Choosing a Development Team for a Startup: In-house or Outsourced?

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To launch your startup and make it work, you need to build a strong development team that can put your idea into action. So, here come the two most common options: you can hire in-house programmers or outsource software development to a third-party company. It is up to you which way of building a team for your startup to choose, but the decision will definitely be crucial for your project.

In-house software developers vs. outsourced team

development team

In general, building an in-house startup team means you are doing all the product development with your own staff (employees). Meanwhile, outsourcing software development implies contracting out your product development to another party – an outsourcing partner. Each of these ways has its pros and cons, so it’s important to consider different factors, such as time, budget, and experience, before making the final decision.

So, let’s take a closer look at these approaches and reasons to use them.

Reasons to opt for software development outsourcing

So, you have a startup and are ready to launch a development process. Hiring an in-house development team takes a lot of time and effort. If you want to get your software development done and don’t want to go into all the employment and hiring process details, you have to find a company providing outsourcing services and assign this task to them.

Hiring employees and forming a team

When you hire an employee, you never know how this person will work, even if he or she has the necessary knowledge and skills. The employee may turn out to be unable to meet the deadline or cope with all the workload. But you don’t need just a person – you need the whole startup team that will be totally devoted to the idea of the project and will know all the technologies and methodologies required to make this project work.

Software developers are not robots – they are real human beings with their own abilities to adjust, work, and interact. Creating an in-house development team means you have to hire all these people and make them work together for the project. Unfortunately, there always is a risk of cultural clashes or misunderstandings when a group of professionals starts working together. Meanwhile, outsourcing companies usually offer development teams consisting of people who have already worked together and are ready to take up a new project.

When the project goes live

After the project goes live, you may not need all team members to continue working for you full-time. Keeping good professionals when you don’t have tasks for them isn’t a cost-effective option. Meanwhile, firing employees after having launched a project creates a huge negative social impact and can affect your company’s reputation. When you opt for offshore software development, you don’t have to face this dilemma since you can scale development teams up and down whenever you need it.

Looking for a simple way

Software development outsourcing is easier than building an in-house startup team. It’s a more simple way to get things done since you don’t need to dive into all the technical details, hire new team members, and worry about recruitment issues.

Instead of a long process of searching people for your development teams, firing them if the project is over, and then hiring them again to start something new – you just need to find outsourcing companies offering these services. When you go with software development outsourcing, you are not limited by geography, and you don’t have to create a new team or check how they work together. You can just hire an existing team with relevant experience and a good reputation.

Finding relevant experience

Many vendors are experienced in an outsourcing software development process, so they can easily evaluate the scope and costs of your project. Outsourcing software development will also allow you to focus on your main business goals and not to go into details of development technologies. This will also decrease the burden on the team members working in your startup.

Choosing a cooperation model

When you opt for offshore software development, you must choose a proper cooperation model that will fit your requirements. The most popular options include:

  • fixed price
  • time and material model
  • dedicated team.

Let’s take a closer look at them.

cooperation model

Fixed price

This model usually works with small and medium-level outsourced development projects with requirements that can be clearly defined from the start. This is the simplest type of all cooperation models with offshore developers since everything is fixed: scope, timeframes, and budget. However, it’s not an option for startups with frequently changing requirements because this model lacks flexibility and ongoing communication with an outsourced team. Eventually, it can lead to dissatisfaction with the final result of software development services.

Time and material model

The time and material model is often used in projects that are dynamic, not predictable, complex, and don’t have clear requirements. It is much more flexible and adjustable to changes than the fixed price, which reduces risks for you and your outsourcing partner. It also implies the active involvement of the client in the development process, so changes can be easily managed.

However, the time and material model has its disadvantages, too. The fact that the budget is not fixed from the beginning not only means flexibility but it also allows for the possibility of the final price being higher than expected. In addition, the client’s involvement can require some time and human resources, which can slow down the process.

Dedicated team

A dedicated software development team model usually works best with long-term projects that don’t have clear requirements and imply a high level of flexibility. As the name suggests, team members are fully engaged in the working process, dedicated to it, and have a deep understanding of the client’s business needs.

But it will not be cost-effective to use a dedicated team model if there’s not enough workload for every team member. Moreover, the client has to be totally involved in the development process, which takes a lot of time and effort.

Reasons for building your own development

Despite its many advantages, outsourcing services to remote development companies cannot be the solution for every startup. Here are some reasons to hire in-house software developers instead of going with offshore software development.

Type of your business

When it comes to purely tech companies, creating an in-house development team will be more effective. The same applies to the development of some simple internal software applications when the process is not very complicated and is easily manageable. Additionally, this option results in significant cost savings in the long run.

Communication issues

communication issues

When you hire a remote team for a startup, you need to pass your idea and vision to these people. That’s why you have to communicate with your offshore developers a lot, either directly or through a project manager. But when they are miles away from you or located in a different time zone, it’s often a challenging task. Communication is an ongoing process of explaining, discussing, pointing out, and just controlling the work to be done. The distance can make it less effective. When building an in-house team, you can avoid many problems since communication comes more naturally than in the case of software outsourcing.

More control over the process

An in-house option gives you more control over the development process than software outsourcing. You also have immediate access to what is going on — something that is hard to achieve when it comes to offshore development. In other words, you can monitor the progress with no third parties involved. Apparently, this makes project management much easier.

Fitting the requirements

When you build your own software development team, you are trying to create a team structure the way it would meet your company’s needs. So, opting for your own development team means it would be perfect considering the business requirements of your company. Software outsourcing gives you an opportunity to choose an outsourcing partner, not individual offshore developers.

Takeaways on creating in-house team

in-house team

If you finally decide to do software development in-house, here are some tips that may come in handy:

Make sure you have proper knowledge about the development

You must be aware of the way the development process of your product is going to look and what skills are required in order to complete the project.

Define your software development strategy

It is almost impossible to execute the development process without a strategy. The strategy ties the iterations together and sets the right direction for the team. The software development strategy must serve as a plan to achieve your software project’s objectives, so it’s crucial to develop it at the very beginning.

Find a project leader

What you need is a person who excels in project management, follows the vision of the project, is great in communication, and knows exactly what he or she wants to achieve. This person must be capable of organizing the whole process and finding an individual approach to every team member.

Organize regular meetings and track your goals

The team must know what goals they have to achieve on a weekly basis. It will help you control the process, see what you can expect, how much work has been done, and how much work is still left. This way, you will be able to check your progress and know whether your strategy is executed as planned.

Keep team spirit high

As it has been mentioned before, your software development team is not some bunch of robots but a group of human beings who need to be encouraged and appreciated all the time. That’s why it is important to keep the morale of the team high and be able to motivate them to do their best.


Having a tech product idea without technical background puts you into a position where you mainly have two options: building a development team in-house or turning to software outsourcing. Each of these ways has its advantages and disadvantages.

The benefits of outsourcing software development include the following:

  • you don’t have to build your development team from scratch
  • you get a higher level of flexibility, including time and price
  • you get a faster time to market since there is no need to wait until a new team is being assembled
  • experience of the outsourcing company will make the process faster and more qualified.

But here are the drawbacks outsourcing has:

  • you have to rely on the outsourcing company you cannot fully control
  • you also have limited control over the things happening in your project
  • establishing an ongoing communication process with your software outsourcing partner takes a lot of effort due to the distance and time zone differences

After choosing a software outsourcing team, your next decision must concern choosing a cooperation model. And here are the three most popular options:

  • fixed price model – for small and medium level projects whose requirements can be clearly defined from the start
  • dedicated team – for long-term projects with not very clear requirements and requiring a high level of flexibility
  • time and material model – for the projects with dynamically changing requirements that cannot be defined in advance.

If you decide to create your software development team on your own, you should be aware of the following benefits and drawbacks.

The benefits of having an in-house team:

  • it’s suitable for purely tech companies
  • it gives you control over the entire process
  • it’s easier to define the requirements
  • a development team will fit better your business requirements

Drawbacks of the in-house development:

  • building a team from scratch is usually longer and more complex than hiring a software outsourcing partner
  • you must clearly define the project and its requirements
  • it can take more time than you expect

When building up your development team in-house, you have to make sure you have the proper knowledge about development to get the perfect set of skills your company needs. You also have to define your software development strategy, find a project leader for your team, and motivate your team members to do their best.

Building a strong and reliable development team is crucial for startup success. It’s important to consider the specifics of your project and the goals you want to achieve. Knowing this will lead you to the right decision. We hope this article will make this process easier.

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