Outsourcing vs. Inhouse Development

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Outsourcing:

Outsourcing is contracting one supplier or more to perform a service. Generally speaking, companies and organizations inhouse their core business/services; though, there are a lot of exceptions out there.

For outsourcing best practices, you may have a look at this article: Information Security in Supplier Relationships | by Suhail Hammad | Oct, 2021 | Medium

In-house Development:

In-house development is using an organization’s current staff (or hiring additional staff) to perform the service or create products.

To read my recommendations for in-house develpment process, check this article: In-house Software Development. My recommendations for in-house… | by Suhail Hammad | Nov, 2021 | Medium

Outsourcing vs. Inhouse:

Main goal is to achieve efficiency and cost effectiveness; so the general rule is whenever you achieve the same goals with lower costs, go for it. But in some cases, money is not your only variable to play with, here are some other factors that affect your decision:

1. Competitive Service: Your organization is one of the best in its domain, then your organization needs to invest in in-house development to maintain its competitive advantage. Basically, if you seek a high level of quality for a certain service, then your first option is to invest in your equipment and in your own staff. Contracting suppliers will loosen your control on your business advantage, unless you sign an exclusive contract with special conditions.
2. Monopolistic Services: Government services, elections, and utilities (in some countries) are monopolistic. Then it is better to develop your own core business services and pay the cost of this development.
   Assuming the monopolistic organization has efficient and effective management, contracting others will cost you more, as suppliers will not be able to resell this service to others, therefore they will add their profit margin on top of all costs.
3. Adaptability and Responsiveness: when an organization lives in a dynamic or unstable environment, and must respond to changes to law, social or technical changing requirements, then it is better to develop your service inhouse. Examples: election management bodies in emerging democracies.
   The same rule applies when an organization is led by a dynamic vibrant leadership, especially for rival sectors or for emerging companies.Examples: hi-tech companies, competitive telecom sector; and so on.
4. Consistency in service: Obviously inhouse development controls all phases of production / development of the service or goods; so more chances to be more consistent in your services.
5. Sensitivity of service: As a general rule, sensitive services are developed inhouse. And when this option is hard to be taken, there must be a thorough study to make the intended balance between organization security needs and cost effectiveness.
   For example military services prefer to perform their services inhouse, but they go with outsourcing option sometimes. Network firewalls are sensitive to all organizations, although most organizations procure from others.

The Bottom line:

Organizations usually choose to perform their core business by their core staff, which allows them for better control and achieve competitive advantage; and outsource additional services.

The following table summarises the main factors that could help when it comes to choosing between in-house and outsource choices: