In-House IT Department or Dedicated Team: What Is More Profitable for Your Business?

13 May 2022

Veronika Nedashkovskaya

Content Manager

There’s hardly any business that doesn’t need an online presence or a digital product. Custom software development is no longer a luxury but rather a necessity for companies to survive tough market competition. And for many organisations, it’s a challenge to choose between creating an internal IT department and outsourcing software development.

The Rocketech experts explain the difference between these approaches. What does your business need to hire in-house developers? What are the main benefits of the dedicated team model?

In-House Department vs Dedicated Team Model—Explained

While the notion of an in-house team is rather familiar to the general public, some business founders may still be confused about the dedicated development team concept. Before going into details, one should define the two approaches.

  • An in-house IT department is an internal team of tech and software development professionals hired by your company and working exclusively as a part of your business. In-house teams have rigid hierarchies and depend on the overall organisation’s development strategy.
  • A dedicated team model is a specific IT and software development outsourcing type. While the tech team technically does not belong to your company (i.e., they are not your employees), you have total control over the project you delegate.

Both approaches have undeniable benefits and certain controversies. The final decision always depends on the company’s individual requirements and business goals. Here are the differences between an in-house and dedicated team, organised by the operations aspects.

Recruitment Process

  • In-House Team

If you decide to go for an internal tech department, you’ll be fully responsible for all recruiting and hiring processes. They cost money and sometimes take months. These are the costs of posting job ads and promoting them. Good recruiters also have high rates—they monitor the market, select candidates, make calls, prepare summaries and organise interviews. On top of that, proper recruitment requires a well-organised onboarding process, which means more work for your HR department.

  • Dedicated Team

If you opt for a dedicated team, the recruitment is already done. Such teams are usually well-adjusted and perfectly organised. Here your task is to choose a company providing dedicated development team services. The IT industry offers a plethora of options, from cheap offshore outsourcing to teams consisting of technical-degree professionals only.

When choosing a software development outsourcing company, take your time to go through the portfolios and prepare detailed questions for their managers. Ideally, the specialists assigned for your project should have experience in your niche and similar products.
In-House TeamDedicated Team
BenefitsYou select an employee according to your company values and corporate culture. You can regulate the salary and discuss it with candidates. You can monitor how internal team dynamics and psychological well-being.The outsourcing company takes care of all recruiting and hiring processes. The team is already well-adjusted; there’s no risk for conflicts to affect productivity. The outsourcing company assigns all specialists required for the project’s successful completion.
DrawbacksYou have to look for each specialist for your team; it takes time and costs a lot. You need to make sure your employees are satisfied with work conditions and salaries and not planning to leave.You can’t negotiate the rates. You don’t know the team members and need time to adjust to their working process.

Long-Term Expenses

Whether you decide to build your internal IT department or hire a dedicated software development team, it’s always a strategic decision. However, in-house teams are traditionally associated with high long-term costs. Here’s what you need to remember.

  • Hiring in-house employees ultimately means extra expenses for social security payments, health insurance, paid vacations and sick leaves, commuting costs and other benefits and perks.
  • You need to provide decent physical working conditions. It includes comfortable offices and quality equipment. In the case of software developers, designers, and QA engineers, we are talking about state-of-the-art hardware and software.
  • You need to be constantly involved in the social dynamics of your team and take care of their well-being. Unhappy employees migrate, leaving the employers with the challenges of new hires.
  • You need a continuous task flow. Hiring an in-house department should be at least justified by a sufficient amount of work to keep the team busy all the time.
Hiring a dedicated development team doesn’t mean that their employees aren’t satisfied with their working conditions and benefits. It simply means that their well-being is their hiring company’s concern, and you can focus on your business objectives. 

While an internal team indeed sounds like a lot of work and extra running costs, it’s a good fit for companies running background checks of their employees (even permanent) and working with sensitive data. It’s also a preferred model for organisations that put their corporate culture on top of all business operations and therefore have a complex selection process. 

Management

There are five aspects of IT management that apply to both internal departments and remote outsourcing teams. These requirements are vital for department managers, project managers and team leaders and universal across employment models.

  1. Highest-level expertise in information and communication technologies.
  2. Comprehensive documentation of the enterprise’s entire IT infrastructure with methods for working with specific software and equipment.
  3. Building backup systems in particular and fault tolerance systems in general.
  4. The organisation of a complex monitoring system for all equipment, software and development processes.
  5. Employee training.

If any or all of them don’t seem feasible in terms of your company’s growth strategy, you should consider delegating the tech tasks to a third party with their respective expertise. This way, you significantly cut expenses on these services and have enough time to focus on other business objectives.

Communication

  • In-House Team

When your company hires staff, building communication becomes your tactical task. You select candidates, expecting them to fit into the team, be able to work with each other and share company values. However, all onboarding and internal training procedures become your responsibility as well. You need to establish effective ways of communication between IT team members and between departments. On the other hand, it’s also up to you to choose collaboration tools and create a corporate culture.

  • Dedicated Team

In most cases, IT project delegating means limited communication between the client and developers. Many customers prefer to stay in contact only with the project manager of an outsourcing software development provider to save time. However, more clients seek more transparency and involvement in their projects. At Rocketech, we have made them the underlying principles of communication between our dedicated teams and clients. Our clients are encouraged to interact with each team member and engage with the process. Yet, they don’t have to spend time on organisational matters.

In-House TeamDedicated Team
BenefitsYou participate in the process directly as a company executive. You can see how your employees react to criticism and can adjust your management tactics. You can evaluate your employees and reassign tasks and roles.You don’t have to micromanage each specialist’s every move. Even if you opt-out of full engagement in the process, you’ll still get detailed reports of every stage as a part of the contract. Your dedicated team gets started immediately; all work and communication processes are already set up.

Control and Monitoring

Some entrepreneurs are under the assumption that it’s easier to control an internal IT department—you can assign a specific role for this task or even install video surveillance at the office. However, you should consider the following.

  • Costs of buying and maintaining equipment.
  • Remuneration of the person in control.
  • The level of involvement of the person in control: IT specialists who understand the process mostly expect higher salaries.

One of the main dedicated team benefits is the contract. It regulates every detail of the client-team collaboration, including timely reports on each project’s stage, deadlines, roles and the overall scope of work. Every dedicated team member is interested in the timely delivery of their part of the work. Otherwise, most contracts provide penalties for the service provider.

Final Thoughts

Building an internal IT department has many advantages but in certain cases becomes time-consuming and inefficient. Large companies that base their business on digital products prefer to create and maintain their own tech teams. They usually have sufficient budgets and extensive operations to provide an entire department’s viability.

Startups and small businesses, on the other hand, rarely have enough funding and capacity to create a new department from scratch. Many organisations choose rigid outsourcing options like time and material contracts and soon get disappointed. At Rocketech, we created our dedicated development team model—a flexible contract based on transparency, expertise and involvement. Our dedicated teams are formed and assigned according to the unique requirements of every project and each client. Contact us for more details.

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