Operating Systems/Programming

Software Development : In-House or Third-Party?

When it comes to software development, an organization’s ongoing battle is deciding whether to build the software in-house or use a third-party company to create and manage it; this third-party organization is often an MSP (managed service provider). A managed service provider is simply a company that remotely manages a client’s systems, security, or software they designed, based on a subscription of services. In the world of software development, many tasks can be automated, and jobs such as patch updates can be performed remotely; due to this, many larger organizations turn to an outside company to handle their needs. In my opinion, relying only on an external party to create and manage a specific software is not the best option for when disaster strikes; however, when coupled with an in-house software development team, this arrangement can be both cost-effective and productive.

Modern businesses rely on many outside services to keep up with the competition, such as email suites and telecom systems, and software development is no different. Everything from security, licenses, administration, installs, and troubleshooting a company’s issues need to be performed and checked daily; with small to medium-size businesses, these complex and lengthy tasks are often outsourced. Usually, an MSP will handle the time-consuming, repetitive, and complex tasks, including the initial build, while an in-house software development team will oversee day-to-day operations.

Organizations who decide not to have their in-house software development team handle a project can either outsource their work to another company, such as with an MSP, or offshore their work, where the organization relocates a specific business process to another country entirely. In offshoring, there are several advantages, such as lower costs due to the region’s taxes or reduced costs of labor and the ability to increase business flexibility and expansion as having software development reside in another country allows the business’ main facility to house other departments they otherwise would not have room or funding for. Furthermore, risk would be reduced as it would transfer to another country’s organization; however, in my opinion, I would not want to rely on anyone else for the well-being and proper construction of mission-critical software, especially when the company in question is in another country entirely.

Using in-house, contracted, outsourced, and offshored software development teams all have their pros and cons; deciding which is best for the specific situation comes down to the software’s use, cost, sophistication, and long-term goals, not to mention the availability and skill level of in-house and contracted software developers. In-house software developers benefit from developing a deep internal understanding of the company’s infrastructure and needs and can offer immediate in-person support instead of waiting on an MSP or other outsourced/offshored staff to initiate contact. Also, in-house employees grow with a company and provide a personal touch. There is increased motivation with in-house teams as if they help a company become more successful, they can potentially earn more money.

In-house software developers also have several drawbacks, including higher costs depending on the team’s size (salary, benefits, training, taxes, raises), and if they leave the company, they take their knowledge with them. Furthermore, many in-house software development teams do not have the manpower and resources that large MSPs or outsourced/offshored companies have. Outsourcing software development allows for the use of industry experts and specialists and provides a stable monthly rate of costs, increased availability (hours can be different from the in-house team), and provide a legally binding SLA (service level agreement) which can be used to ensure the software is developed on time, within budget, and stays well-maintained.

Using contracted, outsourced, or offshored software development companies have negatives as well. With so many to choose from, finding the right contracted company can be frustrating (and picking the wrong one can be disastrous). With a contracted organization or employee, on-site availability is limited; it can take some time for one of them to respond. Also, placing your trust in another company instead of someone at your own can be daunting.

While there are many methods of obtaining the personnel to perform software development for an organization, the decision of which to use is often ridden with complications and uncertainties, but the result is often the same. If proper research is performed on the software project, answering questions like who will be needed, what the cost will be, what could go wrong (risk assessment), what systems the software will interact with, who will be in charge of implementation, management, updating, rollout, and user introduction/training, as well as figuring out the timeframe for the project, the choice on whether to go with an in-house team or a contracted organization will become clear. While outsourced, offshored, or other contracted software development employees and organizations are often the right choice for large projects or smaller businesses, if possible, using an in-house team provides more benefits in the long run.


Otero, A. R. (2019). Information Technology Environment and IT Audit. In Change Control Management. (Fifth ed., pp. 265-290). Boca Raton, Florida: CRS Press.

Otero, A. R. (2019). Information Technology Environment and IT Audit. In Systems Acquisition, Service Management, and Outsourcing. (Fifth ed., pp. 345-372). Boca Raton, Florida: CRS Press.

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s