There are many prejudices when it comes to product vs outsourced companies comparison. Someone may say that developers working for outsourcing companies have too much workload and responsibility to clients. Others may say that working for product companies is boring and that they don’t give any opportunities for professional growth and development.
There is plenty of confusion about these statements. And when choosing where you want to work – in a product or outsource company – you can’t lean on someone’s prejudices and preferences. You need to have a clear and reasonable understanding of the pros and cons of each option.
In this article, we will compare in-house vs outsourced software development companies’ pros and cons to help you make the right decision. So keep on reading.
What is an outsourcing company?
Outsourcing companies work with projects from different industries, and have clients from all around the world. These projects can be short or long-term, simple and complex, etc. They create the whole software products or perform IT-related tasks for other businesses and organizations. Outsourcing companies may also provide not just product development services, but also provide a range of other services such as IT consulting, IT staff augmentation, and others.
According to Statista, “the IT outsourcing sector is the biggest contributor to revenue in the IT services market, with $361 billion in 2021, and is projected to reach $587.3 billion by 2027.”.
Outsourcing company pros
There is a set of advantages that you can gain working in the IT outsource company. Here are the most significant ones:
- Learn new and become more versatile as a developer
Outsourcing companies give software engineers an opportunity to grow professionally, working on a variety of projects from different industries and create an imposing portfolio. Such companies also work with a wide range of technologies and tools, which can help you expand your skills and become more versatile.
- Get promoted for your skills
In the outsourcing company, you probably won’t even find out if the product you’re working on becomes successful when it goes to the end users hands or not. Your main goal is to satisfy the client’s requirements and expectations. This actually means that your career growth will depend on how skilled you are and how much experience you have, not on how successful the product is.
- Earn more depending on the company’s location
Working for an outsourcing company, you have an opportunity to get more money for your skills than you expect. Such companies frequently hire developers on a remote base, and the developers’ salaries vary greatly in different countries of the world. For example, if you live in an Eastern European country and work for Western European outsourcing company, you can be paid more than in your home country. For example, according to Glassdor, the average developers’ salary in Kyiv, Ukraine, is $3000 per month. Meanwhile, the average salary of a developer in London, UK, is approximately $4000 which is 25% more than in Ukraine.
- Gain international experience
Most outsourcing companies work with clients from different countries which provides an opportunity to gain international experience and learn from it. This may give you a competitive advantage in your career in the future.
- Set convenient work-life balance
Companies in the outsourcing industry usually have flexible working policy which means that you can set the convenient time of the day or night for work, select days for rest on your own, and take breaks when you need to.
Outsourcing company cons
Benefits follow disadvantages. In order to have a clearer picture, you need to know about the cons of the work in an outsourcing company:
- Dependency on the projects’ flow
Outsourcing companies totally depend on the number of projects they have. Some of them have a stable user base or continuous customer flow, but others sometimes may need to take a forced break between projects. During these periods, you won’t have a job to do and will probably get paid less.
- The primary need is to satisfy a client
Working in an outsourcing company, you will have to care not only about the end product’s quality but about how to satisfy a client as well. Your main goal is, actually, to meet the client’s needs, not create a product that will be good according to your personal opinion. Delivering a product that a client wants may not coincide with your own beliefs. Moreover, shaping a product according to the client’s needs frequently implies additional work and effort.
- Lack of transparency
Working in an outsourcing company, you may not have an idea of why things happen as they do. Why do you have to follow this or that development plan? What is the idea of the product? You may not have a clear understanding of some things as a lot of them depend on the client.
Some clients prefer limiting access to some documentation to team members and sharing them with the management team only. Of course, it’s not something that makes your work difficult, but it can make you feel like you are not part of the game. This happens because when founders outsource software development, they usually don’t have face-to-face interaction with the offshore development team and feel a lack of control.
- Focus on experienced specialists
As usual, outsourcing companies aren’t interested in hiring inexperienced developers. We are not trying to say that they hire only high-skilled senior engineers. The thing is that they usually have tight deadlines, have to switch from one outsourcing project to another in a rush, and don’t have a lot of time to educate developers.
What is a product company?
Product companies work on product that they own. They don’t provide services for third parties. Such companies may outsource some part of tasks to outsourcing companies or delegate these tasks to freelancers, but the majority of work is done by the internal team that works on product development and support.
Product companies work with in-house development team and hire dedicated developers.
Product company pros
Working at a product company, you can gain a lot of advantages. Here are some of them:
- Gain stability
In product development companies, tasks are usually well-planned by priority and the transition between them is smooth. This suits greatly for people who prefer working according to a strict, predictable plans.
- Care only about the end product quality
Your number one purpose is to deliver a product that the end users want. You don’t need to think about how to meet the expectations of people outside of the company. Of course, you need to make sure that the company’s stakeholders are satisfied with your work, but they are on the same board as you.
- Don’t depend on the clients
The outcome and future of the product company are usually more or less predictable. Of course, bad things can happen to any business, but the chance that the product’s users will just disappear one day is low. Product companies have their ups and downs, but, as usual, this doesn’t mean you will get a pay cut or you won’t have a job to do.
- Be involved in the whole development process
Working for a product company is all about teamwork. This means that you are involved in all the product development lifecycle, can see the clear picture, and know about all the problems. You work solely on one project and you are free to share your ideas and suggestions on how to improve it because you are not limited by external factors.
- Have more opportunities for growth
The product company is interested in your growth. This means that you can be hired as an entry-level developer, and the company will take responsibility for your education and professional growth. This gives an opportunity to build a career almost from scratch.
Product company cons
Just as work in an outsourcing company has its cons, work in a product company has them as well. Here are the ones we highlighted:
- Monotony
Working for a product company implies a lot of monotonous tasks that can drain your potential. You won’t get an opportunity to work on diverse projects as you will be working on one project – the company’s product. Thus, you will be getting a lot of identical tasks.
- Salary dependence on the product’s success
When you work for a product company, your opportunity to grow financially totally depends on how successful the product is. And the product’s success depends on various factors such as marketing strategy, current market state, and others. You as a developer don’t have influence on the majority of these factors. This actually means that you won’t have an opportunity for growth if the product you are working on doesn’t demonstrate outstanding results.
Outsource vs product: What else to consider?
When choosing a company to work for, you should also remember that you are choosing between good and bad places to work. And what makes a company a great place to work? It’s the company’s values, culture, attitude to workers, etc. Make sure to pay enough attention to these factors as well.
So, apart from choosing your winner in the in-house vs outsourcing comparison, you also have to consider such things:
- During the interview, ask questions about the technologies the company works with, development lifecycle, software development methodology, etc.
- Check reviews from the company’s employees on the web.
- Make sure that the company fits your own goals.
Which one is better: outsourcing or in-house?
Let’s outline the main difference between outsourcing and product companies: outsourcing companies built the product, but don’t own it. Product companies, on the contrary, built the product that they own.
If you decide to join an outsourcing company, you will get an opportunity to work on very diverse projects: web development, mobile app development, and many others.
If you decide to join a product company, you will work on one project.
Choosing an outsourcing model is great for you if
- you want to learn as much as possible and improve your professional skills
- you don’t find it disturbing or inconvenient to switch from one project to another
- you are a junior developer and want to gain more experience
Product company is great for you if
- you crave stability and predictability
- you won’t to become an expert in certain field