Hiring a software developer is a tough decision. Whether in-house, freelancers or a software development company all come with their positives and risks. None of those options is the best fit for all instead of each decision works based on the project type.

As each project is different, there’s no single answer as to whether hiring freelance developers, software development companies or in-house developers are the “better” choice. The lack of understanding of the advantages and disadvantages of each option makes this decision harder.

This article discusses the pros and cons for freelancers, hiring an in-house developer and software companies, to help businesses make the right choice.

You should consider these several aspects before making your decision, like:

• Is it a short-term or long-term project?
• Will you need ongoing maintenance and updates?
• Do you have all the technical requirements?
• Do you require consultation services & guidance to manage the project?
• And the budget, of course, is it a small or large budget?
• Is the developed software critical for the success of your business?

Hiring a Freelancer:

Pros:

Low Rates: Most freelancers charge lower rates than software development companies; but even if professional freelancers hourly rates seem high, you can generally expect to save 20-30% off the cost of a development company.

Highly Skilled in One Specific Area: Freelancers usually strive to hone their skills and get solid expertise in one specific area. With that and accumulated experience in that area, they can complete tasks and/or projects seamlessly.

Easily Spotted: Due to high demand, freelancers are easy to find. Once you find the talent you need and agree to the terms, they get right to work.

Fewer Legal Issues: Freelancers work under an independent contract as a separate entity contrary to full-time employees who have certain rights under labor law and are entitled to work benefits.

Cons:

They Can Disappear: Freelancers are typically working on several projects at the same time, so one day they can suddenly become ghosts. They may be great when they’re available, but be prepared with a Plan B in case they’re not. It’s pretty hard to fully control a freelancer.

Confidentiality Issues: You can ask that freelancers sign non-disclosure agreements (NDAs), but you’ll still have to weigh up the risks.

Project Management: If you’re not going to manage your project, keep in mind that while freelancers may be good at their work, they’re not always great at planning and organizing their own work processes. This can lead to problems with meeting deadlines.

No Further Maintenance: Freelancers may be great at finishing the project but once it’s finished, so are they. So in case of bugs appear or need to scale the functionalities, you may have to look for other people to handle the job. Which inquire extra cost and risk due to loss of knowledge, understanding the existing solution…till they get on track.

No Commitment: Not all freelancers care about your product’s quality. Most of them won’t try to win returning clients, unlike companies who care about their reputation. Most freelancers plan A is their current job.

When to Hire a Freelancer

Go for freelancer if you are:

• Building a small tool with a clear scope that won’t evolve in the future. A freelancer, in that case, is a good choice and cost-effective.
• You already have an in-house team but you need urgently some skills until you develop it in-house. A freelancer can bridge this gap.
• Doing a quick and dirty mockup that you are ready to throw it up when building the real product. e.g. you need to pitch a potential lead and want to show them Proof of concept.

Hiring a Full-time Developer

Pros:

Full-time employees have a sense of company culture: which makes them feel part of the team and passionate about the work they are completing for a company. This, in turn, increases productivity in day-to-day projects and nurtures business relationships in the future.

Continuity: No business can operate without someone who serves as the repository of operational procedures and if you don’t have people to do it for you, it’s going to be you.

Retaining employees save money: If you can retain them, hiring employees rather than freelance contractors can greatly cut down on the amount of time you have to spend on filling positions, explaining the knowhow and requirements of your business

Wise Investment: There’s always the need to switch to new technologies. Providing necessary training/courses to the employee, in turn, ensures overall company competitiveness.

Full Control: As an employer, you can demand what work and ways to do it from a full-time software developer. You can assign tasks to increase his capabilities and assign new tasks.

Cons:

Compensations and taxes: In addition to the salary, there are certain right under the labor law like payroll taxes, compensation, paid vacation, health insurance, NSSF, etc.

Productivity: While most employees tend to be motivated and eager to work but some estimates state 700-750 hours a year are wasted on gossip, social media and coffee breaks. However, micromanaging them will demotivate them. This inquires a larger cost for HR, programs, and perks to keep them motivated.

Legal Issues: What if it didn’t work out? What if you need to cut down? If you want to terminate the contract, you will have to take care of a severance package, legal issues, etc.

High Cost: On-site staffing can come with a hefty price tag, especially if your needs are relatively minor. You have less control over budget as you have many unknown variables affecting cost. An e.g. quality of resources, salary, whether they will perform or not, infrastructure cost etc.

When to Hire an In-house Full-Time Developer

Consider hiring a full-time developer in the following cases:

• You already have a team and you want to bring in fresh blood and new skills.
• Your software product is critical for your business e.g. you are building your business around your software or tech product. In that case, you need long-term and continuity.
• You are ready to invest in a team with all the software functionalities (4 to 5 engineers) that cover analysis, specs/requirements, architecture, development, develops and maintenance
• Your scope is continuously changing and you are developing your product by iteration
• You already have the funding or stable source of income to maintain the team, skills, and know-how on board. With time team members will gain experience and they will start to look for higher paid jobs.

Partnering up With a Technology Partner

Pros:

Better for Big Projects and Startup Development: They have the full package that can offer a full software development lifecycle such as professional consulting, business analysis, and business idea evaluation, technical architecture, implementation, go live and implementation. In some cases, they can even help you figure out your monetization strategy before your product is developed.

Up-to-date with New Technologies and Trends: Software development companies are constantly evolving and improving; they are aware and always tuning their skills to use the latest technologies and can provide the right solution for the right problems.

Less legal Issues: Software development companies are legal business entities, and therefore they offer greater stability and less risk. You don’t have to prepare contracts on your own they have a well-defined framework that preserves both your rights and theirs. Though make sure to verify artifact ownership, non-compete, maintenance, preserving the knowhow…

Diverse Experience: Hiring a software development company means that you hire a whole team of professionals with different skills and knowledge from the analyst until the developers.

Quality Of Work: Software development companies value their reputations and strive to develop high-quality products that get positive feedback after they’re launched.

Long-term Relationships: Companies prefer building relationships of trust with individual clients and implementing projects for those clients over the long term. Hit and run is seldom their model instead they focus on the partner lifetime value instead of project value.

Accountability: Probably the strongest asset which is a guaranteed professional approach and reliability in terms of abiding by their contractual obligations and product delivery. All the work can be tracked down by the hour, every feature tested for being up to standard. Also, don’t forget that you’ll need further support and maintenance of the software in the long run.

Cons:

Higher Price Tag: Companies employ and maintain onboard expert developers who cost more than freelancers, and if your project team consists of multiple developers who’ll be working for many years, the cost will be quite high.

Rate differences: Hourly rates can drastically differ between freelancers and companies. From lowest in India ranging between 10-20$ and US & Europe between 200$-400$ which can be confusing to understand the difference. Some software development companies just provide a programmer while others provide software engineers. Some manage their resources while others provide the programmer as is and you manages them. Thus you need to know the value between different offerings

Hard Choice: Choosing the right company is a difficult task but you should always check their portfolio and ask for references to make sure that you’re working with the best according to your needs.

When to Hire a Tech Partner

Consider hiring a tech partner in the following cases:

• Your software solution is critical to your business success. It is your source of income, increases productivity or plays a vital role in the success of your organization
• Your budget is limited and you won’t afford the full team on board for a successful software project or you can’t keep all the team once the product is developed
• Looking for after sale maintenance that covers operations and extending the functionality of the project.
• Looking for outsourcing active development and just keeping Level 1 and Level 2 support in-house. Thus you offload the one-time cost for software development to a tech partner and no need to keep the Level 3 onboard for very little work.
• You require a new technology that you don’t have onboard. Thus a tech partner will be a good choice since it speeds the time-to-start and provides the best practices for your project.

Bottom Line

Working with outsourcing companies and technology partners is pricey but saves you a lot of time and effort, and ensures the highest quality end-product and extend your software product lifetime. Additionally, software development companies may even help you save money in the long run. When choosing what matches your needs, you should never decide on the cost alone, especially if it’s a big project or critical for your business success.