In-house vs. outsourcing software development: overview
Hiring model
Price
Development time
Expertise
Experience
In-house
Higher due to salaries, benefits, and infrastructure costs
Can take longer because of internal resource constraints
Limited to the expertise of your current team, but offers better domain knowledge
Deep understanding of your culture and processes
Outsourcing
Lower due to reduced overhead and lower labor costs
Usually shorter, because the team can start work immediately and is easier to scale
Experience working on a variety of projects across different industries
Depends on the vendor’s experience with similar projects
Outsourcing software development can help you cut costs by up to 53%, but you don’t have full control over development.
If you want to balance control and cost-efficiency, you can also go for a hybrid approach, with both an in-house and outsourced team.
But, regardless of your choice, where your team is located makes a huge difference in your total costs.
Average hourly rates around the globe vary wildly. Here’s a comparison of the average hourly rates by role and region:
Average hourly development rates by role and region
Region
Software engineer
Solution architect
UX/UI designer
Project manager
Western Europe
$120-150
$150-200
$90-130
$110-160
Central Europe
$40-55
$60-80
$35-50
$45-65
Eastern Europe
$30-50
$45-65
$25-40
$30-55
Asia
$20-50
$30-70
$18-40
$25-50
North America
$100-150
$120-200
$80-120
$90-140
Latin America
$25-50
$40-70
$20-40
$30-55
Africa
$20-50
$30-70
$20-40
$25-55
If you’re based in Western Europe or North America, the average rates are much higher than in the rest of the world.
So, if you outsource to Central or Eastern Europe, you’ll pay 3-4x on labor costs alone.
In the end, there’s no one-size-fits-all approach.
You need to weigh the trade-offs between cost, speed, and control to find the best fit for your project.
Key tips for choosing the right team
Assess your long-term needs – If your project is long-term, investing in an in-house team or a hybrid team (both in-house and outsourcing) makes sense.
Prioritize expertise over cost – Don’t go for the cheapest option. A skilled team will deliver faster, write better code, and save you money on maintenance and fixes.
Test with a pilot project – Before committing to hiring a full team from a vendor, start with a small pilot project to evaluate culture fit and the quality of their work.
Tech stack
Your choice of tech stack directly impacts development cost, speed, and scalability.
The wrong choice will lead to expensive rewrites, security vulnerabilities, and performance bottlenecks down the line.
And if you pick the right stack, you’ll develop your product faster – and time is money.
Each project is unique and your choice will depend on:
Your chosen platform(s)
Project requirements
Project scope
Your team’s expertise
You should prioritize tools and frameworks that support faster development, like React or Flutter, which can save you a lot of time.
Still, the easiest way to cut tech stack costs is choosing a stack your team is most familiar with.
You won’t have to pay for training and they can start working without delay.
And that’s essential if you want to cut costs.
Key tips for choosing the right tech stack
Think long-term – Avoid niche or outdated technologies that lack long-term support.
Avoid overengineering – Picking the most complex tech stack often leads to unnecessary delays and higher maintenance costs.
Evaluate developer availability – Some technologies are in high demand but have a limited talent pool, which drives up hiring costs.
Compliance and security requirements
Enterprise software deals with your sensitive business data, so compliance and security are non-negotiable.
You can’t afford to cut corners here.
According to IBM’s Cost of a Data Breach 2024 report, the average cost of a data breach reached its highest level ever – $4.88 million.
Depending on the industry, the average cost is even higher:
So, investing in strong security is definitely a best practice you need to follow when building enterprise software.
You’ll need to invest in end-to-end encryption, penetration testing, multi-factor authentication, and more.
On top of that, you’ll need to ensure compliance with regulations like GDPR, CCPA, PCI DSS (for finance), HIPAA (for healthcare in the U.S.).
All of this will increase your development costs.
But, if you take shortcuts, you risk facing much more expensive fixes down the road and huge reputational damage.
And that’s a risk you shouldn’t take.
Key tips for managing compliance and security costs
Automate security testing – Automated security scans, penetration testing, and compliance audits will reduce manual effort and lower your long-term costs.
Use pre-certified cloud services – AWS, Azure, and Google Cloud offer compliance-ready solutions (e.g., HIPAA, GDPR, SOC 2) that will drive costs down.
Limit data collection and storage – The more data you collect, the higher the risk and cost. Only store necessary data.
Scalability and infrastructure costs
Enterprise software needs to be able to handle a huge number of users and large data volumes.
And that’s why it needs to be scalable from the start.
Cloud services scale automatically but come with ongoing expenses like compute costs, data transfer fees, and storage costs.
And if you don’t correctly optimize cloud costs, your bills can double or even triple unexpectedly.
In short, scalability isn’t just about handling more users. It’s about doing so efficiently without unnecessary costs.
And the best time to plan for it is before you need it.
Key tips for managing scalability and infrastructure costs
Control autoscaling – Set up your cloud resources to scale only when needed to avoid unnecessary expenses.
Optimize database performance – Poorly indexed queries and inefficient schema design lead to higher storage and compute costs.
Monitor and adjust cloud resources – Idle resources bleed money. Regularly audit your cloud usage to identify and eliminate idle resources.
Third-party services and APIs
Enterprise software never operates in isolation.
All enterprise-grade products and platforms integrate with third-party services, APIs, and external tools to extend their functionality.
Some common third-party services and APIs are:
Payment processing – Stripe, Adyen, Braintree
Messaging and notifications – Twilio, SendGrid, Firebase Cloud Messaging
Authentication and security – OAuth, Auth0, Okta
CRMs – Salesforce, Hubspot, Pipedrive
Analytics – Google Analytics, Mixpanel, New Relic
AI and machine learning – Open AI APIs, Google Cloud AI, IBM Watson
And that’s barely scratching the surface.
But, each of these comes with its own costs.
APIs usually charge per request, user, or for monthly usage and third-party services offer similar subscription plans.
So, if you integrate a bunch of different services and APIs, you can dramatically increase your costs.
Plus, as your number of users grows, so do the costs.
And that’s why you need to be picky about integrations and make sure they deliver actual value.
Key tips for lowering third-party service and API costs
Monitor API usage – Set limits for API requests so you don’t exceed limits and avoid unexpected costs.
Negotiate enterprise pricing – Many providers offer custom, enterprise-grade plans that lower your per-request costs.
Only integrate essential APIs and services – Every extra API or third-party service adds recurring costs and complexity, so choose wisely.
Employee onboarding and training
Even the most advanced enterprise software is useless if your employees don’t know how to use it.
Don’t think of training and good onboarding as just another expense – it’s an investment in productivity.
Here’s how it impacts costs:
Lost productivity – Your employees will take time to adapt, which might slow your operations.
Training materials – You’ll need to invest resources into creating documentation, a knowledge base, and tutorials.
Support overhead – Without proper training, your IT team will need to spend more time troubleshooting problems.
User resistance – Change management is critical. If you introduce your system poorly, this can lead to frustration and rejection.
A poor onboarding process will lead to low adoption rates and inefficiency.
Untrained employees will make more mistakes, too, which leads to operational risks.
And if your software is too complex and hard to use, some of your employees might even leave.
So, you need to invest in training and onboarding early.
It’s the best way to reduce long-term costs and maximize your ROI.
Key tips for cost-effective employee training and onboarding
Use role-based training – Customize training materials for each user group and focus on what each team needs to know.
Offer self-service resources – Knowledge bases, video tutorials, and FAQs will reduce the need for extensive and time-consuming live training.
Track adoption metrics – Track adoption and adjust training programs based on real data.
Enterprise software development cost: FAQs
Your development timeline will depend on your project’s scope, complexity, and team size.
So, the answer is – it depends. But, depending on complexity, here’s what you can expect:
Small-scale enterprise software – 3-6 months
Medium-scale enterprise software – 6-12 months
Large-scale enterprise software – 12+ months
Some common hidden costs you should know about are:
Third-party API fees
Cloud overages
Training costs
Ongoing support and maintenance
Of course, you can combine in-house and outsourced development, depending on your specific needs.
For example, you can outsource non-core and specialized tasks while your in-house team handles mission-critical parts of the project.
In fact, a hybrid model like that is the best of both worlds – you save money on development without sacrificing quality.
But, you need to make sure the company you choose can work well with your in-house team. Ask them if they have experience collaborating closely with clients’ in-house teams and how they handle working with them.
Need a high-caliber development team?
Do you need help building your enterprise software but every company you talk to misses the mark?
Well, you’re in the right place.
We’re an EU-based full-service software development company with 12+ years of experience building complex products for both SMEs and Fortune 500 companies.
So, we know a thing or two about building enterprise-grade products and we’re always on the lookout for a new challenge.
If you want to learn more, feel free to reach out and our team will be happy to set up a quick meet to discuss your needs in more detail.
Mario makes every project run smoothly. A firm believer that people are DECODE’s most vital resource, he naturally grew into his former role as People Operations Manager. Now, his encyclopaedic knowledge of every DECODEr’s role, and his expertise in all things tech, enables him to guide DECODE's technical vision as CTO to make sure we're always ahead of the curve.
Part engineer, and seemingly part therapist, Mario is always calm under pressure, which helps to maintain the office’s stress-free vibe. In fact, sitting and thinking is his main hobby. What’s more Zen than that?
