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Outsourcing vs hiring software developers

Outsourcing vs hiring software developers

When it comes to development of the next software project, you may start to consider how to get resources for it. There are three ways – software developers outsourcing, in-house hiring or using freelancers. In this post we will compare outsourcing and hiring software developers. Those options have much more sense in a long run than using freelancers, so we will limit this comparison to them. We’re going to explain the advantages and disadvantages of both approaches in deep.

In-house software developers hiring – pros & cons

The first option that we’re going to analyze is in-house software developers hiring. That means having a team of developers working in your company as usual employees. The assumption is that you have them either in the office, or they work remotely, or partially remotely. Sometimes having in-house employees is necessary (for example when you try to get a grant from the EU), but you can still grow your business and profits without hiring more people to your organization. Let’s consider the advantages and disadvantages of in-house hiring.

 

software developers hiring

 

Advantages of in-house software developers hiring

Full oversight and control

Even the best business models can’t work without trust. However, there is always a need to control your employees. Also when it comes to development of demanding software projects. Someone simply needs to look after the execution of processes and react in case of such a need. It’s easier to do that in case of software developers hired to work in-house. Especially when you have trusted managers and executives chief.

High level of security

There is no doubt that you need to protect sensitive data, confidential information and copyrights of your company and your customers. With all the control over information flow and development department you can easier ensure that all of that is safe and well-protected.

Dedicated environment

Every team has their favorite tools. You just have the applications of the first choice. It starts from the office suite, through the tasks management software, then hardware, to software development tools. With one, dedicated environment your developers can more effectively share the knowledge among each other.

Organizational culture

To my mind, having the proper organization culture is a challenge when you run a business. This aspect tends to be undervalued, but it’s an important concept that tight bonds between your developers (more broadly, employees) and the company. It is easier to instill organizational culture in software developers hired to work in-house.

Disadvantages of in-house software developers hiring

High non-salary costs

If you think about that, the cost of having an in-house developer is much more than a salary. There are plenty of other expenses to take, both during and shortly after the recruitment and regularly once such person is hired.What’s the cost of hiring besides salary, then?

  • Office and office supplies – More developers you have, more space in the office you need. According to Statista, the yearly cost of square meter rent in office properties in Munich that is in the middle of the list, is 474 €. For 80 square meters office it’s 37 920 € per year. And besides that you need to pay for basic utilities, office supplies, and sometimes for regular maintenance, repairs, or even replacements. All of that sum up to significant cost.
    This cost is currently often reduced thanks to the popularity of remote form of work. However, in some countries and some states of the US, there were enacted laws forcing employees to pay for remote work expenses.

 

rental-price

 

  • Hardware and software – You need to take care of proper equipment for your employees. You need to provide the programmer with a computer, with other types of hardware (e.g. when you do embedded software development) and with software infrastructure. That means that you need to pay extra for all the licenses and subscriptions for software that your developer will use to perform his daily duties.
  • Administration, bureaucracy – With every new employee in your company, you need to spend more time on regular administration and bureaucracy.

Costly recruitment

You can either try to recruit a developer on your own or use one of the hiring agencies. Both options are costly. When you go with hiring agencies, you can expect that they service will cost 12-25% of annual developer’s wage. If you do it by yourself, you pay with time.

Paid time spent in-seat

It’s necessary to pay for software developers vacations and sick-leaves. You just need to keep your employees happy. However, I wanted to awaken your consciousness, that you often take costs of time not spent effectively on work. The same comes when developers wait to get unblocked by other delivery team or when you do not have any project for them.

Developers turnover 

Software developers often do not work long for one company. It’s because of many reasons, but to cover them I will need to write another article. The fact is that you may have a problem when one of your core developers leaves the team. Hiring a new, experienced and valuable programmer, will take some time. When you go with outsourcing, you can put a statement in the contract that the outsourcing company needs to fill the position in specified time.

Narrow talent pool

When hiring in-house software developers you are a bit limited in the recruitment context. Of course you can hire software developers from all around the world. After all, in the IT sector, remote work is everyday life. However companies tend to get people from the local market or at least from the same timezone. You can easily integrate one person who works from a completely different timezone into your team, but management of people from many various time zones is a challenge. Therefore, your talent pool is rather narrow if you choose to go with in-house developers.

Outsourcing software developers – pros & cons

The alternative for hiring software developers, is to enter a partnership with a custom software development company. For instance, in Scythe Studio we are capable of outsourcing software developers, outsourcing full software development teams and providing comprehensive software development services.

Just to be clear. What do I mean by outsourcing? Outsourcing is a business approach that is about using outside resources (from another company) to perform services or create goods. In the case of outsourcing software developers it means that you use programmers working for another company to code for you.

This practice is usually worth considering, so see what the pros and cons of it are.

 

Hiring pros and cons

 

Advantages of outsourcing software developers

Cost effectivity

I would like to make that straightforward right away. Hourly rates for outsourced developers are higher than hourly rates of in-house developers. Nevertheless, outsourcing software developers is still more cost effective, because you do not pay for most of the things that are expenses in case of direct hiring. Hardware, software, training, administration, bonuses, recruitment, time spent in-seat are one of those expenses that you simply do not take. Outsourcing companies know how to take care of such things such as a company employees’ self-development and more. This is stated as the first advantage, but still there are other values that you pay for. To summarize this point let’s say that in case of outsourcing software developers you pay only for work done.

Project ready experts

Hiring experts is a though task. Each of them needs to be screened by other software development specialist to make sure his skills are sufficient to work on the project. It is easier when it comes to outsourcing programmers as often they are offered in teams used to develop together. Teams of developers working with each other for some time are usually more efficient as they know their strengths and weaknesses.

Also, some companies have a specific profile, main area of expertise and they do not offer specialists in any possible technology. For instance, the Scythe Studio company specializes in Qt Qml Software Development. If you collaborate with an outsourcing company that has a specific profile, you have a higher probability of getting a real expert.

The another benefit of starting a partnership with a company specialized in a particular technology is the fact that they share their knowledge and experiences within that company. Therefore, if they encounter a problem while working for you, they can get advice from colleagues.

 

code typing

 

Speed of development 

You may want to start the next project, but you are in a hurry, you do not have any free resources or your developers do not have the required skills to develop the project. In such a case, outsourcing software developers would be definitely a way to go. That’s a way easier and faster than recruiting developers.

Scalability

Software projects do not need that intensive development all the time. Projects go through various stages and depending on a particular stage, other commitment is required. For example, when the project is just started there are plenty of new functionalities to work on, but after the release software support and maintenance starts. At this point, the engagement of developers can be reduced. When you have in-house developers and you do not have enough tasks for them or any new project you can either fire not effectively used employees or pay for their time in-seat. On the other hand, when you outsource developers you can adjust their involvement to a project stage.

Software companies also offer various collaboration models. You can choose either the Fixed Price Model or Time and Materials Model to work on.

Wide talent pool 

When you realize that you aren’t able to hire enough developers locally or they are too expensive, outsourcing developers would be a nice option. I wrote that it is a challenge to work with many developers scattered around the world. However, with outsourcing you can choose an outsourcing company from the region that you like. Then you would not have that problem with time zones. Moreover, you have access to quite a wide talent pool and you do not need to worry about legalization of their employment.

 

 

Disadvantages of outsourcing software developers

Worse communication 

Let’s face it. Communication inside one team is straightforward and (in a well-organized company) effortless. When you work with outsourced developers you need to ensure that the communication will go smoothly. If you outsource a team of software developers, they should have a team leader with whom you will communicate to discuss all projects details. A good outsourcing company should also assign a representative to contact with you in all not development-related matters. Make sure to make English fluency a must-have requirement.

Cultural differences

People all over the world are different. You may face differences in work attitude of outsourced developers. Therefore, you need to make your requirements and expectations clear before start of the project. Anyway, it should not be an issue if you choose the right software development company to work with.

Higher security issues risk

The higher security issues risk is caused by a need to pass some of the confidential information to your software development partner and at some point you do not have a control over them. The solution is to obligate partner to keep a high level of security.

Outsourcing vs Hiring Software Development Team – a way to go

That would be all about comparison of those two approaches to get software development resources. Both options have their pros and cons. Notice that there was not a word about the bad quality or lack of skills of in-house or outsourced developers. There is always a possibility that you will hire a developer not matching your expectations or you will outsource developers without required skills.

What’s better for your project then? It all depends on your goals and objectives. As a business owner, director, or manager you should analyze your own situation first and then consider which option is more beneficial and convenient to implement. For sure, you should consider using a software development company that specializes in the niche.

Scythe-Studio - Chief Executive Officer

Łukasz Kosiński Chief Executive Officer

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