The pros and cons of building software in-house

Every tech leader hits the same fork in the road: should we build our software in-house, or look outside for help? It’s not just a budget call, it shapes how fast you can ship, how secure your product is, and how much sleep your team gets.

Building in-house sounds appealing: your own team, your own rules, everything under one roof. But the reality? Salaries, hiring struggles, and scaling headaches can quickly pile up. That’s why most companies today choose a mix. Deloitte’s 2024 Global Outsourcing Survey showed that over 76% of companies outsource some or all IT functions, while still keeping part of their development in-house for control or strategic reasons.

In this article, we’ll cut through the noise and look at the real pros and cons of building software in-house, so you can decide when it’s the right move, and when it might hold your business back.

The pros of in-house software development

Building software in-house isn’t just about writing code, it’s about shaping how your business innovates and grows. Let’s look at the main advantages.

1. Full control over product direction

One of the clearest advantages of in-house development is control. Your team sets the roadmap, defines priorities, and owns every decision, from architecture to release cycles. Without the restrictions of vendor contracts, you can pivot mid-sprint or adjust requirements instantly. For companies where in-house developed software is mission-critical, this autonomy often translates into a lasting competitive edge.

Of course, control alone isn’t enough to deliver results, it has to be paired with strong collaboration.

2. Seamless communication and cultural fit

Internal teams live inside your company’s culture, values, and workflows. They sit in the same meetings, follow the same Slack threads, and understand the unspoken context behind decisions. This is why in-house software development often reduces friction, shortens feedback loops, and enables smoother collaboration than outsourcing. McKinsey & Company reported that strong cross-functional collaboration can cut product development time by up to 30%.

This closer collaboration also creates a natural advantage in another area many companies worry about: security.

3. Greater security and intellectual property protection

For industries where data is highly sensitive, finance, healthcare, or defense, security is often the #1 reason companies prefer in-house software development over outsourcing. By keeping software developed in house, you reduce risks around IP leakage, compliance violations, and third-party exposure. Deloitte’s 2024 Global Outsourcing Survey confirmed that data security and compliance remain among the top concerns for organizations working with external partners.

Beyond keeping information safe, in-house development also means knowledge stays where it belongs, inside the company.

4. Long-term knowledge retention

Every bug fix, architecture decision, or feature experiment adds to the depth of knowledge behind your in-house developed software, creating long-term value. Unlike outsourcing partners who may rotate staff between clients, software developed in-house benefits from continuity and long-term knowledge retention. That continuity makes future decisions faster and more informed, especially when dealing with complex systems or legacy environments. Companies like Netflix and Amazon have publicly emphasized their heavy investment in engineering culture for this exact reason: accumulated knowledge fuels innovation.

This long-term expertise also helps teams respond quickly when market conditions change.

5. Faster iteration and adaptability

When markets shift, internal teams can pivot overnight. There’s no need to renegotiate contracts or wait for external approvals, your developers can reprioritize immediately. This agility is a major advantage of in-house development, especially for startups testing product-market fit or enterprises under pressure to respond quickly to competitors. PwC’s Future of Industries report found that companies prioritizing agility were 2.7x more likely to report strong financial performance.

Finally, the real value of an in-house team comes from their alignment with your bigger vision, not just your backlog.

6. Stronger alignment with business goals

Finally, in-house developers aren’t just coders, they’re stakeholders in your company’s success. Because they’re immersed in your business context, they’re more likely to suggest improvements, challenge assumptions, and innovate beyond the original requirements. This alignment ensures that features don’t just get built, but get built in a way that supports long-term strategy.

In-house teams know the “why” behind the work, making decisions that serve long-term goals, not just immediate tasks.

The cons of building software in-house

While in-house development offers control and cultural fit, it also comes with significant challenges. These downsides can slow growth, drain resources, and create bottlenecks if not addressed early.

1. High and rising costs

Building an in-house team is expensive. Beyond salaries, you’re paying for recruitment, onboarding, benefits, infrastructure, and ongoing training. According to Glassdoor, the average salary for a senior software engineer in the U.S. is $150,000+ per year, not including benefits or overhead. For startups and SMEs, these costs can quickly overwhelm budgets.

And the costs don’t stop at hiring, they show up again when you try to find the right people.

2. Talent acquisition and retention challenges

The competition for skilled developers is fierce. The 2023 CodinGame & CoderPad Tech Hiring Survey found that 61% of recruiters struggle to hire qualified developers, particularly for specialized roles. Even if you succeed in hiring for in-house development, keeping talent engaged is another battle, tech turnover rates are among the highest of any industry.

Even with a strong team, scaling quickly can be harder than it looks.

3. Scalability limitations

Unlike outsourcing, where teams can scale up or down almost instantly, in-house teams grow slowly. Hiring, onboarding, and training take time, which can delay product launches. If demand spikes or deadlines compress, your team may struggle to keep up. For businesses in fast-moving markets, these bottlenecks can mean missed opportunities.

And when you can’t scale, gaps in expertise become painfully visible.

4. Risk of skill gaps

No single in-house team can cover every niche skill. Areas like AI/ML, cybersecurity, or compliance often require expertise that’s hard (and costly) to maintain internally. Companies either stretch their team too thin or face long delays while they try to recruit specialists. Gartner (2024) highlighted that IT talent shortages remain the top barrier to adopting emerging technologies, slowing innovation across industries.

And even if you manage to fill those gaps, there’s another hidden cost: leadership attention.

5. Opportunity costs

Managing an in-house software team doesn’t just cost money, it costs focus. Leadership time goes into recruiting, managing, and retaining talent instead of driving product strategy or customer growth. For small and mid-sized companies, this distraction can stall momentum at critical stages.

And even when budgets allow for bigger teams, the hidden cost is leadership focus, time spent managing engineers is time not spent steering the business forward.

When building in-house makes sense

Building software in-house isn’t always the cheapest or fastest path, but there are cases where it’s the right move. Here’s when the benefits outweigh the trade-offs:

• You’re handling sensitive or regulated data. Finance, healthcare, and government projects often require maximum control. Keeping everything internal reduces exposure to third-party risks and makes compliance with HIPAA, GDPR, PCI DSS or similar frameworks easier to manage.
• The software is your core business. If the product itself is your competitive advantage, in-house knowledge becomes a strategic asset. Companies like Shopify or Tesla built internal teams to protect innovation and ensure expertise doesn’t walk out the door.
• You have the resources to hire and retain top talent. For enterprises with strong HR pipelines and healthy budgets, the challenges of recruiting and training engineers are less of a burden. In this case, in-house development can boost cultural alignment and loyalty.
• Tight collaboration is critical. Some products need developers working hand-in-hand with design, marketing, or operations teams. Having engineers embedded in the same culture, and often the same Slack/Zoom channels, keeps iteration fast and aligned with business goals.

When it might not be the best choice

For many companies, the costs and constraints of in-house development outweigh the benefits. It’s usually not the right move if:

• Budget is tight. Salaries, benefits, and overhead add up fast. For startups or SMEs, maintaining a full team can drain resources before the product even gains traction.
• Speed-to-market is the top priority. Hiring and onboarding for in-house software development takes time, which can delay product launches compared to outsourcing. If you need to launch quickly, say, to capture funding opportunities or outpace competitors, outsourcing or hybrid models usually deliver faster results.
• Specialized expertise is required. Emerging areas like AI/ML, cybersecurity, or blockchain demand niche skills that are hard to keep on staff full-time. Outsourcing lets you tap into specialists without long recruitment cycles.
• Scalability is unpredictable. If project demand fluctuates, scaling internal teams up or down is costly and slow. External partners can flex capacity far more efficiently.
• Leadership bandwidth is limited. Managing an in-house team pulls focus from strategy, fundraising, or customer growth. For founders and lean teams, that opportunity cost can be steep.

Conclusion

The pros and cons of in-house software development show a clear trade-off: you gain control, security, and alignment, but face higher costs, hiring struggles, and scalability limits. The right choice depends on your resources, timelines, and long-term goals.

If in-house development feels like it’s slowing you down, a partner can help. At Devico, we’ve spent 15+ years supporting tech teams worldwide with the engineering and QA expertise they need to move faster without adding overhead.

Let’s talk about how we can speed up your roadmap while keeping quality intact.