Miko Lehman

Outsourcing Software Development: Benefits and Risks

Outsourcing software development is the practice of hiring outside vendors to build software instead of outsourcing it in-house. Both have advantages and risks, so it’s important to understand which is right for your business.

Outsourcing Software Development

Software development is typically a large fixed cost that grows over time. Outsourcing allows you to pay as you go and scale up or down based on your current needs. It also gives you access to more specialized developers with specific skills or experience. When done correctly, outsourcing can be cheaper, faster, and more consistent than developing in-house. However, there are risks involved with outsourcing any part of your company’s software development process. Let’s take a closer look at the pros and cons of outsourcing software development so that you can make an informed decision about whether this is the best option for your business.

Why Outsource Software Development?

There are many reasons why a company might choose to outsource software development.Most organizations do not have the in-house resources to build all of the software they need. New software types, business needs, and regulatory requirements all make it necessary for businesses to outsource at least some software development. And outsourced software development can bring many benefits to your business if you select the right vendors and manage the relationship effectively.

There are two main types of outsourced software development: offshoring and outsourcing.

  1. Offshoring is the process of contracting with a vendor in another country, while outsourcing is contracting with a vendor in another country or in your own country.
  2. Outsource software development is typically cheaper than hiring in-house developers, especially for niche skills, and allows you to quickly scale up or down with demand.


Outsourcing has many advantages, including:

  • Access to specialized skills and expertise: Outsourcing software development allows you to tap into the skills of developers with specific expertise or experience in areas that are difficult to find locally. If you’re looking for programmers with specific skills and expertise, then this may be an ideal solution for you.
  • Cost savings: Outsourcing to vendors in lower-wage countries can save you a lot of money. This can be especially appealing for smaller companies that don’t have the resources to hire in-house developers for specialized skills.
  • Quicker delivery: Hiring in-house often takes longer than outsourcing because of the hiring process, onboarding, and other administrative issues. When you outsource, you can often get quick results and hire based on current needs.
  • Consistency: With outsourcing, you can hire consistent teams to build software. This can help create a consistent look and feel across your product.

Risk of Outsourcing Software Development

While there are many advantages to outsourcing software development, there are also some risks. The most important one to be aware of is the risk of poor communication: one of the biggest challenges when outsourcing is ensuring that your developer understands your needs and requirements.

Some outsourced software development also comes with varying degrees of intellectual property risk. You may be required to sign a non-disclosure agreement, but even with one in place, you might not have the rights you need to protect your IP.


Even with all the advantages of outsourcing software development, there are a few drawbacks. They include:

  • The risk of losing control of your product: When you outsource software development, you hand over a lot of control. It’s easy for the vendor to push back on your requirements and want to do things their way. To avoid this, you need to be able to clearly define the product requirements to prevent misunderstandings.
  • Loss of knowledge in your company: When you outsource, you bring in an outside team to work on your product. They will know the ins and outs of your product, but your employees won’t. This can create a knowledge gap within your company.
  • Risk of lower-quality products: Outsourced software development teams have less incentive to ship high-quality products than teams in-house. This is particularly true for offshore teams, whose livelihood is less dependent on your success than an in-house team.

Risks of In-house Software Development

While there are several risks associated with outsourcing software development, there are also risks with in-house software development.If you decide to build software in-house, you need to be aware of the following risks:

  • Access to specialized skills and expertise: Similar to outsourcing, if you’re looking for expertise that is difficult to find locally, you may want to consider outsourcing the development.
  • Cost savings: Building in-house can be cheaper than outsourcing, but only if you have the right resources on hand. It’s easy to underestimate the cost of hiring in-house and overestimate the cost of outsourcing.
  • Quicker delivery: Hiring in-house may take longer than outsourcing because of the hiring process, onboarding, and other administrative issues. If you have the resources in-house and are able to hire quickly, however, you may be able to get results more quickly.
  • Consistency: With in-house development, you can hire consistent teams to build your product. This can help create a consistent look and feel across your product.


When you’re choosing between outsourcing software development and in-house software development, it’s important to weigh the risks and advantages of each. Because different types of software development have different benefits and drawbacks, it’s not enough to say that one type is better than another. You need to consider the specific type of work you’re outsourcing or doing in-house.

For example, if you’re building a product that requires a lot of research and expertise, outsourcing your software development may be the best option. On the other hand, if you need to build something quickly, with a consistent look and feel, that’s where in-house development shines.That being said, there are only a few cases where it makes sense to build a software product in-house from scratch.

When you need a specialized product that has a high barrier to entry, when you need to build something quickly, and when you have a fairly small budget, outsourcing is likely your best option.

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