Why Is It Hard To Find a Good Developer? Freelance vs Outsourcing Comparison
Finding a good developer can be quite challenging due to the increased demand for the services of technical specialists from businesses striving for digital transformation. To overcome the shortage, they start looking for new opportunities to hire a developer. Two of the most widely used options are freelance and outsourcing. In this article, we describe the reasons for the developer shortage and define the pros and cons of each hiring tactic in the context of specific use cases.
The supply and demand for good software engineers have never been as out of sync as it is right now. The ongoing digital transformation of all spheres only exacerbates this lack of equilibrium further. Nowadays, it is hard to imagine a company that can create, deliver or market its product efficiently without technology. The speed of digital innovation and ever-changing consumer expectations make technology a part of every organization’s journey.
With businesses moving into the tech sector, the IT industry is experiencing a shortage of software engineers to help manage workloads, new technologies, and new ways of working. It led to 1.4M unfilled programming-related jobs while the number of graduates is only 400K a year. Among areas with the greatest need to address potential skill gaps are data analytics, IT, mobile and/or web design industries. If the skills gap and the IT talent shortage continue growing simultaneously, it will mean a loss of $162B for the US.
What are the Causes of the Shortage of Software Engineers?
Businesses need IT specialists more than ever before as they automatize more and more of their business processes. There are multiple reasons for the shortage of software developers. Poor education is the primary one. Not many graduates are ready to pursue tech careers, as only 3.2% of schools offer AP computer science courses.
However, it is forecasted that 77% of jobs will require technical skills in the next ten years. Educational initiatives and sufficient funding can improve this situation. As an alternative to academic education, big tech companies like Google offer internships and free courses for everyone who wants to start their career in IT. As a result, more people get access to CS courses to develop their tech skills.
Growing new talents will take time, while businesses are striving for digital transformation and development right now. A lot of skilled and experienced developers are already assigned to the projects and not planning to change their job. Employers, who quickly adapted to the changes in the developer ecosystem and provided workers with a better salary, remote work, flexible working hours, and opportunities to learn, managed to retain specialists.
But more often than not, the difference between what companies offer and what developers are looking for is still significant. Therefore, companies are compelled to look for new opportunities to overcome the software developer shortage. One of the most widely used tactics is to hire freelancers and outsourcing companies.
Where to Find a Good Developer
When hiring a developer, you have two options: go with a web development company or choose a freelancer (contractor). Each option can bring a variety of benefits to your business. Freelancers present an opportunity for short-term, low-cost, and widely skilled technical projects. In contrast, an outsourcing team will be a perfect fit for big long-term projects with seamless management. Before you start googling “What are the best web development companies?” or “Top websites to hire freelance developers,” make sure you know the advantages and disadvantages of both variants and how they work to choose what will match your project requirements better.
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According to the Statista report, there were around 59 million people doing freelance work in the United States in 2020. And it is projected that in 2027, 86.5 million people will be freelancing and will make up 50.9 percent of the total US workforce. There are a number of factors why there has been such a boom in the freelancing market. Most notably the opportunities to make more money and flexibility (work hours, remote work, work/life balance, etc.). No wonder there are so many freelance developers to choose from. They offer their services on numerous freelance websites.
Freelance websites or portals is an online outsourcing platform that connects businesses and clients with a global network of freelancers. Any member can post a project, whether a short- or long-term, and choose from available freelancers who offer bid proposals with rate quotes and time estimates for completing the work or offer a job themself to a suitable candidate. The most popular ones are:
Freelancing is a “flying solo”, it allows you to hire a private expert who can cooperate directly with more than one client/business. Such specialists can work without leaving home, rent a room or an office, work any time a day and what is most important they can earn money around the world by being in one particular point. This is the top option for those who don’t want to be attached to one location or a specific working time.
Here are some pros and cons when it comes to hiring a freelancer.
Flexibility and Special Expertise
By hiring freelancers, a business gets flexible access to unique expertise at the proverbial drop of a hat. Independent contractors are often available at exceptionally short notice to fulfill a sudden demand that your in-house team may not be capable of meeting. Moreover, freelancers tend to be narrowly specialized in their respective fields and occasionally are adept at niche tasks. Freelance is a good solution for complex issues that your current employers can’t simply solve.
Freelancers are not employees, therefore, the risk your company may incur is greatly reduced. They can’t collect unemployment insurance, seldom have a right to compensation or company’s benefits, and they can be fired and replaced relatively easily if they underperform. When you rely on in-house specialists, you are “on the hook” for a lot more.
Hiring a freelancer means not only a lower hourly rate, but also no responsibility for paying a menagerie of benefits on behalf of your freelance talent. This includes Medicare, Social Security, health insurance, retirement benefits, etc.
Hourly rate for in-house developers (in the US)
Hourly rate for freelance developers (Upwork)
*Note that all rates here and further along the text may vary depending on the particular developer.
You can also save money for office space and lower your office supply costs because freelancers are usually equipped with modern home offices and work remotely.
In the case of in-house employees, you are pulling from a finite pool. They have to either live in the area where your office is or be willing to relocate for work. Conversely, freelancers don’t need to work from the office and can be located anywhere with wi-fi available. This provides you more with opportunities when looking for a specialist. The only thing that matters is language knowledge in order to conduct effective communication.
Hiring a freelancer is not all puppies and rainbows though. In reality, there are many disadvantages of hiring contract workers.
Unpredictable quality of work
When you want to hire someone fast, hire a freelancer. It can be an advantage and disadvantage at the same time. Therefore, an extensive, thorough technical interview is not something entrepreneurs want to invest time in. As a result, a freelancer’s CV and portfolio are usually breezed through by whoever is responsible for hiring and onboarding a specialist relative to the immense amount of time dedicated to ensuring a potential full-time hire is a good fit or not.
Lack of supervision
Since freelancers are working remotely, there are not many ways to control if 2 or 20 hours billed were spent working hard or watching videos on YouTube. Not all freelancers do this, but without minimal control, immediate motivation can take a backseat to leisure.
There is a high chance that a freelancer has more projects to work on apart from your project. And while they want to keep you as a client, your company’s individual success is not a priority, so their loyalty is probably lower than a full-time employee. In-house specialists are likely to feel a higher level of commitment to your organization, and therefore more motivated to add to the bottom line. This factor may not be decisive when looking for a specialist, but it may play a role depending on the project.
Freelancers can be an extremely valuable asset for businesses, particularly those who are in need of a rare skill and unique expertise or those running a tight budget. In those cases, freelance platforms are a good alternative. They allow you to find a freelancer that will be highly qualified in their respective field and occasionally is adept at niche tasks. Mentioning a freelancer in the singular is for a reason. For business, communicating and controlling one freelancer will not be a problem, so as for a freelancer to integrate into a company's development team or work independently on a single task that in-house specialists can't do. But if you want to find a one-man band who can do everything at a high level, you will not find them on a freelance website. For complex business challenges that require a diverse team with various skills, outsourcing will be a perfect match.
Just like any other business decision, you should do homework and think critically before jumping head first into one of the hiring options. So let's have a closer look at outsourcing companies and define their pros and cons.
Outsourcing is the process of recruiting field experts using an external outsourcing company to perform services. It becomes the company’s duty to find, select, hire, train, and retain personnel.
Basically, the client has to do nothing except for providing the project details and pay for the services. The services can include support of what is already produced or be a supplement to services lacking in expertise. They also vary depending on the industry they cater to. When hiring an outsourcing development team, you can essentially fill any technical position starting from a developer and ending with project managers, data scientists, and DevOps engineers.
The outsourcing partner will employ a number of contractors allocated to different clients depending on the specific requirements. They will have (most of the time) regular working hours and participate in company’s activities, as well as adhere to a code of conduct. For clients, outsourcing is often a cost-effective move. According to the statistics, 24% of small businesses that outsource at least some of their functions do so to increase efficiency. It allows them to save on resources without sacrificing product quality.
It is also important to note that outsourcing allows businesses to choose a partner anywhere. Most companies go for more economical third-party outsourcing providers. Simply put, the same amount of work with the same quality produced in one city or country differs from one another. For example, if you decide to outsource development to North America, the average software developer hourly rate will be $55, while for Eastern Europe this will be $20-40. As such, companies continually outsource their operations to nearshore or offshore because the benefits often trump any potential drawbacks.
Hourly rate for in-house developers (in the US)
Hourly rate for freelance developers (in Eastern Europe)
With all of these being said, here are the advantages and disadvantages that companies and businesses must consider when hiring an outsourcing company.
When talking about experience, it is more about how the team works together based on the projects they have done in the past, rather than the developer's seniority level. It also includes knowledge of the newest technologies and trends. It is crucial for outsourcing teams to stay competitive and tech-savvy, so they invest time and money into their employees' education and professional development. Therefore, such teams offer businesses unique solutions with deep focus on cutting-edge technology.
Building software is not only about writing code but also understanding how to manage the process, identifying and eliminating defects in a product, providing a good user experience through design, etc. So by hiring an outsourcing company, you get a full set of specialists ready to support you all along the way.
Programming relies on a vast number of technologies, frameworks, and libraries. And most of the time, one project combines several of them. One doesn’t need to know everything to be a good and highly professional frontend or backend developer. In outsourcing, you get access to all kinds of specialists working with different technologies and all experts in their field. They complement each other and provide clients with a perfect match of modern innovations and good quality.
Timing plays one of the biggest roles when developing a project. Whether you plan to build new software or redo the existing one, deadlines are something that you need to consider and follow if you don’t want to lose money. With outsourcing, you save time on recruiting and onboarding programmers. It also cuts the time for team formation since an outsourcing company provides all needed specialists, and you don’t need to look for additional ones. As a result, the overall time for development, including the time-to-market, is reduced.
One of the most widespread fears regarding outsourcing is to let the project slide. In reality, outsourcing gives you way more control over the project than any freelancer. You can set up regular meetings with an outsourcing team where you can discuss updates or do timely follow-ups. Moreover, outsourcing teams have a project manager responsible for planning, organizing, and directing the completion of the project, ensuring your project is on time, on budget, and within scope. They are experienced in managing many projects and strive to communicate effectively for project success.
Are you ready to take advantage of outsourcing? Drop us a line and we will help.
With all the benefits, outsourcing still has disadvantages to take into account.
If in-house developers or freelancers started your project, and then you decided to outsource it, or you often change your development team, code quality can suffer. In some severe cases, this may lead to the code having to be rewritten partially or completely from scratch. It will cost you time and money.
Outsourcing can run into problems when there is a cultural misalignment between the client and the development team with poor English skills. Time-zone differences where there is almost complete workday overlap can also lead to a breakdown in communication when expectations and rules are not set up. This problem is also common for freelancers. However, the outsourcing team is mostly located in one country or/and in the same time-zone to cooperate easily within the company. Project managers, either in-house who are responsible for an outsourcing team or on the vendor’s side that are used to managing the challenges of working across time zones, can also help with communication.
Expensive for regular use
Most of the time, hiring an outsourcing development team will cost less than your own IT department. This is among the biggest comparison factors of in-house development vs outsourcing. The employer saves money on tax deductions, medical insurance, technical equipment, and workplaces, downsizing risks, etc. But if you plan to use software development services constantly and full-time, expanding the in-house team might be a more feasible solution.
At the same time, outsourcing is still more expensive than hiring a freelancer who can do all the same work at half price. To overcome this, outsourcing companies offer discounts if you hire the whole team and special conditions.
We have already mentioned that outsourcing will match your business if you need a team of developers due to a lack of in-house specialists. For example, you want to scale, but all your employees are fully-loaded, so you need to connect additional staff to keep the project growing. Or if you are starting a new one that happens to require more specialists than you currently have or you don’t have any developers in your team, and now you want to integrate technology into the workflow. Hiring a bunch of developers can take up to 2-3 months, and sometimes a company can’t wait for so long. In such cases, outsourcing can help.
Another common reason is when you have a lack of expertise within the company, and you need to widen your skillset. Maybe you want to start a new project on an unfamiliar stack, or your old projects have grown, and you want to implement new technologies into it, or simply your website needs a redesign, but your developers don’t have the experience to pull it off. It will be much more cost-effective for you to outsource the development part to achieve your goals and not get bogged down by risky experiments and amateur mistakes.
Recommendations to Companies Who Want to Hire Outsourcing Teams
After such a detailed comparison of two options, you should have a complete picture of what to choose depending on your business goals and project requirements. If everything is more or less clear with hiring a freelancer, with the outsourcing team, there can be questions. Based on our experience, we want to share some recommendations that may well improve your hiring chances.
Be ready to pay more. Good specialists are not cheap
If you're not paying the market rate, then you're going to struggle. The competition for good developers is higher than ever, and they do not sit for a long time without a project. You will have to pay for an experienced team. Don't be fooled if you are offered a large development team that is now available and ready to take on your project. Most likely, a company simply could not sell it anywhere, and it will eventually cost you even more than a few highly-qualified (and expensive) developers
Clarify project requirements
Simply put, the more carefully requirements are formulated, the easier it will be for the team to meet them. The project team has to know what they are building, why they are building it, and what to expect at the end. You can make up requirements yourself or an outsourcing company can do paid research for you. They will define product features and all possible business and technical specifics needed to start the development process. As a result, even if you decide not to continue working with a company that made a discovery, you will get deeper elaborated requirements for a future vendor and a clear vision of where the project should move.
Don’t spend too much time on the vendor selection process. Offer fast and offer well
Before starting the outsourcing vendor evaluation process, define evaluation criteria. If most of them are met, don’t hang around, get to the details fast and direct. While you are in doubt or looking for someone cheaper, good developers will probably be interviewed elsewhere. The delay may cost you a vendor.
If you see that your vision and the vision of a potential partner are not similar, don’t waste your and their time discussing cooperation that won’t happen. A qualified team that looks in the same direction as you is a key to success.
Be ready to offer more freedom
You will have more chances to hire a good development team if you allow at least a degree of flexibility into your workflow, like remote working and flexible working hours. With video conferencing, corporate messengers, and other tools that simplify the working process and allow you to cooperate successfully even at a distance, you will still control the process and communicate effectively with your team.
Encourage new tech usage
While you are an expert in a specific domain, developers are experts in the tech area. Specialists in outsourcing companies are doing their best to keep on top of the latest innovations in this field, and they can recommend the most suitable and relevant solution for your business. Provide an outsourcing partner with more initiative in terms of tech stack choice in order to get a competitive product that keeps up with the time.
The IT industry is changing rapidly, and more and more companies are undergoing digital transformation. With this, a great challenge of developer shortage appears for companies, especially small ones, that are looking for experienced specialists with the right skill set. Hiring a freelancer or a software outsourcing company can be a way out.
Freelance can be a beneficial instrument when you are in need of a single developer with unique expertise or those running a tight budget. Partnership with freelancers can reduce risks, provide you with low cost and offer flexibility along with worldwide reach. The freelance market is represented by many experienced specialists ready to help in a short time.
In contrast, an outsourcing company will be a perfect match for complex business challenges that require a diverse team with various skills. The talent pool in Eastern Europe can offer a vast pool of experienced, affordable IT professionals covering the most popular languages and services and niche technologies (such as Go, TypeScript, or Dart) or combining varied skills (e.g., data analytics + programming). It makes Eastern Europe a favorable region for foreign company owners to outsource the development process. And with a reliable vendor like Upsilon, companies will easily solve the issue of tech talent shortage but will also ensure steady development of their business.
Levering the benefits of these two tactics will help you be better equipped and effectively rebuild workflows in conditions of developer shortage.
Frequently Asked Questions:
1. What is an outsource developer?
Software outsourcing is a practice where clients delegate the development process to an external vendor instead of using in-house resources. Outsourcing companies find, select, hire, train, and retain developers to allocate them to different projects depending on the client’s requirements.
2. Is outsourcing and freelance the same?
Freelance and outsourcing are two concepts often used to express similar meanings. A Freelancer is an autonomous individual without commitment, and if he doesn’t like the project, he can change it anytime. On the other hand, an outsourcing contractor is an employee of a third-party company that provides its internal resources to the client to perform some services.
3. How long does it take to hire software engineers?
It depends on the seniority level you are hiring for, size of the company, market, and others. Freelance will be the fastest option to hire software engineers. You post a job, and an available specialist can now apply for it; this process can take from a few days to a few weeks. Hiring an outsourced or in-house developer takes from a few weeks to months.
4. Where to hire developers?
You can hire developers on freelance websites like Upwork, Fiverr, Freelancer.com, Guru, TopTal, etc. On the other hand, if you want to find a good outsource developer, check out Clutch rankings, ask your social circle for referrals or look for them on social media.
5. What countries are the best for outsourcing?
India is the cheapest country to outsource your software development, although you can experience communication challenges and poor quality of work. Because of this, companies most often choose Eastern Europe (Poland, Ukraine, Belarus, etc.) for outsourcing. Combining a big talent pool of well-trained and experienced developers with prices that are substantially lower than those in the UK and the US, Eastern Europe provides a good price to quality ratio.