Should SMBs Hire Tech Talent Or Outsource?

Building an in-house tech team is difficult, and so is explaining your requirements to the outsourced company. With budget and time constraints, SMBs and startups must choose the best that suits their needs.

Software development is difficult and a long process. While large companies with no budget issues ensure that they have the best-in-class tech team, SMBs and startups, however, neither have the budgets nor the expertise to build their teams. With initial ideas being the most important and security being a cause of concern, it is also difficult to trust outsourcing the development work. While the in-house team and outsourced professionals work on the same thing, there is a difference in the approach, and it is essential to choose the best that suits your needs.

Inhouse teams are the best and the worst

Building an in-house team feels amazing. It is a team that’s aligned with the company’s culture, you can pick team members, and the whole team operates in synergy. One of the prominent benefits of making an in-house tech team is that it offers direct communication. Generally, the team is within the physical space, and it is easier to get the point across. As soon as the team develops a product, the immediate flaws can be catered to, investigations can be executed immediately and can be fixed without any delay. An in-house team offers full control over the development.

Taking the work outside the company network reveals a lot of vulnerabilities of the systems. The in-house network and technologies are the best to work on any solution development as they have better security, and every team member would work on keeping it safe. There are no trust issues with your own teams, and it is much simpler to control, track, and communicate right with the members.

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Here comes the difficult part: Having an in-house team is quite expensive. Let’s consider that the base salary of a developer in India is Rs 6 lakhs per annum. Multiply this for four members, and it comes to Rs 24 lakhs. Of course, this is the least that one has to spend. As the designation increases, so do the salaries. Tech managers are not just expensive but also hard to find. Also, there are added costs of systems, supporting software & tools and training expenses. Since developers need to constantly upskill themselves to stay relevant, that means they will need support to visit conferences and even buy online training courses.

Hiring a developer is tough too. India does have a great number of developers; to get a smart one of the lot, the employer needs to be a smarter developer. If all goes well and the product works great, the issues of scaling up begin. Let’s count the least essential roles required while scaling up – FrontEnd developer, well versed in javascript frameworks, BackEnd developer for the API, UI developer for the designs, Dev-ops guy to manage servers, a security and disaster recovery expert, and a manager for all of them. These roles are in high demand, and it is difficult to defend from poaching attempts by competitors. This is important as if the team is small and the core 3-4 guys leave, the whole product development muddles.

If the main product of the company is dependent on its tech, there is a high chance that the startup’s or SMB’s focus will move away from the business and into these issues, thus halting innovation and affecting the business negatively.

Is outsourcing the best solution then?

Messaging software Slack had outsourced the designing of their beta version to a Canadian company called MetaLab. The founders of Whatsapp, Jan Koum and Brian Acton, were low on funds and had outsourced their development to a Russian company. Jack Ma had outsourced the software development of Alibaba in 1999 to remote developers in the US. A look at these companies proves that outsourcing at the initial stages has not been that bad of an option.

The biggest perk is obviously the expertise that comes with an external technology partner. The outsourcing company consists of the much-needed skills and experience that is required to build a product. Irrespective of demand, there are higher chances that a specialist’s company might have already developed something similar. India’s IT outsourcing industry is predicted to reach INR 8,830 billion by 2025. Out-sourcing offers the best control over costs and opens up the whole world. You are no more left with any technology constraints and can choose from the diverse skill sets required for your project. Outsourcing allows collaboration with different IT firms that are proficient in different technologies to build a robust product.

While building your tech stack sounds like the ultimate solution, it is essential to consider the security risks that outsourcing comes with. There will always be a fear where hackers and even ransomware can attack IP security. For startups, their idea and their intellectual property are the main treasure but have to be shared with the remote tech team. Even properties like business plans and trade secrets have to be revealed to the outsourced company. It then becomes essential to write contracts in a way that mentions the seriousness of protecting the IP.

Outsourcing comes with freedom from the hassle of developing the product but can also result in losing control over the project. Issues also arise when the expectations are not fulfilled, and the company increases costs. It is extremely essential to discuss the budget and details of the project way in advance. There always will be a communication barrier and trust issues with an external company that can sometimes slow the pace of development.

Similar to hiring issues in building an in-house team, it is important to understand the types of outsourcing companies and choose the best that ticks the right boxes. Some types of collaborations include – a tech partnership that has better-skilled people for niche industries (travel, fintech, delivery); a hiring a software vendor, which includes outsourcing for a team for a specific task that works best when you exactly know your end-product; CTO as a service which follows a different approach which is solving a business problem and demands a high level of engagement; hiring a consultant who is a senior software developer and helps companies build their own team, guide and mentor them.

Wrapping up

The best solution is to get the best of both worlds where SMBs can retain a core team that can work on the basic dependencies and outsource features that demand specific skills. The key is to blend in-house and outsource development to save time and money and be able to focus on the core of the business. It is essential to keep financial, operational and motivational differences separated for better business outcomes and ROIs.

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Meeta Ramnani
Meeta has completed PGD in Business Journalism from IIJNM, Bangalore. She comes with over six years of experience in journalism and writes about emerging enterprise technologies with a focus on digital transformation. She loves to go on bike rides and stays in touch with nature. Contact: meeta.ramnani@analyticsindiamag.com

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