In-House vs. Outsourcing: Which is Best for Hiring Tech Talent in Malaysia?

As technology advances, so do the different digital needs and requirements of companies and businesses. In Malaysia, this is evident across all industries and sectors, from big corporations and medium-scale organisations to SMEs. The increasing need for digitisation means employers constantly search for the best people to achieve these goals. As such, your company should be ready to put the right strategies to work to onboard top tech talent. Deciding between in-house vs. outsourcing recruitment works best for your organisation is a great way to get started. 

With the increasing dependence on digital solutions and platforms, companies should be able to quickly fill roles that are crucial to a seamless and hassle-free digital experience. Fortunately, the IT industry remains one of Malaysia’s fastest-growing sectors. This means employers can tap into a wider and more diverse pool of talent by hiring in-house or outsourcing them.

However, there remains an ongoing debate about which option is better for Malaysian companies. Establishing an in-house tech team is tough as is – so is communicating with an outsourced company or talent. The challenges compound for smaller businesses, especially when factoring in time, resources, and budget constraints. So, to help you make more informed and strategic hiring decisions, let’s take a look at the pros and cons of each approach.

The most common route for employers to secure tech talent is to keep it internal for a good reason. 

1. It ensures quality candidates When you put together an in-house team, you handpick candidates with competencies specific to your needs. They fit your company culture and embody your organisation’s values. It’s easy to tweak their skill sets and track their progress. 

2. It encourages direct communication Since everyone is in the same space – or at least, in the same group – it's easier for the team to get on the same page. If something goes wrong, fixing things as soon as possible is easy.

3. It fosters a culture of innovation and collaboration Since the members closely work on projects together, it’s easier for them to develop a sense of ownership over what they do. As a result, they all feel a collective desire to involve each other in developing and improving the workflow, results, and strategies as necessary.

4. It assures company goals are met With an in-house tech team, you have experts who develop an in-depth understanding of your company’s specific needs and long-term goals. Since they already know the ins and outs of your digital requirements, tools, and platforms, you minimise the need for any external consulting work. This makes it easier to scale up your digitisation efforts and experiment with various digital solutions anytime and within a budget and timeline you can control.

However, alongside all the benefits of having an in-house tech team are disadvantages that employers should also consider. 

1. It can be costly The biggest disadvantage is the reality that keeping things in-house is expensive. An Information Technology Officer, for example, earns a typical salary of RM 2,600. Depending on your company's size, you may need more than one – and that’s just for one designation. You'll need to hire several IT specialists with different competencies to build a solid tech team. Each of them will negotiate their compensation package with you; the higher their qualifications, skill level, and work experience, the higher their asking salary tends to be. Finally, some expenses come with setting up systems, acquiring the right digital tools and software, and investing in training. So, all that cost adds up.

2. It can be challenging to retain tech employees Tech roles continue to be in high demand at present. They also have plenty of options that, according to HR Asia, one in two tech talent turned down job offers. As such, keeping your best tech talent from being plucked by your competitors remains challenging. The risk is higher when you have a small team working on multiple major projects. It will be a nightmare when your company depends on tech and half of your core team leave on short notice.  

Because of these major challenges, many small and medium enterprises (SMEs) in Malaysia opt to outsource tech talent. 

1. It gives you the flexibility to tap specialists The biggest benefit of this option is the freedom to tap the expertise that external tech companies can provide. They already have talent with the necessary skills, experience, and technology for building a product or system according to your needs and specifications. As such, you minimise or avoid altogether the financial burden of purchasing equipment, putting together and managing a team, and investing in their training.

2. It encourages diverse perspectives Outsourcing tech talent through freelancers or external companies allows you to bring fresh perspectives into your projects. Diverse skill sets and extensive experience working with clients and industries enable them to respond to your tech needs with proven and innovative solutions. You can enlist multiple outsourcing IT firms or gig workers with different specialisations and have them collaborate to build a solid product or service.

3. It offers faster recruitment processes Finally, outsourcing allows you to avoid the time-consuming process of screening and hiring in-house tech talent. It saves you the time and effort needed to create job descriptions, interview candidates, put together an offer, and onboard new hires. Instead, you can dedicate precious time and resources to product development, improving your systems, and strengthening your competitive advantage.

As with building an in-house tech team, outsourcing tech talent comes with its own set of disadvantages. 

1. It can cause miscommunication Communication issues and cultural differences can affect how instructions are sent and carried out. Without personal interaction, misunderstandings and misconceptions tend to be common.

2. It becomes more difficult to monitor the project With outsourcing, companies have minimal control over tech talent and how they tackle projects. Monitoring the outsourced team isn't a common practice; you will only get updates or progress reports from the company's representatives.

3. It can pose security risks It's also important for companies to weigh the potential security risks that this option comes with. This is especially true since you'll share sensitive information – such as business plans, trade secrets, and intellectual property – with a remote tech team. Hackers, ransomware, and data security breaches are serious risks in outsourcing, especially for startups and SMEs.

So, how do you decide between hiring in-house vs. outsourcing tech talent? The quick answer lies in finding the right mix to get the best of both worlds. 1. Consider the size of your organisation.

2. Evaluate your specific needs, budget, and business goals.

• How much of your tech needs can or should be outsourced? 

• Which of your tech requirements can be better served by outsourced tech experts? 

• What’s your budget and timeline for establishing an in-house core tech team? 

• Are there any urgent projects that an in-house tech team can immediately fill?

3. List down the roles you need for a core tech team.  Ideally, they should handle all the aspects of the projects that involve sensitive information. Depending on job roles and industry, some tech roles are better outsourced than in-house. Digital marketing, web development, IT support, and software development are among the most common tech roles that Malaysian companies can consider outsourcing. Research different types of outsourcing companies and what they offer, and choose the ones that can best address your needs.

4. Design a hybrid model that fits your needs and budget best. You should invest a little extra to make your core team in-house. Evaluate your current needs and projects and see which would benefit from collaborating with multiple outsourced tech teams. It's also a good idea to explore strategic partnerships wherein you enlist tech talent based on the outsourced company's speciality or even niche industries (e-commerce, fintech, etc.). This will give you the best chance to get the best results in all areas of your projects, products, or services.

Whatever you decide for your hybrid tech team setup, you must build a culture of collaboration, innovation, and trust between your in-house team and outsourced talent. Establishing clear communication lines, implementing transparent project monitoring, and setting realistic timelines will also help ensure that both sides of your hybrid team will work together as best as possible.

There's no one-size-fits-all solution for Malaysian companies deciding between in-house vs. outsourcing tech talent. Since the current tech landscape in Malaysia has been quickly adapting to the needs of the times, tech talent continue to be in high demand across different industries and sectors. It's not uncommon for companies to find members of their core tech team plucked out by the competition. So, companies must be quick and decisive regarding the best ways to enlist the expertise of tech talent. 

However, your organisation can combine in-house recruitment advantages with the benefits of outsourcing. As both setups have pros and cons, evaluating the benefits and challenges against your tech needs, business goals, hiring capabilities, and unique circumstances is important. Your company must also be ready to be flexible about your hiring and outsourcing strategies in response to changes in market conditions and business requirements.

Whatever your tech team setup is, the key to making it work lies in establishing a collaborative relationship between your in-house and outsourced tech talent. When both sides are on the same page, understand your needs, and complement each others' competencies, they can work together better to bring your goals forward.

Ready to apply these tips for hiring or outsourcing essential tech roles in your company? Register now on Jobstreet to stay updated on the latest talent acquisition and management trends on the Employers Insights page. You also get instant access to over 5 million talent in Malaysia through Talent Search.