In-house Development and Outsourcing in IT: How to Strike a Balance
When creating IT products, some companies strive for the development by their in-house team, while others turn to outsourcing, leaning on the expertise of IT companies. Let's consider the issue of striking a balance between these methods, using fintech cases from our practice.
Advantages of Using an In-House Team
In-house development is commonly used by the companies of all sizes and types nowadays. Yet, the option of working only through the internal team is most often a privilege of the small companies. This comes out of the team’s goals and possibilities: small companies don’t need any additional opportunities and the in-house IT department can manage both support and development of internal information systems without being overloaded.
As a company grows, its digitalization needs increase. At this stage, IT products are an integral part of the business that determines its competitive advantages. When the resources of an in-house IT team become insufficient, businesses often turn to IT companies for outsourced development.
Outsourcing companies are developing in the fiercely competitive IT market. The competition dictates the need to improve all internal processes, including development, team management, and quality assurance.
In these conditions, outsourcers who are able to form teams quickly and delve into new subject areas are at an advantage.
Balance of Outsourcing and Product Development
Sometimes a company prefers to develop its own IT products simply because it does not know how to cooperate with an outsourcer. There may be various concerns on the part of the businesses:
The product owner may think outsourcing is expensive. However, the business will have to create an IT company in-house, investing both money and time in order to do the development on its own.
Businesses may fear they will not be able to retain expertise. Understanding these fears, an experienced outsourcer helps the client retain control over the project first and foremost, as well as organize the infrastructure perfectly.
Our experience shows that companies from nearly all business branches turn to outsourcing, including high-tech leaders who maintain their own IT departments. Using external teams, businesses can find new technological solutions, as well as speed up development, if necessary. In addition, product teams sometimes need help aligning development processes.
Case in point:
Several years ago, we were approached by a new client, a startup in the banking industry. The client set a goal to create a remote banking system (RBS) from scratch and become a leader in the prestigious banking ranking. In doing so, the company was focused on in-house development with minimal outsourcing.
To achieve its goal, the bank formed an IT department and allocated a lot of time to building Agile operations. However, as the development team grew, it became difficult to manage. Certain interaction problems emerged; for example, some operations were done manually, without any automation.
Based on this experience, the bank changed its approach to outsourcing. Development tasks are now carried out by distributed teams consisting of both in-house experts and outsourced programmers. This method has proven to be effective; this way, the bank can leverage the expertise amassed by the IT company and retain it.
"The customer's task is to maintain their own knowledge base and infrastructure, which the outsourcer will work with (Docker, GitLab, Jira, Confluence). Simply put, the outsourcer's team will enter the corporate infrastructure and do coding or QA as part of their task. This way, roles and responsibilities will be divided in an optimal manner," says SimbirSoft CEO Alexey Florinsky.
An outsourcer can help with the following tasks:
- Analytics (Terms of reference, prototypes, UX)
- Architecture development
- Coding, code review
- Quality assurance (testing, SDET, incident management)
- Development of new ideas, creation of MVPs
The in-house team is responsible for:
- Building your own infrastructure
- Automation of operations
- Metrics and reporting
- Working on development methodology
- Retaining expertise (training, meetups, hackathons, grading)
Whom Do Outsourcing and In-House Development Suit Best?
Some companies do their own development, believing that it will be much cheaper and faster than working with an outsourcing IT team. However, if a business faces the need to develop its own new product from scratch, it has to effectively create an in-house IT company in order to do so. In this case, it takes not only funds but also time — usually no less than 3 months — to form an in-house team and get it up to speed with the task.
A temporary team — outsource programmers and other IT specialists — is often less expensive than building a full-blown in-house division. Also, the outsourcer can use their experience in implementing products for different business sectors to help the company settle on flexible technological solutions and release the software on time. The average outsourcing team creation time is just a week, by the way, depending on the project type and the team composition.
Learn more about our approach and the IT outsourcing itself.