account cost, implementation time, and quality, could be collaborating with an external company to develop a solution based on a turnkey system provided by them. This approach enables prompt assessment of performance, construction components, and user-friendliness. Moreover, implementation time is significantly shorter compared to developing a system from scratch.

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