They use The Alias largely because of cost, corporate synergy and creative control. The Alias are managed by Fascination too so everything is in-house and affordable with the band/Fascination being able to have complete control over the sound rather than handing that over to producers. They're already getting songs from a range of writers and producers but The Alias are fleshing the demos out and trying to meet the expectations of what Steps fans want their songs to sound like. If Xenomania had produced To the Beat of My Heart, it would sound like a Xenomania track rather than a Steps track. They gave it to Steve Smith rather than The Alias to produce, so there must have been conversations about who could turn it into the track they wanted it to be. Sia's What the Future Holds demo, produced by Greg Kurstin, isn't massively different to the final product by The Alias.
One of the last things Pete Waterman produced was the UK's 2010 Eurovision entry, which was met largely with ridicule and cringing over how dated it sounded. The man is 77, retired, and it isn't the 80s/90s anymore. They're using the Alias to hit a balance between nostalgia and contemporary, which has been well-received so far. If it isn't broken, don't fix it. They'd be better off trying to do some collabs rather than ditching The Alias completely.