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Custom Software Development: IT Staff Augmentation, Outsourcing, & In-House Development – Differences & What to Choose?
20 OCT 2023

In the endless pursuit of software development, applications, websites, and IT process optimization, companies often face the dilemma of whether to use internal resources or leverage the services of external providers. This is a choice between the concepts of custom software development: IT staff augmentation, outsourcing, and in-house development.

In this article, we will explore the differences and advantages of each of these approaches, as well as determine the most optimal option for engaging IT specialists in custom software development.


Table of content:

  • Evolution of Hiring: from In-House, through Outsourcing, to Staff Augmentation.
  • What Is In-House Development?
  • What Is Outsourcing?
  • What makes IT staff augmentation attractive in such cases?
  • When do you need IT specialists from outside? And when do you not?
  • When Do You Need IT Specialists from Outside? And When do You Not?
  • The Hybrid Approach as the Ideal Solution.

Evolution of Hiring: from In-House, through Outsourcing, to Staff Augmentation

In search of optimal solutions for software development (mobile or web applications, business information systems, software), companies repeatedly turn to staff augmentation agencies, strive to strengthen their in-house development or resort to outsourcing.

First and foremost, let’s clarify the definitions of each of these approaches.

What Is In-House Development?

In-house development is a strategy where a company creates and maintains its own team of developers within its organization.

Advantages of the in-house strategy:

⚫️ Full control: 

The company has complete control over the development process, and the internal team can quickly and flexibly respond to changes or project requirements, as they are familiar with the company’s work style from the start.

⚫️ Direct collaboration: 

The in-house team of developers can directly interact with other departments within the company, such as marketing, sales, or product management. Effective communication precedes a high level of understanding of business needs and enhances the quality of the IT product.

⚫️ Preservation of expertise within the team: 

Having a deep knowledge of the project allows for the accumulation of expertise and insights. This can be particularly valuable in the long term, as accumulated experience and expertise can be applied to new projects and products.

⚫️ Long-term investment: 

Maintaining an in-house team of developers contributes to the development of internal technical skills and the growth of IT specialists’ competencies, which can become valuable assets for the company.

Disadvantages of the in-house strategy:

The main difference in maintaining an in-house team compared to other strategies lies in regular expenses for IT specialists. Additionally, companies may not always have tasks readily available for developers, leading to downtime, which may not be cost-effective for the company.

In such cases, organizations often turn to the outsourcing model, fully delegating tasks to an outsourcing company.

What Is Outsourcing?

Outsourcing involves the complete delegation of IT product development processes to a third-party company.

Advantages of using outsourcing:

🔴 Cost reduction: 

The client company can eliminate the need to maintain its own team of IT specialists, as the outsourcing agency will handle the hiring of the development team and HR-related tasks such as reporting and employee selection.

🔴 Wide range of specialists: 

Collaborating with specialized outsourcing companies provides access to a wide range of experts and specialists who have expertise in specific areas of IT.

🔴 Focus on core activities: 

Outsourcing software development allows companies to focus on their core activities, freeing up resources and energy for business development, while a specialized outsourcing team takes responsibility for all stages of software development.

Thus, outsourcing helps companies reduce costs and hand over control of the project, including document management, to a third-party mediator.

Disadvantages of outsourcing:

Undoubtedly, today outsourcing companies are actively working on improving customer orientation and addressing the risks of mismatched corporate work styles between the outsourcing provider and the client company. However, in the outsourcing model, one remaining disadvantage is the dependency on the success of the project on the work of external contractors. To mitigate this drawback, companies need to carefully select outsourcing agencies, relying on their experience in IT project development.

What makes IT staff augmentation attractive in such cases?

Staff augmentation in IT involves the temporary transfer of necessary specialists to the client company, where the staff augmentation agency, similar to outsourcing, takes care of the legal support of the employees.

With staff augmentation, the employees work for the client company but remain on the payroll of the staff augmentation agency.

Staff augmentation in IT offers the same advantages as outsourcing. However, there are several additional benefits to using the staff augmentation strategy:

⚪️ Cost reduction: 

Significant savings can be achieved in office supplies, technical equipment, software, organization of corporate events, bonuses, corporate training, and more. These responsibilities are taken on by the staff augmentation agency.

⚪️ Flexibility in personnel management: 

The staff augmentation agency provides exactly the number of people required for the current workload. If the number of tasks increases, the development team can be quickly strengthened.

⚪️ Absence of migration risks and labor disputes: 

Since the employees continue to be on the payroll of the staff augmentation agency, the migration risks for the client company are zero. Any difficulties or disagreements between the employer and the staff augmentation agency are handled by the agency.

⚪️ Access to external expertise: 

Companies can benefit from the experience of the staff augmentation agency and utilize new IT technologies for the successful development of their projects. Additionally, they can tap into the knowledge of experienced specialists who have worked on various projects.

⚪️ Objective and duration of collaboration: 

Staff augmentation is most commonly used for long-term collaboration and strengthening the company’s development team. For example, if a company needs to hire several IT specialists for a three-month project, staff augmentation can be an optimal solution.

⚪️ Level of project control: 

By choosing the staff augmentation model, the client company retains a higher level of control over software development since the external IT specialists align with the existing development processes.

Thus, with staff augmentation, companies hire an external team of developers who effectively become part of their internal team and work on a permanent basis.

Staff augmentation allows companies to efficiently manage the development process while reducing costs associated with maintaining an internal team of developers. The main difference between the staff augmentation and outsourcing models is the retention of project control by the client company.


We understand that companies’ desire to move away from the in-house strategy and towards staff augmentation is not without reason. It is usually driven by unmet needs, such as:

  • high expenses associated with maintaining employees;
  • excessive bureaucracy;
  • high employee turnover and a shortage of specialists for projects.

When Do You Need IT Specialists from Outside? And When do You Not?

In this section, we will consider the factors that should be taken into account when choosing the appropriate personnel hiring strategy for your project.
So, in-house development is suitable if:
  • The company is willing to maintain a full team of IT specialists.
  • The internal development team possesses sufficient expertise.
  • Projects can be delivered on time.
  • There is an adequate amount of tasks to fully utilize the IT specialists.
Let’s take a closer look at situations where companies may find it more beneficial to utilize the outsourcing model:
  • When the company needs to save on equipment costs.
  • If the company cannot ensure proper administration and support for its own team.
  • For companies that lack sufficient IT expertise to develop turnkey projects.
Staff augmentation development is suitable for companies in the following cases:
  • When the internal development team lacks quality expertise.
  • For companies that cannot meet project deadlines by themselves.
  • When there is a shortage of personnel resources to complete a specific project or task.
  • If the company is looking for rare IT specialists to carry out projects.
  • When the company is not ready to hire individual IT specialists as permanent employees.

If you are facing challenges with meeting deadlines for the implementation and launch of IT products, our team is ready to provide you with technical specialists to handle tasks of any complexity. You can contact us here.

The Hybrid Approach as the Ideal Solution

Considering the specific nature of the approaches described above, in certain cases, it is optimal for companies that want to maintain an in-house model while strengthening their internal development team to use a hybrid approach in personnel hiring.

In-house with Staff Augmentation

The internal team focuses on strategic tasks, while staff augmentation is used for specialized expertise or temporary resource needs.


A window manufacturing company needs to optimize internal production processes and decides to develop an information system (IS). Due to the scale of development, additional IT specialists are required. In this case, incorporating staff augmentation allows the company to:

  • strengthen its team to meet established deadlines;
  • save on budget, as the client company does not have to pay employment taxes or invest in equipment and maintenance;
  • access specialists who immerse themselves fully in the development process and understand product nuances.

Outsourcing and Staff Augmentation

Outsourcing and staff augmentation are used when companies do not have an in-house team of technical specialists but still want to release their own IT products. This approach saves time and money as the responsibility of maintaining a full team is shifted. Additionally, it guarantees the development of high-quality IT products due to the broad expertise of specialized outsourcing and staff augmentation agencies.


A women’s clothing store wants to expand its business and launch an e-commerce website. Prioritizing the creation of a website and a custom web application, the company realizes that it lacks in-house IT specialists. Consequently, the company outsources website development and contracts with a staff augmentation agency for maintenance and enhancements.

In-house, Outsourcing, and Staff Augmentation Combined

By employing all three models simultaneously, companies ensure both high-speed IT product launches and their quality.


A furniture hypermarket plans to launch a second mobile application featuring 3D interior modeling. They outsource this task to an outsourcing team. However, due to a delay in development, the decision is made to hire staff augmentation testers to meet the deadline. The in-house team focuses on supporting and further improving the existing application, where customers select and order products.

Thus, companies delegate IT tasks to external specialists without disrupting the integrity of their internal team. On the contrary, they strengthen it.


In general, hiring IT specialists from outside is justified when companies need additional project expertise, lack resources, or require flexibility for successful implementation.

The hybrid approach is the most optimal solution in many cases, as discussed above. This approach allows companies to optimize resource utilization during development and achieve effective results.

You may also find other articles on related topics interesting: 


If your company is in need of highly skilled IT specialists to strengthen your internal team, please contact us here.

Thank you for your attention! 🙂

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