In today’s technology-driven world, software development is an important aspect. Companies that hire them fall into two camps: direct hiring or a willingness to hire dedicated development teams more flexibly through outsourcing providers. Each of these models has its pros and cons, budgets, and costs, which we will discuss in detail in this article.
Models Explanation
In-House Development Team
The in-house development team consists of specialists hired by the company full-time on a permanent basis. These engineers are fully integrated into the company for the long term. Most often, such specialists work from a physical office of the company, although hybrid work models also exist.
Dedicated Development Team
A dedicated software team consists of specialists of various profiles, provided by an IT service provider. Such a team works exclusively on the customer’s project. Usually, this refers to long-term projects. Most often, these are remote software engineers or other IT specialists who work as a holistic extension of the team under the management of the customer or service provider.
Hiring Costs: Comparison
In-House Development Team
- Monthly costs: The costs are higher because they include not only the salary, but also taxes per employee, equipment, workplace rental costs, and other related costs.
- Recruitment costs: The costs of recruiting fall entirely on the shoulders of the company. Searching for and hiring a professional can be costly, as it is sometimes difficult to find the right candidate locally.
- Additional costs: This includes the costs of additional training and development of its employees, which the company invests in.
Dedicated Development Team
- Monthly costs: Lower costs, as the payment for a specific specialist from a dedicated development team has a fixed monthly amount or is tied to an hourly rate. These are predictable and pre-negotiated costs between the customer and the service provider.
- Recruitment costs: No costs for the customer. The service provider independently searches for specialists to hire in the dedicated development team and does not charge the client additional funds for this.
- Additional costs: No additional costs for the customer. The development and training of developers is carried out at the expense of the service provider. Also, the external company provides the specialist with everything necessary for work.
Hiring Speed
In-House Development Team
- Time from initial candidate search to the final hiring decision: Typically, directly hiring developers to your internal team takes more time due to search processes, stages, etc.
- Developer’s availability: Hired developers usually work full-time during set hours, but sometimes it is difficult to find the right expert locally.
Dedicated Development Team
- Time from initial candidate search to the final hiring decision: Hiring time is faster. Service providers already have a pool of candidates available for the cooperation, who are ready to join the dedicated software development team.
- Developer’s availability: Developers are available full-time, thanks to flexibility in location, experts with the appropriate skills can be found quickly, and a dedicated development team will work during the hours agreed upon with the customer.
Communication with the Team and Control Over Executed Work
In-House Development Team
- Communication way: face-to-face in the office or remotely using collaboration tools.
- Team management: from the customer’s side.
- Control over progress: Each customer has its established process for controlling the progress of the internal team. This can include, but is not limited to, KPIs, time tracking in project management systems, daily meetings, performance reviews, etc.
Dedicated Development Team
- Communication way: remotely using collaboration tools.
- Team management: from the customer’s or service provider’s side.
- Control over progress: To monitor the progress of the work performed by the dedicated development team, the service provider implements a reporting system: 1) The customer can check the progress of the team or individual developers through the project management system. 2) The service provider provides reports to the customer with logs (usually, these can be weekly, monthly, or post-sprint reports). 3) Demos, planning sessions, burndown charts, performance KPIs, etc.
Skills and Cooperation Duration
In-House Development Team
- Duration of cooperation: customers aim to hire in-house developers for long-term cooperation, which depends on the candidate
- Skills: skills and proficiency depend on the candidate. Customers are often ready to hire less experienced engineers to the in-house team and to invest in their further technical growth.
Dedicated Development Team
- Duration of cooperation: dedicated development teams are focused on the result and long-term project involvement
- Skills: service provider offers top software engineers for inclusion in the dedicated development team; therefore, from the very start of work on the project, they can provide value
Team Scalability and Performance
In-House Development Team
- Team scaling: The team can be expanded based on the customer’s budget, but the process of finding an additional specialist can be time-consuming.
- Developer replacement: Possible, but the process can be rather long.
- Performance: The speed of work can be from medium to fast.
Dedicated Development Team
- Team scaling: The team can be quickly scaled up or down depending on the customer’s needs. The software development company has a network of developers who can quickly start working on the project
- Developer replacement: If a replacement is needed for another developer on the team, the service provider quickly offers a replacement with the appropriate skills and knowledge level. In addition, there is a smooth transfer of knowledge from one developer to another for a smooth entry into the project.
- Performance: the dedicated development teams offer fast and smooth onboarding, project boost, and 2x-3x development speed. Recently, there has also been a practice where teams in the development process, with the customer’s permission, involve specified AI tools to improve their efficiency and speed up work by automating repetitive tasks.
Conclusion
In this article, we explained the main difference between internal development teams and dedicated development teams, and also made a comparison, taking into account the main working and organizational aspects. Each business chooses the model that is best for it in terms of its goals, needs, and budgets. Each of the models has its own advantages and disadvantages, so it is impossible to single out any of them, but with this article, we help you understand their main differences.
