Outsourcing Software Development Services: Pros and Cons

The Pros & Cons of Outsourcing Software Development to Freelancers in 2019

Little did Sir Walter Scott know that when he referred to paid medieval mercenaries as “free lances” in his 1819 novel, Ivanhoe, that the term would become a hallmark of what economists are calling the 21st-century ‘gig economy’. When it comes to stepping up productivity, tapping into the global talent market, and gaining a competitive advantage in the software development space, more and more companies are turning to outsourced software development via remote freelance subcontractors and independent software agencies than ever before.

Choosing an outside partner can have its ups and downs, but after reading this ultimate guide to navigating the advantages and disadvantages of outsourcing software development, you will have a much clearer sense for how to approach a new software development relationship and how to protect yourself.

Benefits of outsourcing software development

Less hassle hiring

Can you guess how many days it takes for a company to “hire” someone? A 2017 study from the company review and job listing site, Glassdoor, found that on average, the length of the hiring process in the U.S. is over three weeks long, 23.8 days to be exact. And that only takes into account the time spent once the interview process has begun. It doesn’t reflect the additional time that might be required when a candidate needs to quit their current job and give two weeks (or more) of notice.

The fact of the matter is that identifying, vetting, making an offer, having the candidate accept the offer and then quit their job, followed by onboarding new full-time employees requires time, focus, and an array of fixed costs for a business. In many cases, it consumes much more time and energy than recruiting and outsourcing an available freelancer or outstaffing to a reliable software agency that has engineers ready who can get up and running within a matter of days once a contract is signed and project discussed.

In addition to minimizing your IT recruitment budget and negating some elaborate strategy to compete for the best talent, outsourcing with a freelance subcontractor vs. a full-time employee also eliminates the need to fund overhead costs (think extra office space, expensive hardware and bonuses you may have to pay out to recruiting agencies or company employees who refer a full-time hire). An outsourcing or outstaffing model allows you to run your business without much of the ‘hassle’ that comes with bringing another full-time employee onto the team.

Less time spent searching for, hiring, and training new employees also affords your senior staff the ability to direct more of their attention to their work and other mission-critical areas of the business.

Affordability

Full-time employees are certainly essential assets to a company, but they are also often the most expensive part of doing business in terms of necessitating salaries, benefits, equipment, and other perks.

When you outsource work to a freelancer or outstaff with an agency, you are not responsible for paying salaries, nor do you have to cover associated taxes regarding their employment (make sure you write this in your contract). You don’t have to worry about funding severance packages or giving away equity, and you don’t have to contribute to health care plans or 401k retirement funds. Plus, you only need to pay a freelancer for the actual time they spend on your project and for the work they deliver; which can exclude vacation/holidays/time off that you would normally have to cover with full-time employees via paid time off (PTO).

The drastic increase in the number of software developers around the world who freelance also means that accessing the best outsource web development talent on a global scale has never been easier or cheaper. The cost-savings are especially evident when you see just how much you can save by using the dollar arbitrage and the cost of living to take advantage of the price differences between different parts of the world.

This type of budget-friendly hiring ultimately allows you to optimize your project budget by only paying for completed work (excluding external benefits, taxes, supplies, or employee extras) and finding more cost-effective labor around the world.

More flexibility

Need to scale development up quickly for a short or long-term project with a hard deadline? Outsourcing development work for micro-tasks or 6 to12-month projects is ideal because freelancer subcontractors predicate their own businesses based on taking on a variety of temporary jobs, or “gigs.” You can ramp up or dial back your team and their hours by hiring freelancers and letting them go as needed based on your load or time of year.

Leveraging this kind of quick, high-quality coverage allows businesses to increase their product’s speed to market, scale and shrink development as needed, and reduce unnecessary overhead. Plus, outsourcing software development costs for the ongoing maintenance and support of your legacy software to a freelance developer means that your in-house team has the flexibility to spend more time innovating and concentrating on new feature development.

Access to niche skill sets

Identifying and contracting developers with niche experience, say in a harder to find programming language like Golang or development framework, can be your business’ ticket to bridging the gap between your product as it is and your product as you always dreamed it to be.

If your software is written in a programming language that many local developers know, it may make your area very competitive talent-wise, and you may need to find outsourced developers with those skill sets in other parts of the world. For example, say Google is hiring all the best Golang or React.js engineers in the Bay Area and you are having a hard time competing with the employment packages they offer. This is a great time to outsource your highly technical work to a freelancer or outstaffing company who can fill in the gaps while you continue to hunt for a full-time hire to sit in your office.

Another way to introduce much-needed expertise to your in-house team and improve the web design and software development services you offer is to send employees to specialized trainings or conferences where they can learn new programming skill sets. Both these avenues require money though — money that might have otherwise gone back into finding customers for your business. The benefits of that type of ongoing education might not outweigh the savings and speed you get from outsourcing with an independent contractor who already has the necessary talent.

Reduced risk

It may sound harsh, but simply put, freelancers aren’t legally considered the same thing as ‘employees.’ Hiring freelancers or outstaffing to augment your own team places you, the employer, at less risk for loss should someone not work out for your project. You can hire and fire a freelancer as needed, you don’t have to pay unemployment insurance, you don’t need to pay a severance fee, you don’t need to offer workman’s compensation benefits, and generally, freelancers don’t have the legal standing to sue for discrimination or harassment.

When it comes to working with an outsourced development team or software engineer who is an independent contractor, you’re effectively outstaffing your business with people who are trying to run their own business. They know that their flexibility and the quality of their work will influence whether clients return to them for more work and recommend them to others. Freelancers and outstaff agencies just starting out or wanting to win a new client are often willing to offer a free trial period, free quote process, or other attractive benefits at little or no risk to a potential client.

Streamlined communication

Technology-driven communication is fast, effective, transparent, and accountable (hello, paper trail). While e-mail continues to be an avenue, albeit a slower one, for outsourcing teams to communicate with clients, advancements in team messaging and project management apps have made direct communication even faster and more secure helping to reduce issues around time zone and language barriers.

Skilled outsource contractors should be familiar with or may even suggest that you use tools like Jira, Slack, Asana, Trello, Assembla, and other project management and ticketing apps. If they don’t use tools like these (red flag), that simply means they haven’t yet seen a project go off the rails because of lack of communication, which happens when you don’t use tools like the ones listed above.

The success of a freelancer’s business will be based in part on their ability to communicate clearly, frequently, and efficiently from afar (but you also want to make sure they are available during your working hours). You will know that a well-recommended candidate likely excels in those fields and will push you to use those tools.

Disadvantages of Outsourcing Software Development

Risk of Exposing Intellectual Property

It’s no surprise that when businesses recruit outsourced help for software projects outside of their company walls, they want to take measures to protect themselves and their intellectual property. Working with independent contractors is in some sense, like managing a long-distance relationship. Without trust, it won’t last.

If you’re concerned about your intellectual property being exposed or stolen (better safe than sorry), you have to take steps beyond assuming everyone adheres to the honor system. Building trust with your freelancers is key, but a little legal contingency doesn’t hurt either.

Always make sure that a lawyer reviews all contracts and that all confidentiality and transfer of ownership agreements are crystal clear. You want to know that only the appropriate people are going to be reviewing and working on your project and no one else unless you are made aware.

It’s a good idea to ask an agency about how they protect against IP theft. It’s also smart to only give them as much access to your sensitive material that they need to get the job done. That might mean limiting the data they can see or their ability to add code to your application.

Communication Gap

Many of the major challenges with outsourcing often boil down to time zones and language. When you outsource development to teams in different parts of the world who therefore work in different time zones than you (and probably your clients), effective communication can be one of the first things to fail. When outsourcing, ask lots of questions upfront about how a freelancer or team effectively communicate when on different time zones.

Your developers overseas might be finishing their day when you are just starting yours. This can cause a lag in correspondence that has a cascading effect leading to miscommunication and roadblocks that potentially delay your project and make outsourcing less dependable as a cost-saving tool. Remember, if you are not getting immediate, reliable, and transparent communication back from your freelancer or agency regularly, you’ll have an even bigger problem should the going get tough.

If you start up a good cadence with your team where they operate while you are sleeping, then you set up a daily meeting at the start of your day and then prepare additional tasks or review their work while your freelancer or agency winds down their day, that can be very effective. Planning out precise communication times each week (and hopefully daily) will get you the best results.

You only have a narrow window of quick and efficient communication that can occur in your working day if you are partnered with a team overseas, so maximizing it is critical. It is crucial you create as much overlap as you can have with your engineering team in a different time zone.

Recruiting technical talent from emerging markets can also require more feedback loops as you navigate language barriers and new technologies. One way to circumvent a communication gap is to interview the actual engineer you outstaff with and speak to him or her. Also, you can lay out strong, explicit guidelines with plenty of documentation prior to kickstarting a project (which a good engineer will need anyway).

You can also set expectations with outsourcing talent by relaying clear milestones and regularly requesting progress reports in tools like Jira. This consistent contact helps keep things organized and naturally fosters transparency keeping non-technical and technical stakeholders alike apprised of where a project stands. Daily to every-other-day “standups” where you virtually meet with your outsource engineering team for 15 minutes is a must.

Freelancer Priorities

While you might like to think you’re numero uno in your freelance developer’s little black book, the reality is that you might be sitting in third or fourth place behind larger clients or more lucrative projects that pass out longer-term work. Sure a competent freelancer is going to do their best to hit your deadlines and do a quality job, but it may not always be on your schedule, and there is a possibility your project may get pushed back.

If you are only giving a freelancer or an outstaffing agency a few hours a week/month of work, then you have to expect they will most likely not jump through hoops for you (if they are it either means you found an absolute winner or they have no other clients). A freelancer also won’t necessarily be invested in the success of your company as a whole, especially if they are temporarily on-board for a one-off task or short-term project (less than a week or 40 hours). They’re in the business of helping their own business succeed long term, and what happens to yours outside of the project they focus on is likely less of a concern to them.

Different Design Tastes & Engineering Styles

What takes a web or mobile app from being merely adequate to being wildly successful? Hands down, it’s the user experience. Intelligent UX isn’t just a matter of a developer’s design chops, speed, or knowledge of technologies though. Crafting a flawless UX also comes down to understanding how a market, audience, and even a culture engages with a piece of technology.

A freelance specialist may be more effective when they offer years of experience working (and even living) in the country where your business is based. Their native association with your platform will influence how they approach the development they do for you so that it makes sense for your key users. You may encounter a lack of market awareness when you outsource design and engineering projects to remote freelancers in different countries, but this should really only be a minor factor.

The Growing Freelance Market

Full-time employees can offer companies a degree of loyalty, team cohesiveness, and shared knowledge and memory that most freelancers simply can’t. The advantages of hiring an independent contractor or outstaffing with an external agency, however, are outweighing those traditional benefits more and more, especially when it comes to software development.

Recent survey data highlights a particularly steep shortfall in tech talent for companies seeking to fill positions for software developers, data scientists, and system architects. Where this type of high-level work is concerned, a qualified and reliable independent contractor may be an easier, cheaper, and faster option.

John Griffin

John is the co-founder of Spiral Scout, a software development company and is based in San Francisco, California.

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