Outsourcing vs Hiring Full-time Staff
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You want the best quality at the cheapest price when it comes to getting work done. You are in a fix whether to hire specialists for ad-hoc work or whether you want to build a full-time resilient team. Whether building a full-fledged pay scale for a short term project makes sense or hiring a freelancer makes more sense has to be debated. These decisions carry a huge impact on your quality of work, costs and client satisfaction.
Startups Often Resist Outsourcing: Startups fear hourly cost overages and sifting through the freelancer pool without direction. Or they’re eager to build their core team and culture with full-time employees.
Would you be interested in hearing more from Jen Leech, co-founder of Truss, a digital services firm, about scenarios where contractors do (and don’t) make sense for startups? Truss has experience on both sides of the contractor fence: they are a software engineering contractor and they use consultants to grow their own business.
As a start-up here are a few pointers which will help you to draw a broad line as to when to hire people or outsource work partially:
1. Bridge the Knowledge Gap
Early-stage startups often “don’t know what they don’t know,” and contractors can help expose these knowledge gaps. “We often see that with startups specifically, the company founders may not be aware of the gaps in their ability,” says Jen Leech, co-founder of Truss, a digital services firm. For example, Truss started as 3 people-consisting of 1 business person and 2 engineers. Jen says, “We missed out on many opportunities to build our business more effectively, using design and research competencies. We didn't have those things, and didn't know what we were missing out on until we got a consultant.”
But the other side of that is that it's very unlikely the consultants you hire are going to be experts in their field- if you find the right one. It's a lot like hiring an executive to help build part of your company.
2. Compare and Contrast Costs
Hiring a contractor means lesser fixed costs and getting the work done by an expert without having to pay fixed monthly expenses. Obviously, contractors are a benefit in not having to commit yourself to long-term resources.
“Hiring contractors means you need not pay the monthly fixed salary coupled with medical and health benefits which actually turns out way too expensive to maintain full-time staff,” says Rachit Bhandari, CEO of Rachit Bhandari & Co. Jen also supports hiring the proficient contractors and paying them the due hourly charges.
At times the contractual services for some specific job can turn out to be exorbitantly expensive, especially when there are few players in the field.
3. Retention and Training
Retaining employees can be a daunting task. Worse is when they just walk out! Hiring a new employee, finding the right person and training them to be proficient are cumbersome, tedious and expensive.
“Hiring a freelancer on LinkedIn and various job portals is quick, time-saving and relatively easier than hiring and training permanent employees. This also exposes you to a vast pool of talent,” says Arpit Jain, founder of Promatics Information Technology.
The purpose for which you are hiring plays a significant role. If you are hiring for scaling up, contractors aren’t the right people. Another reason startups tend not to hire consultants is because they fear they are hiring the wrong person. Part of that can come from people who have been at big companies exclusively and have seen consultants act as mere staff augmentation (doing the same thing as others at the company by just being an extra hand). It's much more effective for mid- to large-scale businesses that are growing faster than they can keep up with.
4. Work across Time-zones
Contractors and freelancers work across the globe. This means your work is in process 24*7 and your efficiency is improving. You can work across all time zones and increase the output.
“The difference in the conversion rates per se is a big factor that can help you hire people across different time zones at a much cheaper rate. The dollar conversion rates fluctuate and the variations can be beneficial monetarily as well,” says the CEO of Share India Pvt. Ltd., Sachin Jain.
The difference across time zones might lead to a communication gap and may delay the work or affect the quality of the work.
As a start-up, you need to beware of the fake profiles and weigh various factors before outsourcing your work. You may find specialists as freelancers, but the person might be working on ‘first come, first served’ basis, thereby delaying your work. The most important criterion should be the cost, expertise and flexibility and these will help you fight the battle of outsourcing vs. in-house staff.