Are you considering and in-house development for your company? Here are three essential reasons why it is time to abandon this idea in favor of solutions that actually work best for you.
Do you remember the days when your tech team gathered in a conference room every week to discuss goals, check on new developments, and chart their progress? These days, those meetings are completely outdated, a thing of the past.
If your company wants to develop high-quality software and remain competitive in the process, the reality is that an in-house software developer (or the complete development team) might no longer be the perfect choice for the job. Between the cost, the learning curve, the talent shortage, and your company’s tight deadline to turn around your product, you simply cannot afford to waste your time with in-house development.
Here are three essential reasons why it is time to abandon in-house software development in favor of solutions that actually work best for you.
Do not miss this: IT outsourcing vs Insourcing: which is the best option?
Price is an issue that can change everything, which is why many businesses choose to outsource for cost-saving reasons. Once you compare the cost of hiring an in-house team against the cost of outsourcing an employee, it is easy to see why the choice is a game-changer for many businesses.
Cost of an in-house employee
The cost of recruiting someone alone is an expensive matter. If you use an internal recruiter, you can factor the cost of their salary into each hour they spend recruiting. The average time to hire an IT specialist in the US is 51 days — that’s a lot of hours.
If you use an external headhunter, the average cost breakdown in 2018 is as follows, according to Top Echelon:
- Recruiting fees: $20,283
- Average fee percentage: 21.5%
- Average starting salary: $93,407
On average, if you use in-house recruitment staff, you can expect to pay at least $4,000 to recruit a new developer.
Plus, onboarding requires document signing, NDAs, tax forms, employee benefits enrollment, etc. Assuming you hire a recruiter company that charges $25 an hour and you hire 50 new employees per year, with 10 hours of administrative time to process their documents, that’s a total of $12,500 per year spent solely on recruiting and onboarding (and that’s a conservative estimate for large companies).
You will also have to train your new employee, even if they happen to be an expert. According to the Society for Human Resource Management, you can expect to pay an estimated 38% of an employee’s salary to train a new hire. Yes, even an expert needs training — the higher-paying the job and the more responsibility attached to the role, the more training required to ensure quality job performance.
Plus, the time an employee spends in training equates to deferred productivity time, which means that your company is still not earning from that employee at their full potential.
After all of that, you still have to pay your new employee their salary and benefits, which will be written off as a cost to your company.
Cost of an outsourced employee
On the other hand, there is the cost of outsourcing an employee.
When you outsource a position, you outsource all of the onboarding costs along with it. You no longer have to worry about paying a recruiter and training an employee — instead, you can hire a developer (and the entire team, including testers, designers, and a business analyst) whose qualifications have already been vetted and who has already been trained to perform based on the staffing company’s expectations.
All you really need to do is find an outsourcing IT partner that matches your company’s culture, mentality, and goals. After that, you are all but guaranteed to find professionals who are qualified and ready to complete your project with high-quality standards.
2. The high cost of employee turnover
Even if your company can downsize the cost of hiring, you have to account for the high cost of employee turnover.
Every year, U.S. businesses lose $1 trillion to voluntary turnover, according to Gallup. The average cost of replacing an employee can range from half to two-times an employee’s annual salary, which means that with an annual 26.3% turnover rate, a company with 100 employees and an average salary of $50,000 could have turnover and replacement costs ranging from $660,000 to $2.6 million.
That number does not account for employee morale when an employee is replaced. Companies with high employee turnover and subsequent low morale will see their productivity numbers drag as employees become dispirited, which will feed into the cost of employee replacement even if the number is not directly calculated in your balance sheet.
With outsourced employees, the recruitment and turnover costs are removed from your company entirely. All you have to do is find the right company partner. Hiring the right developers for your project is their responsibility and due to their focus on client mindset, they will work hard on hiring the best professionals.
3. Talent access
Another unfortunate reality of in-house development hiring is that a chronic talent shortage has left the job market wildly competitive.
Software engineers have topped the list of hardest jobs to fill in the United States for years. As of 2018, companies who lagged in attracting the best talent had to make up the difference by offering up to 20% higher salaries to candidates with in-demand skills, a group including high-end developers, data scientists, and information security analysts.
Overall, the U.S. job market is overwhelmingly competitive, but the tech sector in particular leads the pack. This is because of the supply-demand gap — although job postings for tech positions shot up 32%in the first half of 2019, the supply of tech professionals has not kept pace.
And while there is a global struggle to find sufficient tech talent, opening up your company to outsourcing allows you to access a global pool of qualified candidates, significantly increasing your odds of finding top-tier talent at competitive rates.
Content related: 5 symptoms your business needs software development
Time to invest in the talent you need
If your company is ready to stay competitive in the tech industry, you have to keep one eye fixed on the future, your bottom line, and your needs.
There are several signs that tell you in-house software development is not working and you must be aware of the signals. The ones I mentioned here are just a few of them.
When the cost of an in-house developer is so high and finding (and keeping) talented developers is so difficult, small businesses can quickly find themselves edged out of the competition simply because they lack the resources to attract top-tier talent away from large companies.
Outsourcing gives you the tools to change all of that. Now, you can access some of the best development talents the world has to offer at a price your company can afford. And when you are trying to plan for your business’s future, why would you invest in anything less than the best?
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