If you have system development skills and human resources in-house, you tend to face the question of whether to in-house or outsource when developing a Web system. Which one should I choose for successful system development? This time, we will explain the specific selection method while comparing the advantages and disadvantages of in-house production and outsourcing.
table of contents
- 1. Is system development in-house or outsourced?
- 2. Advantages and disadvantages of in-house system development
- 3. Advantages and disadvantages of outsourcing system development
- 4. Which is better, in-house production or outsourcing?
- 5. How to find a subcontractor that will not fail
Is system development in-house or outsourced?
| System development method | |
|---|---|
| Internal manufacturing | Promote system development in-house |
| Outsourcing | Requesting development from a company other than your own |
Before introducing the advantages and disadvantages of each, let’s first understand the outline of in-house production and outsourcing in system development, the specific procedure of development, etc.
● What is in-house production?
In-house production means “promoting system development in-house” when the need for system development arises. When developing in-house, first gather members and ask an in-house system engineer or IT engineer to develop. If it is difficult to develop by ourselves, we may ask a subsidiary or a consolidated group for help, or we may cooperate with a system engineer dispatched from SES (System Engineering Service).
● What is outsourcing?
Outsourcing refers to “requesting development from a company other than your own.” When developing outsourced, it is common to first make estimates from multiple development companies, compare them, and then conclude a contract with a company that meets their wishes. Nowadays, there are many cases of considering “offshore development” by requesting overseas development companies. By the way, since it is easier to compare and manage the progress of development companies when requesting outsourcing, the company’s “employees who are familiar with system development” may be the contact point with the development company.
Whether you choose to make it in-house or outsource it, there is no difference in that you can “complete the system.” However, the advantages and disadvantages that come with each are different, so it is recommended that you understand the characteristics of both before making a comparison.
Advantages and disadvantages of in-house system development
| Advantages and disadvantages of in-house system development | |
|---|---|
| merit | Easy to lead to employee growth |
| Easy to convey and share information necessary for advancing development | |
| Easy to change system specifications and add functions | |
| System and application development know-how accumulates in-house | |
| Demerit | Costs are likely to occur if development does not proceed as planned |
| Difficult to get the engineers needed for development | |
| Employees who can manage the entire development are required depending on the scale | |
| It is easy to have an engineer after the system is completed | |
The main advantages and disadvantages of in-house system development are as shown in the above figure. Each is explained in detail below.
● Advantages of in-house production
The advantages of in-house production of the system are as follows.
- Easy to lead to employee growth
- Easy to convey and share information necessary for advancing development
- Easy to change system specifications and add functions
- System and application development know-how accumulates in-house
If you acquire know-how on system development through in-house production, you will be required to have a vision of “how to utilize it in management.” Without such a vision, it is unclear whether the accumulation of know-how will be a management resource. For example, it is up to the company to develop a new system using the know-how cultivated, sell the system package to other companies in the same industry, and utilize the acquired know-how.
● Disadvantages of in-house production
On the other hand, there are also disadvantages to manufacturing the system in-house.
- Costs are likely to occur if development does not proceed as planned
- Difficult to get the engineers needed for development
- Employees who can manage the entire development are required depending on the scale
- It is easy to have an engineer after the system is completed
System development is not just about hiring skilled engineers. The important thing in development is the first “requirement definition”, and if this is not decided, there is a risk of incurring unnecessary costs in development. In addition, finding and hiring engineers who can handle the programming languages and frameworks needed for development can be a daunting task.
Especially in cases where there are few engineers in the company, there is also the problem of “I do not know what kind of person to hire”. For example, no matter how sophisticated the applicants are if the hiring side is not familiar with system development, there is a risk of a mismatch in human resources. When hiring engineers, employees who are familiar with system development will be indispensable.
Even if you can hire an engineer who has the necessary abilities, if you have no work at the end of development, you will not have the skills of the engineer you hired. Simply put, if it’s difficult to hire the engineers needed for development, it’s just as difficult to maintain an employment relationship.
Advantages and disadvantages of outsourcing system development
| Advantages and disadvantages of outsourcing system development | |
|---|---|
| merit | Easy to proceed with development according to the desired schedule |
| No need to hire a system manager in-house | |
| There is no need to make additional investment in equipment depending on the contract details | |
| Can absorb the latest know-how of system development | |
| Demerit | Costs are often higher when compared to in-house production |
| Security risk tends to be high | |
Now that we have explained the advantages and disadvantages of in-house production, let’s move on to outsourcing. The main advantages and disadvantages of outsourcing system development are as shown in the above figure.
● Advantages of outsourcing
There are many benefits to outsourcing system development.
- Easy to proceed with development according to the desired schedule
- No need to hire a system manager in-house
- There is no need to make additional investment in equipment depending on the contract details
- Can absorb the latest know-how of system development
In particular, not having to hire a system manager in-house is a big advantage for the company. After system development is developed, you will not have to spare resources such as the advanced skills of system engineers and the development environment, so you do not have to worry about wasting costs. In addition, there is no cost for the capital investment required for development, and the system is developed according to the desired schedule.
By the way, consistently outsourcing system development is called “full outsourcing”. Due to the many merits mentioned above, many companies in Japan outsource system development, and many companies cover all development with full outsourcing.
● Disadvantages of outsourcing
On the other hand, the disadvantages of outsourcing the system are as follows.
- Costs are often higher when compared to in-house production
- Security risk tends to be high
The cost varies depending on the development company and the project, but as long as it is outsourced, a reasonable cost will be incurred. There is also the disadvantage that it is difficult for the ordering party to control the system development for outsourcing. Since system development creates new products almost by fumbling, it is also characterized by the fact that minor troubles are likely to occur during development. Under such circumstances, many people may be worried about the situation where they cannot steer the progress of the project in-house.
Which is better, in-house production or outsourcing?
Whether in-house production or outsourcing is better depends on the development project, but one of the guidelines is the development period and scale.
For example, for small system development, outsourcing is recommended rather than in-house production. Developing a small system makes you want to cover it yourself, but in-house production of the system consumes a lot of human resources. Requests to “go ahead with one hand” may hinder the main business, and setting up a development department within the company tends to increase costs. Overall, the cost can be higher than outsourcing. To put it simply, in the case of small system development, it is easy to get fewer “results” for the human resources invested.
On the other hand, if a large system development is expected to “prolong the development period”, even if you create your development department, the human resources you have invested will not be wasted. When making in-house, it is risky to keep all human resources in-house, so it is a good idea to work on system development with the help of subsidiaries and SES. But again, whether in-house production or outsourcing is better depends largely on the development project. We recommend that you take a comprehensive look at the advantages and disadvantages of in-house production and outsourcing, and adopt a method that has great advantages for your company.
How to find a subcontractor that won’t fail
System development is a world where trends change very quickly. By quickly introducing cutting-edge technology, we have the potential to have great strengths in business performance and cost competitiveness. However, if you leave everything to an external company, you will not be able to accumulate system-related know-how in your company. It is important to strike a good balance between these and determine how much the company’s strengths are the know-how related to system development and the human resources with development skills.
To find a subcontractor for system development, we recommend using the supplier selection support service. Order Navi is a support service specializing in system development. We will respond free of charge from consultation to introduction. Professional staff will ask you for details, and even those who do not have IT knowledge can use it with confidence. After an in-depth hearing, we will introduce the most suitable company according to your request.
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