Definition:

In-house development, also known as insourcing, describes software developed by an internal team, without external assistance from consultants or staff augmentation.

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Analogy:

In-house development is like hiring an employee.

When you start a company, you need to hire people. Those people that you hire can be from all different departments. If you have a lot of marketing work that needs to be done, maybe you need to hire some social media managers and digital marketing experts. If you are struggling in the growth category then maybe you will need to hire someone for business development.

Companies will commonly hire in-house when they require the full-time resource of the individual, don’t require as much flexibility, and can afford the overhead costs of hiring an employee.

However, sometimes if you can’t afford to hire a full-time resource as an employee for some tasks, you will outsource those tasks rather than hiring employees to cover it.

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In other words:

In-house development is when you hire a full-time employee. In legal (IRS) speak, it is called a W-2.

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It's one thing to know what a term means, but that is worthless if you don't know why you should know what in-house development is in the first place. Let's break down the importance of this tech term based on two high level categories. We'll walk through an explanation as well as provide a score, 1-10, that shows you how much you should care about in-house development.

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Pre-Product: 3/10

The first will be if you do not have a product yet. This means that you don't have a physical product. Maybe you're in the ideation phase, or maybe you're almost ready to start development. Whichever it is, we'll get into why in-house development is important and why you should or shouldn't care about it if you do not have a product.

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If you don't have a product yet, you likely won't need to worry about hiring in-house developers. However, you may need to hire in-house developers if you are ready to start building your product. If that is the case, study up! You have plenty of options ahead of you as to how you can go about building your product, and in-house development is one of those!

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Live Product: 6/10

The second category is if you do have a live product. Maybe you just launched your business or maybe it's been live for years and you're continuing to improve its quality. Regardless of the scenario, if your product is live, in-house development carries a different weight.

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If you have a live product, you likely already know this term because you have a live product. You may be outsourcing, you may be using a no-code solution, or you may be working with an in-house team. Regardless, congrats on your live product!

So you know what in-house development is, by definition. You know if you should care about it or not depending on your situation as a business/company/product. To dig in deeper, we will walk through some examples so we can make sure you really have a solid grasp on in-house development.
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In-house development scenarios:

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1. A startup with a CEO & CTO co-founding team
   
   When you have a two person co-founding team, you often have at least one of those co-founders who is technical. In this case, your CTO is technical (aka a developer). Since your CTO is a full-time resource 'employed' by the startup, the CTO is considered in in-house developer. The entire workflow of the CTO is focused on the startup and the CTO only works for the startup.
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2. A company with six developers in one office
   
   Imagine a company has a physical office in Chicago. This company has 12 total employees, and six of those employees are software engineers. Everyone works in the physical office and their full-time responsibility is working for the company. These engineers are on payroll (meaning they are W-2), they receive benefits, vacation days, and a 401(k) matching program. These engineers receive all of these benefits because they are full-time employees, or in-house developers, of their company.
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3. A startup with three developers working remotely
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   The new remote world allows individuals to work from anywhere, so long as their company permits it. Imagine there is a startup with a seven person team, three of which are developers. These developers can work from anywhere, as per company policy. One developer is working from Denver, one is working from London, and the third is working from Mexico City. Even though all of these resources are scattered around the world, they are all fully employed by the startup. They receive benefits, vacation days, and other company perks. Since these resources are full-time hires by the company, they are considered in-house developers.

1. In-house development is when you hire a full-time employee. In legal (IRS) speak, it is called a W-2.
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2. If you don't have a product you are building, you don't need in-house developers.
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3. If you do have a product you are building, you likely will have in-house developers.
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4. In-house developers doesn't mean they work in a single office, it means that they are fully employed by the company themself, regardless of location.