Hiring developers vs outsourcing: Which is better for your business?

coding on a laptop

Building a growing startup team is challenging in the best of times. In 2022, it’s even more difficult. 

Compounded by wage increases, talent shortages, and all the top companies scooping up the best candidates… it’s never been more difficult to find and hire developers. Right now 61% of HR footnote 1 professionals say that finding qualified developers is their biggest recruitment challenge. Startup founders know that speed is essential when it comes to launching your next big thing. After all, if you don’t get your idea to market, someone else will beat you to it.

Building your dream product—and fast—demands the help of top-tier developers to take on the job. You probably don’t want to hire an inexperienced engineer fresh out of school. You’ll want someone with technical abilities that can carry out your project whether you bring them on as a full-time employee or a contractor in a completely different time zone.

In this article, we’ll highlight the pros and cons of hiring a full-time developer versus hiring a freelancer to complete your project.

The pros of hiring developers in-house

  • Growth and learning. While it may take more paperwork, training, and formalities to ramp up a permanent hire, new team members will have ample opportunity to expand their skill set. As a result, they offer more to your company than someone who comes in to work on a single project. 

  • Leveling up skill sets. If you need a developer now, chances are you’ll need more development work in the future, too. Hiring someone in-house allows you to build software and functions amongst your team. Instead of having to look for a developer every time you come up with a new idea, you can simply ping your in-house engineer and run your idea by them.

    This brings us to my next point…

  • Valuable perspectives. Whenever you come up with a brand concept, you can get it to your engineer to talk about the build and logistics. In contrast, some freelancers charge for their time spent consulting rather than building your actual product.

    Having a developer on your team adds a new stakeholder who can
    advise on the more technical aspects of your projects. Having this can help move the project along or give you valuable reframes that could help make your idea even stronger in the end.

  • Employee investment. Permanent employees apply to work (permanently) within your business for a reason: they care about job security. Hiring someone in-house increases the likelihood that they care about the future of your business, too.

    In contrast, a freelancer is likely more focused on completing your project and getting paid. There’s nothing wrong with wanting compensation—and that’s not to say freelancers will deliver more or less than that of an employee—it’s just that an employee is more invested in your business health in the long run. 

The cons to hiring full-time software developers

  • High salaries. Highly skilled and educated individuals are more likely to have a higher salary. According to Payscale footnote 2 the average software developer makes $50K- $112K per year—not exactly a tiny salary for a startup. Not to mention, other fees come with hiring employees—benefits, training costs, equipment, the list goes on…

    That said, perhaps you want to staff your startup with less experienced developers and hire more experienced freelance engineers for your more complicated projects. Starting wages begin around $48k/year, depending on location and the candidate's coding skillset. Hiring a newbie may seem risky, but it ensures both you and your new hire will learn a lot (and probably, make a few mistakes along the way).

  • High burn-out rate. It's no secret software developers are in high demand right now. This increased demand could be blamed for the increased level of burnout among many developers. A survey found that more than 80% footnote 3> of developers report feeling burnt out due to increased demand from the pandemic. Burnout comes with many negatives—reduced productivity, mental health issues, and ultimately, the likelihood of bottlenecks in production.

  • High turn-over rates. Forbes suggests developers change their jobs to increase their salary by upwards of 20%. And it’s not just developers who feel this way: a popular belief amongst industry professionals is that you should change your tech job at least once every four years footnote 4. That’s not great news for startups that hope to grow a team full of long-term employees.

Because of the increased strain on tech workers, developers may want a more flexible work/life balance. More on this later. But first, let’s look at the pros and cons of hiring freelance developers.

The pros of working with freelance developers

  • Cost savings. Some contractors come with higher rates than others, causing your project to come with a hefty high price tag on top. Although upfront costs may be high, in the long run, hiring a freelance developer could save you from paying an annual salary to an experienced developer. If your operating budget is tight, it may be worth either seeking funding to pay a salary or seeking financing to pay for a one-off marketing project instead.

  • Project completion. When hiring a freelance developer, it’s best to set a clear outline of the project deliverables within your freelancer agreement. This agreement ensures project completion in exchange for paying the services.

    Your agreement should include key delivery dates, such as hard launches and release dates. These dates should be realistic and consider all stages of development. If you aren’t an expert in project management for development, get feedback from your team, experts, and freelancer.

  • A varied skill set. A survey by Upwork footnote 5 shows freelancers are most likely to be skilled professionals in programming, marketing, IT, and business consulting. Do your due diligence and hire an experienced programmer, ensuring they’ve worked on various projects that have given them a broad range of experience and skills.

Freelancers, too, tend to have more responsibilities than an employee, as they are more likely entrepreneurs themselves. Typically, they have to sell and market themselves, carry out their bookkeeping, and continually educate themselves to remain competitive and get hired for gigs.

  • Client retention. Freelancers don’t always have a steady or predictable paycheck. Developers gotta eat too! Don’t forget, they don’t likely receive healthcare benefits and will need to cover their medical expenses, vacations, time off, etc. Because of this additional pressure, freelance developers are more likely to care about winning and retaining clients so they can live a particular lifestyle. A good freelancer is expected to go above and beyond to keep and delight their clients, so they get repeat business.

The cons of working with freelancer developers

  • A slower start. Whether you hire in-house or outsource, it's essential to invest in the onboarding of anyone on your team. This ensures that your new developer, and anyone working for you, is on the same page with your project and business objectives. It takes time to introduce each developer to your business and processes. Depending on how much time it’ll take you to get a freelance developer trained and ready to start work, hiring an internal developer might be more cost-effective.

  • Documentation and security. Impeccable documentation is critical when hiring freelancers and giving them access to sensitive information, like your server. It's essential to document every step taken in a software build if you have questions or something breaks later down the line.

    For instance, you might need access to a specific tool the developer uses to gather information for a future project. If you don’t carefully document everything, you might have questions for your freelancer after they’re gone and onto a new project with a different client.

  • Culture clash. There's also the possibility that the developer you hired doesn't fit in with your company culture or the team. Perhaps it’s not the biggest problem if a freelancer isn’t interested in joining early morning meetings, but if they miss out on important information and updates, can breakdowns in communication cause delays in your build?

    Which may make you think… If onboarding a developer will take so much time, effort, and documentation, why not just hire someone in-house? 

Final thoughts on hiring freelance vs. in-house developers

If you have a more regular need for software development and can afford the payroll increases, you may want to hire developers as part of your long-term talent strategy. 

If you’ve received a set amount of funding or have a limited budget, hiring a freelancer is likely the best choice for you. If you don't have the budget, there are other options available: Clearco offers marketing capital that allows you to pay your freelancer invoices and move your projects forward before your competitors do. Interested in getting funded so you can complete a significant development project? Apply today. 

References

  1. https://www.techrepublic.com/article/hiring-developers-is-going-to-be-your-next-big-problem/

  2. https://www.payscale.com/research/US/Job=Software_Developer/Salary

  3. https://www.zdnet.com/article/developer-burnout-isnt-going-away-employers-need-to-act-now/

  4. https://www.codemotion.com/magazine/dev-hub/cto/change-developer-job/

  5. https://www.upwork.com/press/releases/freelancing-in-america-2019

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