Outsourcing and in-house development: a cost breakdown that is not a slogan

“Outsource to save money” and “never outsource your core” are both slogans. The decision is about a specific backlog, a specific year, and whether you can manage the work.

In-house costs people undercount

Recruiting time. A salary plus the loaded cost of employing someone. Equipment. Management. The months before a new hire is productive in your codebase. The cost of a wrong hire.

You also get something outsourcing does not hand you: context that stays when the ticket is closed. That context is worth paying for when the product is the company.

Outsourcing costs people undercount

Your time explaining the domain. Rework when the scope was a paragraph. A handover if the vendor leaves and the repository is a mess. A cheap rate with no tests and no deploy notes is not cheap.

You should still own the code, the accounts, and the deployment. If the vendor holds those, you have not outsourced development. You have rented your product.

A breakdown you can actually use

Split the next six months of work into two piles.

Pile A: undefined, core, and continuous. Product decisions every week. This pile wants someone who stays. In-house, or a long retainer with a named person, if you are not ready to hire.

Pile B: defined, bounded, specialist. An integration, an upgrade, a first version. This pile is what a fixed or milestone engagement is for. Compare the quote to the loaded cost of hiring someone for the same months, including the time to hire. Often pile B loses the comparison to outsourcing. Often pile A does not.

A pattern that works

Build pile B with an external developer. Hire when pile A is real, and have the external developer write the handover: how to run it, where the decisions are, what not to touch. That handover is part of the quote, not a favour. It is described in how we work.

If you are comparing a freelance engagement to an agency rather than to a hire, read freelancer vs agency. The cost line moves again, because you may be paying for a coordinator.