Source: www.itsquare.com

Outsourcing
In the case of outsourcing , it take time to to find and evaluate a vendor with the appropriate expertise. the firms can either choose a large corporation or find smaller firms that contract to build custom Software forthe specific firm. When firms choose to outsource their software development, they traditional send out a Request for Proposal (RFP) to all potential vendors inviting them to give their respective proposals. The firm then chooses on the lowest cost bidding vendor (other factors apply) to outsource the development project.
Traditional Intermediaries for Outsourcing: Generally there are no traditional intermediaries between outsourcingfirms and the bidding vendors. If the company chooses to outsource the development to off-shore companies (for e.g. Software development companies in South East Asia), then there might be intermediary companies to facilitate the process.
 

In-House Development
In-House software development firms utilize their own IT professionals. These [professionals are generally skilled experts for higher end systems development who also possess deep understanding of business processes.The Software development is carried out through a number of phases from Requirements gathering to the final integration and Testing phase.
 

Traditional Intermediaries for In-House Development: There will obviously not be
any intermediariesor middlemen for developing the software in-house.

In the Software development process there are no middlemen, infomediaries,
channels distributors, wholesellers or brokers. The transaction takes place directly
between the outsourcing firms and the Software vendors. Hence in Software
Development industry there is no value added by any of the above.