Insourcing vs Outsourcing in IT & Software development. The Roots

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Outsource software development grows in 2021st

If we want to know which wins the battle between insourcing and outsourcing, we need to understand what exactly are insourcing and outsourcing and why should it matter which we choose for our IT projects.
IT business processes are many, ranging from the many parts of creating software or hardware and marketing it to all the support services provided afterwards - and each of these are potentials for outsourcing.

Let's get back. In the beginning.

Once upon a time, all firms were small and did everything they needed themselves.
Then, as they started growing, various forces drove them to use ready-made parts instead of producing them themselves.
In part, this is nothing new:  for centuries, specialists have been used for providing knives, metal implements, pottery etc., not to mention even food!

The reasons are several, including:

  • Cost
  • Capability
  • Quality
  • Concentration

The COST Factor is highly visible in mobile app development outsourcing

The COST Factor

The costs of production start rising when you can’t do everything with your existing resources.
Every time your production increases, you reach stages when you have to take on new staff, invest in new machinery or tools, extra space,...
The list goes on. This cost doesn’t stop rising, in fact, it generally rises ever faster, reaching a stage when you either have to stop expanding or change something drastically.
This is where outsourcing starts becoming an option, becoming ever more an option as you expand.

IT is no exception.

Look at all the giants of IT and you will see that they grew from single sites to multiple and now they outsource much of their work, with software houses, production plants, and support centers all over the world.

The Capability Factor

As alluded to already, producing anything often requires using tools or utensils that you can’t make yourself: so even from the earliest stages of production, you effectively outsource by buying in ready-made items.
As production increases, you will generally also reach a stage when you can’t make more of what you generally used to make and you start to buy in ready-made versions of the same items so that you can concentrate on other parts of your production process using existing capacity.
This includes IT business processes: you pay external businesses to perform your IT functions like networking, database management, web applications etc..

The Capacity factor, the final component of capability, is having the physical capacity to keep expanding. When capacity runs out, in order to expand, firms generally start specializing in the parts of their whole process they do best and start using other firms to produce the other parts - hopefully, cheaper, faster, and in sufficient quantities! The alternative is using every last gram of capacity until there is literally no space in the factory or machines starts to break.

In the IT sector that machines are the development staff of your core product. Outsourcing the website or the mobile app that communicates with your core product will ease your production and will cut your time and expenses.

The ongoing COVID-19 Crisis 2000-2021st pushed up global outsourcing and now is faster to find a software development outsourcing team than 5 years ago.

Numbers behind Quality Factor comparison for software outsourcing and insourcing become close when time is short

The Quality Factor:

Firms’ core production always aims to be of the highest quality, even when they pride themselves on being the cheapest!
Again, as production exceeds a certain level, that quality invariably drops: managers can’t observe enough of the production process, workers can’t concentrate enough or just can’t cope and machinery starts to overheat or give out.
By outsourcing these processes, e.g. IT, you can leverage the services of experts.


Firms usually start producing just a few things of the highest quality they can manage. As they expand, this concentration on quality tends to drop to a point where they start losing money.
At this point, they either start diversifying their businesses into the parts that made up their original business or they contract their area of business into the part(s) they do best.
Either way, the business(es) remaining become(s) more focussed on specific products or services. IT will still be necessary, so those remaining functions should now be outsourced to experts, and keying them into your operations should be seamless to keep your quality at its best.

So, now businesses have to decide whether to continue as before or effectively split off or stop production of those shed parts.
If they keep everything in-house, this is what’s called "insourcing" and if they start sourcing parts or services from external suppliers, this is what’s called "outsourcing".
As deferred to already, there is a hybrid version of these where firms split into their various parts and their core outsources to their own specialist.

What is insourcing? The history of automation explains...

Insourcing, as already mentioned, is a firm’s production of what it needs (parts, components, plant, etc.) by itself.
This can range from a limited number of components or parts to the whole production process, even including the machinery required to make everything else.
There are famous examples of car manufacturers, for example, that make everything required within their own production process without the need to buy anything other than raw materials.
However, it would be interesting to know if they all achieve this without using external IT expertise. Those that don’t will definitely be outsourcing it.

So, why does it matter which you choose? Which option is better?

We say: The software & mobile apps development outsourcing will push you forward!

Our Position is based on our experience. We offer that experience in the outsourcing of all application development from desktop applications to web apps, from local networks to cloud infrastructure.
We develop using most of the major platforms, scaling apps up and down accordingly and, once we have your solution ready for you, we offer exhaustive, comprehensive testing of that solution in situ, resolving problems until it is as perfect as you are.

Come and talk to us to find out more!

By Elders Marketing Team

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