When it’s time to hire outside experts: Out-tasking can be more affordable (and effective) than in-house development

In the era of digital everything, companies often require assistance with the budget associated with designing and developing software. The traditional approach has been to handle these large-ticket items internally (or make a new hire) because the initially perceived high outsourcing costs can be alarming. However, it’s crucial for business leaders to carefully consider what these costs truly entail. Are the expenses genuinely too exorbitant, or are you actually saving money in the long run by leveraging the expertise of an external vendor? 

A more thorough analysis of the numbers indicates that outsourcing is often more cost-effective. In a recent Clutch report on the surge of small business outsourcing, the organization found that most small businesses (83%) planned to maintain or increase their spending on outsourced business services. It also noted that SMBs are seeking new providers, specifically in the areas of marketing (27%), IT services (22%), and design (21%).

Many companies establish an internal technology design and development rate, usually roughly $100 to $125 per hour. At first glance, this might seem reasonable. However, when factoring in additional employee expenses like benefits, PTO, management, and other corporate overhead, the “loaded” cost can quickly rise to $150 per hour or more. 

This translates to around $300,000 per year per employee annually. Furthermore, these numbers do not consider the employee’s productive time percentage. Most companies don’t track their salaried employees’ hours or measure their success based on productivity percentage, commonly called “billability” in consulting firms. While these figures may seem manageable within a healthy corporate budget, several less obvious expenses can significantly inflate costs.

The cost of hiring full-time designers and developers extends beyond their salaries. Additional expenses include productivity rates and the need for managerial oversight. Managers and supervisors contribute to the overall cost through their wages. It’s important to consider the concept of employee productivity as a percentage, meaning if they are 65% productive on your project (equivalent to 26 hours a week), there is a stranded cost of 14 unutilized hours. Additionally, it’s important to account for the direct design/development value and reduced productivity as they are not directly involved in development tasks. This analysis does not include the cost of technology tools, systems, licensing, maintenance, IT support, training, and processes that ensure quality and successful deliverables.

Consider the following points. 

Outsourcing design and development tasks to external experts may initially seem more expensive, with rates ranging between $200 to $250 per hour (and sometimes higher), corresponding to around $450,000 annually (and that’s per person!). However, this fee includes a complete service provided by top-level professionals who offer specialized expertise and an external viewpoint that can significantly accelerate and improve project results. Furthermore, for that rate, you often get a full team rather than a single employee; there may be solution architects, designers, content strategists, software architects, and developers all collaborating on a successful outcome. Simply put, you get a dedicated team of experts in different domains rather than one employee. 

These professionals work within teams and are familiar with each other, many of whom have worked together for years. These teams work collaboratively using well-understood systems, tools, and processes that ensure high-quality, consistent, and efficient deliverables. Their only learning curve is their client’s unique initiative, which means that they get up to speed more quickly than a new hire, and the time to value is on the order of days and weeks. These external teams can usually accomplish the tasks more rapidly as well, having seen similar situations, problems, and opportunities in other environments and industries; they do not have as high a frequency of trial-and-error situations and operate, generally, more efficiently as a result.

Out-tasking not only aligns you with experts in the field but also ensures that you are paying for deliverables rather than mere employee presence. Working with a team of experts can also help professionalize your internal team and amplify the desired impact on your business. External teams are often more motivated to maintain high productivity and innovation as their continued engagement (and compensation) depends on their performance and the quality of the work delivered. This setup translates to a higher likelihood of project success without the added burden of employee management and overhead costs.

When choosing a workplace, there’s a significant difference between a typical corporate environment and a more diverse and dynamic setting, such as a digital transformation studio or advisory firm. Highly skilled design and development professionals are increasingly opting to work in these stimulating environments because they offer the chance to contribute to various projects for innovative startups and exciting brands. This trend reflects the desire of creative individuals to engage in more interesting work and highlights the importance of out-tasking when seeking builders and innovators rather than folks solely focused on day-to-day operational tasks.

Additionally, business leaders can breathe easier knowing they’re not paying for employees who are not actively working on a specific initiative. Without a high-performance culture and management program, you’re not reaping the full benefits of those full-time team members.

In today’s fast-paced world, businesses must keep up with the rapidly changing digital landscape to stay competitive. One way to achieve this is by re-evaluating their development processes. Out-tasking development work to specialists can help companies effectively manage costs and leverage expert skills that may not be available internally. This ensures higher quality output and positions the out-tasking company as an attractive place for leading talents seeking diverse and challenging projects. Outsourcing can be a strategic move to promote innovation, cost-efficiency, and overall business growth.