When looking to build a technology business, you need great talent. Whether it’s a startup or a large-scale enterprise, it can be extremely challenging to find premium technical talent. However, while searching to hire the best developers, 2 things must be considered – cost of hiring and time taken to hire.
Most who seek talent in the developer marketplace look to hire in-house first, which can be expensive and unpredictable. The others outsource through freelancers and development agencies, which presents its own challenges such as communication gaps and lack of transparency.
Let’s take an example of hiring in-house: expenses vs productivity?
You hire a front-end developer in California for a yearly base salary of $100,000. You also end up incurring the following expenses:
- Health/dental benefits ($4,490)
- Social Security/FICA ($7,650)
- A yearly bonus ($7,500)
- Workspace / equipment ($7,000)
This totals to $126,640.
Now let’s consider that most companies barely get 6 productive hours from employees. Then there’s the annual allotted time off – say 5 sick days, 12 vacation days and 10 federal holidays. This adds up to 1,404 hours of productivity a year.
Doing the math, you are actually paying that employee $90.20/hour.
And if you are looking at outsourcing as an option, development shops can costs upwards to $300/hour while outsourcing through freelancers working in different time zones can lead to miscommunication. So as an entrepreneur what model do you choose?
Here we will discuss the pros and cons of different sourcing options and we’ll cover a new model that brings premium talent with experienced leaders at affordable costs.
With in-house hiring, all developers are hired full time and need to be fully vested in your idea for success.
- Technical Team Vested: Most companies have the ability to offer equity in exchange for work; this reduces flight risk and increases ownership. This also makes individuals more vested in the idea for the long term.
- More Face To Face Communication: By nature of being in the same space, you can have serendipitous conversations.
- VC Friendly: VCs like in-house technical teams that are vested in the product / idea.
- IP In-House: Product intellectual property remains in-house .
- Confidentiality & Security: Ideal for both long-term projects and transactional based businesses. With E-commerce and SaaS solutions, for example, support tickets and technical issues can be resolved more quickly.
- Long Lead Times: It can take anywhere between 3-6 months to hire premium talent, which can delay time to market. There is also a possibility of employees leaving that can lead to falling into the recruiting cycle again.
- Good Technical Talent is Expensive: Hiring technical talent comes with other costs such as medical benefits, dental, 401K and recruiting costs (recruiting agencies) as discussed earlier.
- Quality Employees are Scarce: Finding top talent is difficult – they are usually employed by larger companies.
Outsourcing with Freelancers
When outsourcing with freelancers, you seek a specific skilled resource – say a web designer – and must adequately fill that space from the thousands of freelancers available.
- Short Lead Times: Less time hiring can mean quicker time to market.
- Affordable: Ability to hire any developer from across the world, using dollar arbitrage to take advantage of price differences between two markets.
- Ideal for Short-Term Projects: Great for micro-tasks and non-core short term projects to reduce overhead and increase speed to market.
- Intellectual Property Not In-House: Having the development of a technology product outsourced carries risk of exposing IP.
- Communication Gap: Developers working in different time zones in different countries can limit communication times, which may lead to unnecessary overhead. Also, communicating with people in different countries can lead to miscommunications and delayed projects.
- Design/Engineering Styles Different: Specialists should be native to your platform so they understand the market’s design. It’s easier for a developer to be effective if their experiences reside in the country you work in.
- More Handholding: More feedback loops required with technical talent in emerging markets. Lots of back and forth can lead to miscommunication. · Especially if you haven’t laid out strong project guidelines and documentation.
- Fake Profiles: Some individuals exaggerate their talent in these marketplaces that can lead to uncertain results.
Outsourcing With Software Development Agencies
The other form of outsourcing option is hiring a development shop to build your software product.
- Good for Short-Term Projects: Development shops located in your city or US are good for building prototypes, minimum viable products.
- Effective Communication: These development shops are usually based within the US. Due to their stateside locations, they have an experienced product manager, CTO and a business head. This combo of professional leadership with technical talent helps bring the product to market quicker.
- Great Talent: Most agencies employ good talent that work on multiple projects within the development shop.
New York: Quora Answers
SF: Quora Answers
- Expensive: Development shops are more focused on building a product and moving on. They usually cost $200-$300 an hour especially the ones located in the US.
- Not Sustainable: They typically have a finite team, and when they get new projects they move yours back depending on the cost of project.
The New Hybrid Model
There is a new hybrid model that combines outsourcing’s affordability with in-house accountability. Its services combine premium developers, designers and marketers in North and South America with a leadership team residing in the US to help you develop your service – all while working within the same time zone. This matchmaking of talent and project leadership lowers risk and saves time. It also allows you to augment or reduce staff size depending on the needs of a business while giving you complete control of the product development process
Talent with managed leadership highlights a new sourcing model and here are some of its pros and cons:
- Leadership – Key Differential: On-demand premium talent combined with managed leadership. These leaders have track records, provide quality results and act quickly. They are experienced Project Managers, CTOs, Architects, and expert Growth Hackers. These experienced leaders speak your language and are based out of the US. Having leaders helps keep your project transparent, on-time, and delivers high-quality results. This managed leadership lowers risk and guarantees success.
- Flexibility: Hire your team from the matches Scalable Path has selected. Manage the team yourself, or let Scalable Path help. It’s up to you.
- Affordable: Developers can be hired anywhere between $40-$65/hour.
- Same Time Zone: Leadership and developers all work in the US time zones, which prevents communication gaps. Short Lead Time: It takes 0-3 weeks to define goals, match talent and start working.
- Partner to Get You to Scale: The group of strategists and technologists are your path to scale. Literally. They work with funded startups who recognize the need to access talent quickly and affordably, projects that need to be rescued and most importantly, on-demand with low overhead.
- Design/Engineering Styles In-Sync: Leaders that have experience in product design and development in the US that can help you lead to an effective solution better.
More on Hybrid Model: Scalablepath
Not In-house: The model provides managed leadership with premium talent, but the product development process is still outsourced.
Developing A Product? Pick Your Choice
Given these sourcing models, choose a solution that is right for you. Each model has its pros and cons, but it’s important to make decisions based on time to market and the long-term vision of your company. Scalable Path’s new hybrid-sourcing model helps achieve this; it finds premium developers that are already vetted and can be hired on-demand with the addition of the leadership team. To learn more, visit www.scalablepath.com.
Scalable Path are a group of visionary strategists and technologists, headquartered in San Francisco, with a network of top talent in North and South America. We work with clients to understand their business, technology, creative, and marketing needs. Then we put the right team, technologies, and processes in place to design, build and deliver awesome products.