Hire a Developer or Outsource?

You have a plan for software, and now the question that actually matters: hire a developer or outsource? For a lot of small business owners it feels like choosing between two things you can't fully see through. You don't want to make an expensive hiring mistake, and you don't want to blindly bring in an agency that doesn't get your product. Below I lay out plainly what each side costs you, what you get back, and when each choice is the right one.

What a developer on the payroll really costs

Hiring a good developer costs more than the gross salary listed in the job ad. Count on employer contributions, holiday pay, pension and insurance on top of that salary. And there are things that are easy to overlook.

• A workspace, laptop and licenses for the tools a developer uses every day.
• Recruitment costs. A recruiter, or a drawn-out search if you do it yourself.
• Onboarding time. In the first months someone isn't yet running at full speed.
• Guidance. Who manages this person, reviews the code and sets the technical direction?

That last point is where small businesses often go wrong. Put one developer in place without experienced oversight, and that person makes every technical decision alone. Sometimes well, sometimes not, and you only notice the difference when it gets hard to build on top of it.

And then the risk nobody likes to name: what if it isn't a match? Or what if they leave after a year? Then all the knowledge about your software is in the head of someone walking out the door. For a small company that's a real problem, not an edge case.

What an agency gives you that you can't get in-house

One developer is one pair of hands with one set of skills. With an agency you're buying something broader.

Most digital products ask for more than just programming. Someone who shapes the user experience, someone who guards the architecture, someone who tests, someone who thinks along with you about what you should actually build. You rarely find those roles in a single person. At an agency they sit in the same team, and you pay them for the time you need them.

That brings the second advantage: the freedom to scale. During the build you need a lot of capacity, after launch much less. A permanent developer costs you the same in both phases. With an agency you dial up and down to what the work asks for.

And you inherit continuity. If one person at an agency gets sick or leaves, the knowledge about your project stays in the team. That's exactly the risk you never fully remove with your own developer.

When in-house is the right choice

Outsourcing isn't always the answer. There are situations where hiring a developer is simply the better move.

Is software your core product? If you earn your money from the platform itself, the knowledge about it belongs inside your walls. You don't want the heart of your business sitting permanently with an outside party. In that case you build your own team, however slowly.

Do you already have a tech lead, or someone solid enough to manage the technical side? Then you can guide a developer in a meaningful way, review code and give direction. Without that person on board, a solo developer runs the risk I described above.

Is the work predictable and long-running? If there's enough to do year after year to keep someone busy full time, a permanent contract eventually works out cheaper than hiring on an ongoing basis.

When outsourcing wins

Turn the questions around, and you see when an agency is the logical choice.

Speed to market. Filling a vacancy takes months, and then onboarding comes on top of that. An agency can start next week with a complete team. If you want to get something to market fast, that time difference almost always wins.

A limited budget. Sounds contradictory, since an agency looks more expensive per hour. But you don't pay a fixed salary that runs every month, no workspace and no idle time. You pay for what you need and stop when it's done. For a first version or an MVP that's often the cheaper route.

An uncertain domain. Not sure yet whether your idea works, or which way it's heading? Then you don't want to commit to a fixed salary. You want to be able to build, test, adjust and, if need be, stop. That's exactly what outsourcing is made for.

If you're weighing whether to build something custom at all or use an existing package, read our take on custom versus off-the-shelf first. Sometimes the cheapest developer is no developer at all.

How to evaluate an agency as if you were hiring someone

If you outsource, choose an agency with the same care you'd use to hire an employee. After all, you're letting them build something important. A few things to ask.

• Ask about earlier work that resembles what you need. Not just what they're proud of, but something comparable in size and type.
• Call a reference. Don't ask them whether the agency was good, ask what went wrong and how they fixed it. That tells you more.
• Sort out ownership up front. The code, the accounts and the data should be yours. Put it in writing that you get everything if you part ways.
• Ask how they handle handover. Can you continue it in-house later, or move it to another party? A good agency doesn't make you dependent, it makes it easy to leave.
• Watch how they react when you have doubts. Do they steer you toward the priciest plan, or think along honestly, even when the answer is "you don't need this"?

That last one might be the best test of all. An agency that just nods along with everything you say is selling you hours. An agency that pushes back now and then is thinking about your business.

In short

Go in-house if software is your core product, you already have technical leadership on hand, and the work is predictable enough for a permanent hire. Go with an agency if you want to move fast, your budget is limited, or you're still figuring out what to build. There's no universally right answer, only the one that fits your situation.

Still unsure about your case? Feel free to run it by us. We'll tell you honestly what we'd do, even if that means you're better off hiring someone yourself.