In-house vs outsourcing business models: differences and benefits

During the business growth phase, every business owner faces the question of how to use IT services efficiently. What to choose — outsourcing or in-house team? There are some business benefits in both approaches, so below we will talk about the options, advantages and disadvantages of both ways.

At first, what’s the difference?

The in-house team is the group of people you hire one by one to your office. You might hear the phrase: “If you want to do something well, do it yourself”. If this is your motto, the in-house team will suit you. In this case, you will look for specialists, make interviews, ask questions and control all the processes of hiring and work.

When you choose to outsource, you refer to the Managed Service Provider (MSP) and it provides you a dedicated team. It can be the team of one kind of specialists (developers or DevOps, for example) or full team with all necessary talents from developer to Project Manager.

Both ways can be profitable but there are some features.

In-house team: pros and cons

As we mentioned before, the in-house team will be a great decision for people who want to control all the processes in the company. But what is the backside here?

Cons of the IT in-house team

  1. Great expenses. The insourcing or in-house team is quite a luxury item. You’ll need to invest a lot of money in the recruiting process. Also, you need to equip the workplace for every new employee or even rent/buy a new office because of team extension. Besides, you’ll need to pay salaries even after the project will end — or fire the specialists and hire them anew when the need arises.
  2. Time. Highly-qualified specialists are rarely available in the job market. Usually, they already have a job and don’t want to change it. So, you’ll need to offer such specialists something better than they already have. This might be a great salary, an interesting project, etc. While you look for the talents, gather them and create a cohesive team, your project is paused. Nowadays a lot of innovations need fast implementation. This allows the company to stay competitive in the market, and prolonged pauses are very undesirable for your project success
  3. Absence issues. If some of team members become sick or leave, you need to spend time and money on new hiring or endure project pauses.

Pros of the in-house team

  1. Control. You can manage teamwork internally and control all the processes. This is a very important point for some business owners so we can’t neglect it.
  2. Work immediately. Of course, you need to spend a lot of time to collect the team but after that, you can immediately start to work with new projects. Access to the talents in-house can be a good competitive advantage.
  3. Deep understanding. The in-house team work with the project from its start till completion, so they know all the features and can work with them on quite a deep level of understanding, unlike the outsourcing team which will need time to discover and grasp the project details.
  4. Talent development. If you need some specific talent, you can develop your employees in the way you need them. As a result, you’ll get a satisfied employee because he gets an opportunity for professional growth and simultaneously you’ll have a necessary specialist in the team.
  5. Outsourcing. Yes, we are still talking about the insourcing team but here is a thing. You might outsource your own team and become an MSP. Such an approach is suitable if you finish your project and can’t organize fulltime work for every team member.

Thus, in-house team suits the companies ready to invest in the recruitment processes, in the development of the team and ready to organize comfortable work for Employees. Usually, the in-house team is more preferable for mid-to-large companies because they already have some money to invest in new employees.

Outsourcing team: pros and cons

There are two common statements about outsourcing: it is suitable only for startups and it is often about the bad quality of work. Let’s see the advantages and disadvantages and decide if it’s true or not.

Cons of IT outsourcing

  1. Quality. Yes, the very first disadvantage is the probable bad quality of work. There are a lot of situations when the business owner was forced to collect in-house team to solve problems after the outsourcing team. To avoid this risk you should select the MSP very meticulously and check its reputation on the market before hiring the team.
  2. Management issues. You can be involved in the project but can’t control all the things. Actually, with a reliable MSP, you won’t need to control everything but there are still a lot of business owners who don’t like to delegate important management tasks. In this case, you might hire the dedicated team and involve your in-house Project Manager in the project.
  3. Problems with communications. This is not a big problem in the 21st century but still, you need to pay attention to the time zones and choose the MSP with the appropriate one.

Pros of the outsourcing

  1. Cost efficiency. Unlike the insourcing team, the dedicated outsourcing team will save you a lot of money. You shouldn’t make a lot of interviews, pay huge salaries for top in-house specialists and equip workplaces. You just pay the agreed sum per hour or for the whole project. Also, you don’t need to pay salaries after the project ends.
  2. Access to the talent pool. A lot of great IT specialists work with MSPs because top-level talents like variety in projects to support their professional growth and MSP can provide it.
  3. Focus on core business functions. You’ll delegate a part of your work and can focus more on some important business needs, allocate resources for it, etc.
  4. Reduction of the personnel size. This is quite important because you don’t need to look for a bigger office, equip new workplaces, etc. You just hire a dedicated team and can work with it despite locations.
  5. Quick team change. If you don’t like the quality of dedicated team work, you always can find new MSP and change the team. With in-house specialists, it’s more difficult.

Thus said, outsourcing has its own benefits and drawbacks. This is an efficient way for startups because you’ll have an experienced team without additional investments. IT outsourcing is good for big companies too, because you will have access to worldwide talents regardless of yours and the team’s location.

How to find a good IT team?

Well, you might decide what variant is more preferable for you. But what’s next? How to find a dedicated team or collect in-house team?

To collect the in-house team you should first hire a recruiter and HR manager who will help you to collect and analyze a lot of CVs, make interview and other preparatory processes. When you’ll hire all the talents HR manager needs to prepare adaptation plans for each employee and work with team cohesiveness. This is a really long way but you’ll receive more benefits from the cohesive team unlike the scattered group of people who need to work with each other.

Talking about IT outsourcing, the most important point is to find a Provider. The experience and principles of a trustworthy MSP will guarantee you a good quality of teamwork.

How to find a good MSP?

You need to pay attention to a few things. If you have business partners who already have worked with an MSP, it will be great to ask them for reviews and maybe refer to the same MSPs. If it’s impossible, try to find as many reviews as you can on the Internet. Try to have a conversation with previous MSP’s customers and ask all the questions you’re worried about.

Also, you might look for MSP in the worldwide ratings like Clutch. The top-10 companies will be good and reliable partners. Please, don’t forget to ask MSP about previous successful cases and technologies they work with. You might find a great MSP company that provides software development, but if you need DevOps services, such MSP won’t help you.

The other important moment is an interview with the team members. This is a common practice to have an interview with some specialists. You will have the ability to access the hard and soft skills of your future employees. Such a way really helps to understand is this is the team you look for or not.

Last but not least. When you finally find your partner, you shouldn’t try to control all the work. This is your choice and you should trust the team you have chosen. The dedicated teams often have a great experience and a lot of ready solutions that can save your time and investments. So, they really know what to do for achieving your goals.

Final thoughts: who did win, after all?

We started the article from some kind of competition — outsourcing vs in-house. So, it is logical to find a winner. Well, there are no winners or losers. Every approach is suitable for different cases and requests.

If you have a big company and want to always have an available team or even to outsource this team, you should spend money and time on collecting in-house team. You’ll need to make a lot of investments at the start and after that, you will have your benefits. Your result will be the IT team at hand and the ability to start a new project almost at every moment. The common risks are the absence of some specialists and probable pauses in the project.

If you are a startup owner or you don’t want to expand your in-house team or you need to implement only one project, the MSP company is the most suitable variant for you. You’ll just hire the whole team at once and MSP will manage all the risks, issues and other points.

There are also some risks but all of them are about the right choice of MSP. So, if you will find an experienced and reliable MSP, you will have a great experience of such cooperation. To protect yourself from unscrupulous outsourcing providers, check ratings, ask for feedback from previous customers and don’t forget about the interview with key team members.

Also, you might combine two approaches and merge your in-house team with a dedicated team. This is also an efficient approach, especially if you need some talents you can’t hire in-house for some reason.

Analyze your company’s needs, be meticulous with your choice and your business will prosper in both outsourcing and in-house ways.

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Vladimir Fedak

Vladimir Fedak

DevOps & Big Data lover

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