Growing a Software Company – Hire or Outsource?

by Milica

March 4, 2018

When you’re building a business, one of the most significant questions you face is how you should grow your team. Should you hire someone in-house or outsource to a freelancer or agency?

When hiring employees, not every position needs to be in office, full time or part-time. In some cases, outsourcing some of your staff may give your business exactly what it needs. There’s no clear-cut definition of when to outsource and when to keep the work in-house; each situation is unique and you must assess each decision on its characteristics to ensure you have the right fit.

Ten years ago, outsourcing work overseas looked like the future of doing business. Major U.S. companies were outsourcing aggressively to bring down costs. In a perfect world, all firms would have access to both options to turn to as the situation demanded. But in the real world, many professional services firms must choose between the two, at least temporarily.

Both options have their pros and cons. In this article, I’m going to share some of the reasons you’ll want to carefully consider each angle, giving you the advice you need so that you can make a decision.

Some basic math suggests that hiring an employee can cost a small business owner 25 percent more than it would to hire a subcontractor to do the same work. Most startups want the absolute best developers and they would be willing to pay premium prices, but in reality, many startup companies can’t afford to hire top U.S. developers – that’s why clients go offshore in the first place.

If you don’t have enough work to hire someone for at least half-time, it’s usually better to outsource. After all, the amount of paperwork and the legal considerations involved in hiring an employee, such as learning tax reporting requirements, purchasing the necessary insurance, creating benefit plans, and so on, can be overwhelming to a business owner just looking for a little help.

Hiring a full-time employee is a huge commitment, it involves a considerable amount of time to train a new employee and just as long for them to adapt to their new work environment. It’s a lot harder to let an employee go than it is to cancel a vendor contract.

An article published by Deloitte, states that 31% of IT services have been outsourced in 2017 and will continue to grow in future. If you have serious tech chops and know how to manage a software project, you’ll usually save quite a bit of money by hiring and managing freelancers to build your app without the overhead of an agency. However, if you can’t attract, recruit, retain and manage a great freelancer or two then going the freelancer route can be extremely risky.

Going with freelancers can end up costing more in the long run. In many cases, you’ll have to hire a separate freelancer to work on multiple aspects of your project. This process can be complicated and time-consuming because you’ll end up having to be the project manager.

Hiring multiple freelancers can also cost you more due to delays and revision costs. There’s nothing wrong with going with a freelancer if you have a small project. But when it comes to more important projects, going with an agency is always the better decision. Collaborative efforts typically have far better results than projects handled by only one person.

By going with an agency, you know that there is a project manager on board to make sure every aspect of your project is making progress, or creative director to make sure that all parts of your visual branding are consistent and presented correctly.

The best part is that you only pay for what is done rather than spending your budget on multiple service providers. Since you’re relying on a team that’s communicating with each other, you can expect to get the project completed quickly and with very few errors. It reduces revision fees and increases your speed to market.

Make sure you go with a company that understands how to work with startups and has lots and lots of experience doing it. Working with startups is difficult and a group that isn’t well versed in startup culture is going to struggle with it. When your outsourced team is struggling to maintain your satisfaction, your quality goes down the toilet.

So, let’s compare! Hire someone in-house with limited experienceand capability starting at $40,000 plus production and distribution costs or hire a company that includes a team of experienced expertswho can also deliver production and distribution services for a fraction of what the salaried individual would cost. Which do you think is the better deal?

One thing is clear! If you hire the right agency, you get more bang for the buck. More brains are working for you. Tie your success to theirs– they get a bonus if you reach specific goals. Outsourcing can bring more to the table. As competition in your industry increases, you will need to find a steady ally that will make it easier for you to survive the hustle.

Remember, when it comes to making a decision of in-house or outsourcing you don’t need to choose either/or.  It’s reasonable that one of your projects may be better off with an employee owning it while your another may be better off with an external company managing it. Even within a particular project, an external contractor could take care of one small part while the rest is managed in-house.


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