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Developing software internally or submitting your request to an external party

Here are the pros and cons of different options

Software development has become an essential part of almost every modern business. Whether it's automating internal processes, creating a user-friendly mobile app or setting up a sophisticated customer relationship management system, software plays a crucial role in the success of businesses in all industries.

A key question companies should ask themselves is whether to develop the software internally or outsource the task to an outside party. Both options have their own advantages and disadvantages, and making the right choice can have a big impact on the success of a project.

In this blog article, we will take a closer look at the different options and explore the advantages and disadvantages of developing software internally versus engaging an outside party. Whether you're a startup with limited resources, an established company looking to optimize its internal processes or an enterprise looking to take advantage of new technological opportunities, this article will help you make an informed decision.

  • Linda

Written by Linda

Internal development

Especially when software is part of your core business, when there is a shortage of hands at the keyboard, it seems a logical choice to increase development capacity by hiring additional programmers. However, a vacancy is often not filled just like that and you also have to take into account that you need to keep this person at work for longer than just a few months.

Advantages

  1. Full control: By developing the software internally, you retain full control over the development process. You can set development priorities, customize functionality and fully tailor the software to your specific needs.
  2. Faster communication: Internal development allows team members to communicate directly, which can reduce project turnaround time. Problems can be resolved quickly and changes can be made quickly without relying on outside parties.
  3. Long-term cost savings: Although the initial cost of setting up an internal development team can be high, it can be more cost-effective in the long run. By building knowledge and expertise internally, you can save on external development costs for future projects.

Disadvantages

  1. Higher initial costs: Setting up an internal development team requires investments in infrastructure, equipment, and personnel. These initial costs can be significant, especially for smaller companies with limited resources.
  2. Limited expertise: Finding and retaining the right talent for the development team can be a challenge. The lack of specialized knowledge can slow down development or affect the quality of the software. Therefore, consideration should be given to (internally) training the staff.
  3. Loss of focus: When a company focuses on internal development, it may neglect other important tasks and priorities. It can be difficult to strike the right balance between development activities and core business activities. The well-known saying, "Cobbler, stick to your last."

When is internal development a good idea?

Ask yourself the following questions:

  • Can I keep these programmer(s) busy once this project is completed?
  • Am I acquiring sufficient knowledge necessary for this project?
  • Do I now have enough capacity to gain/retain a competitive advantage?
  • Do I have time to find the right person and introduce them to our company and their future work in a peaceful manner?

If the answer to all these questions is "yes," then you are likely to benefit sufficiently from hiring additional programmers as employees.

Offshore Outsourcing

If you decide that your software challenge cannot be solved internally, foreign companies often entice with their low hourly rates. Besides the lower hourly rate, working with a company on the other side of the world allows for continuous development day and night (as the company on the other side of the world takes over development while you sleep). The only challenging aspect of outsourcing to foreign countries is often the communication. The more complex your problem, the more difficult it becomes to explain (especially if both parties do not speak their native language). Moreover, it is also wise to consider the business environment in the country where you are outsourcing the task. After all, you are providing a developer with access to your computer systems, which may contain sensitive information such as legal documents or medical records. Do you know what to do in case of theft or (identity) fraud?

Advantages

  1. Cost savings: One of the biggest advantages of outsourcing to a foreign party is cost savings. Labor costs are often lower in certain countries, allowing companies to benefit from lower development costs without compromising quality.
  2. Access to a broad talent pool: By outsourcing abroad, you gain access to a wider talent pool. You can tap into the expertise and experience of developers and specialists from around the world, allowing you to benefit from different perspectives and innovative solutions.
  3. 24/7 development: By transferring work to a team in a different time zone, development can continue non-stop, reducing the project's duration.

Disadvantages

  1. Cultural and language barriers: Outsourcing to a foreign party can bring challenges in terms of cultural differences and language barriers. Different work methods and communication styles can lead to misunderstandings and project delays.
  2. Less direct control: When outsourcing software development to a foreign party, it can be more challenging to exercise direct control over the development process. This can result in a diminished sense of involvement and may affect communication and collaboration.
  3. Legal and security risks: Outsourcing to foreign countries entails potential legal and security risks. There may be differences in laws and regulations, intellectual property, and data protection, which can lead to complications and risks regarding trade secrets and confidential information.

When is Offshore Outsourcing a good idea?

We are not saying that outsourcing to foreign countries is a bad idea. In fact, for simple issues that require only a few hours of work, you are likely to be well served by a foreign party. However, the question remains:

What good is a low hourly rate if the speed and quality are also low?

Outsourcing within the Netherlands

However, if you are dealing with a complex problem where clear alignment is essential for your business processes, you are likely to be best served by a Dutch party. By communicating in your own language, it is often much easier to discuss specific requirements and expectations. Interim deliveries or consultations can be easily organized, avoiding the need to travel to the other side of the world. This allows you to stay well-informed and maintain control over the development process. All of this helps to prevent miscommunication and ultimately saves you time.

Advantages

  1. Easy communication: Outsourcing to a party within the Netherlands offers the advantage of proximity. This facilitates communication as there are no language barriers, and meetings and collaboration can take place easily. It ensures quick responses and the possibility of face-to-face communication when needed.
  2. Cultural affinity and local market knowledge: Working with a party in the Netherlands means they are familiar with the local culture and market conditions. They have a better understanding of the needs and preferences of the target audience and can develop software solutions that align better with the Dutch market.
  3. Legal and security benefits: Outsourcing to a party in the Netherlands means working within the same legal framework. This reduces legal complications and risks that may arise when working with foreign parties. Moreover, the Netherlands adheres to strict data protection standards, which enhances the security of confidential information.

Disadvantages

  1. Higher costs: Outsourcing to a party within the Netherlands can involve higher costs compared to offshoring to countries with lower labor costs. It's important to consider the cost aspect when making a decision, especially for companies with limited budgets.
  2. Limited availability and competition: Since the Netherlands is a small country, the availability of specialized development companies may be limited. This can make it more challenging to find a suitable partner quickly who is available for the project.
  3. False advantages: The fact that a party is based in the Netherlands does not automatically guarantee their expertise or quality of work. Even within the Netherlands, there is a significant difference among software developers, so it's important to research and evaluate potential partners thoroughly. Schedule a (online) meeting and check references.

When is Outsourcing within the Netherlands a good idea?

If you want to benefit from local market knowledge, cultural affinity, fast communication, legal advantages, and familiarity with local regulations, it is best to collaborate with a Dutch party. These factors can contribute to the success of your software development project and ensure that the developed software seamlessly aligns with the needs of the Dutch market and users.

Want to delve deeper?

Download the do's en don'ts of development outsourcing

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