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Outsourcing Developers

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Are you thinking of hiring outside developers? It’s not for everyone, so make sure you’re doing it for the right reasons. These insights are largely based on the experiences of Hacknocraft, a development studio based in NYC. Let's get to it.

When you should hire outside developers

  • You’re in the market for in-house developers to bring onto your team, but you need to ship product quickly and you don’t want to rush the hiring process. Hiring a dev shop to ship your product gives you time to find the right in-house developers rather than hire the first ones who bite. That sets you on much better footing long-term.
  • Technology is not your core business. You don’t want to spend time hiring, managing, and maintaining a development team, so you decide to outsource the whole thing and focus on your core business.
  • You’ve pivoted your company to an area where your current developers do not have core competency. You need a product fast to raise your next round of funding and justify your pivot.

When you shouldn’t hire outside developers

  • You have a lot of money and you’re too lazy to learn about technology or recruit a technical co-founder. You just want to have someone else do all the work and see a shiny app or website after three months. If this is the case, you are doomed to fail, so you might as well save your money.
  • You’re not technical and you have a hard time selling your vision to engineers. You want to build product to attract engineers to your team. This is not necessarily a bad idea if you have a web business, but we generally recommend against this if you’re mobile. This is because a good app is expensive, so before you make it, you should have done enough homework to have a compelling vision to pitch.
  • You know someone who knows someone who can build your product twice as fast and at half the cost of hiring a developer in house. If it sounds too good to be true, it probably is.

Do your homework

The more homework you’ve done beforehand, the better you are able to articulate to the dev shop what you want and supervise their progress. You’re also less likely to make changes in the middle of development.

If you don’t have detailed specifications for your product, then the time and cost of development is not clear. Good dev shops generally price this into their quote by assuming that things will end up harder than you first told them, while less scrupulous dev shops will give you a low bid, but then ask you for more time or money midway through the project and hold your product hostage until they get it. Neither of those situations is favorable for you, which is why it’s important to have a very clear idea of what you want before approaching outside developers.

How much should it cost? 

We routinely come across entrepreneurs who get sticker shock when we quote them $100,000 for their app, and then tell me with a straight face that they’re currently raising funds at a $2 million pre-money valuation even though they have no product. “So, you think your company is worth $2 million pre-product, but you’re not willing to spend 5 percent of that valuation on actually building that product?” Yeah, don’t be an idiot.

As of mid 2015, we generally see good apps built in the $50,000 to $150,000 range. Any higher than that, you can probably break it into phases. This reduces your risks and allows you time to test your app between phases. Web products cost less, but not by an order of magnitude. Websites (as opposed to web products) are really cheap if all you need is a static website. If so, you should probably just learn Wordpress and do it yourself for free.

First, to know if a quote you get is fair, understand the components of your product. Do you need a custom backend? Do you need iOS and Android or can you start with just one? Do you need to host vast amounts of images and videos? How much of what you need to do is novel versus how much is straighforward? All of this determines how much needs to be built from scratch.

Next, research the economics of the tech industry—how much good UX/UI designers, project managers, and developers are being paid. Then figure out how much they would cost if you were to hire them in-house. The best way to find out is by hitting up your friends who work at good tech companies and asking them what their companies are paying.

As of mid 2015, my research in New York tells me that senior iOS developers are making $150,000, senior web developers a bit less, and good designers and project managers break $100,000 as well. You can adjust these numbers downward if you’re hiring outside of the area, but remember that high-end development is a global market.

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