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In-house Vs Outsourcing: 5 Critical Factors Every SMB Must Consider

In-house Vs Outsourcing: 5 Critical Factors Every SMB Must Consider

Small business owner: Hey Jane! I’ve got some great news for all of us! We’ve just bagged a big project. We’re going to need a bigger Salesforce team.

Recruiter: Wow! That’s great news! How many Salesforce developers do we need?

Small business owner: Considering the size of the project, we would need 5 at least.

Recruiter: 5! That’s quite a number, I’m assuming we have other Salesforce projects in pipeline as well.

Small business owner: No, not as of now. Why?

Recruiter: If we don’t have a project in pipeline, investing in the recruitment process might not be a great idea. Besides, what should we do with the resources if we do not have any other project lined up?

Small Business owner: That’s something I hadn’t thought about. Approximately, what would it cost to hire and maintain a Salesforce developer?

Recruiter: The cost of recruitment would be somewhere around $3,000 and the average salary of 1 salesforce developer is $110,014 per year.

Small Business owner: and how long does it take to hire the developer?

Recruiter: Also, it usually takes a minimum of 28 days to hire 1 developer, but in our case, it may take longer as we are not well-versed with the essential technical capabilities and requirements.

Small Business Owner: Oh no, that’s a lot of time. The project should start within the next 2 weeks.

Recruiter: In that case, we should consider weighing the pros and cons before we rush into hiring an in-house developer.

Does this conversation between the recruiter and the small business owner resonate with you? I’d think so.

To hire, or not to hire is one of the defining questions of how we do business in the 21st century. Especially when you’re starting out, it can be quite expensive to hire a team right out of the gate.

Plus, it may take a while to understand what kind of full-time resources you’ll need in the long-term and finding the right balance between hiring permanent employees and outsourcing at the right time.

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Here are five questions to help guide you choose the best fit for your business 

1. What’s your requirement?

Often, small business owners decide to hire in-house or outsource for their software development projects without having the exact requirement in mind. Only having a vague-ish idea makes hiring decisions quite difficult. Moreover, it also becomes increasingly difficult in the later stages when setting clear requirement specifications and evaluating the direction of the project becomes necessary.

Therefore, defining the scope of your project/requirement in the most detailed way possible will help you save time on several decisions, including this one.

Opting for an in-house employee or outsourcing could also come down to your project timespan. If you have a big project and need resources for a longer duration you could consider in-house hiring. However, if you have a one-time project that you may or may not take up in the future – outsourcing is the right way to go.

Nevertheless, you should also consider that the time required for hiring for specific skillsets may vary vastly. Hiring for niche skillsets may take a longer time than usual.  Whereas, if you choose to outsource, you are more likely to find an outsourcing partner with expertise in a technology/skill-set and is ready to hit the ground running. This reduces your recruitment timescales.

In addition, if you decide to outsource, the handover periods and training courses stand void. So, if you need to fill a skills gap quickly and can’t be flexible on timings, outsourcing is probably your best bet. 

2. What is your budget?

The budget that you allocate for a particular project and the cost difference between an in-house employee and outsourced party must be taken into account. At the onset, it is best to have a stipulated project for the project, inclusive of its resource requirements. This gives you a clear direction in making the right choice.

In the above-mentioned scenario, the small business owner did not have a clear view of the budget that would be required to hire an in-house resource or get outsourced skills on-board. What kind of a decision do you think he would have made?

Usually, small business owners tend to consider cost as a deciding factor in making the hiring vs. inhouse decision and end up making grave blunders.

While outsourcing may seem like the more cost-effective option considering the cost savings in the short-term due to no overheads such as recruitment, training and other ongoing company perks such as healthcare or pension schemes, some outsourcing companies may charge a relatively higher daily rate. The initial cost savings will then quickly disappear If you intend to work with such outsourcing companies.

Also, remember that there may be several hidden costs that you may have to incur occasionally, besides they may not be trained on technologies as per the requirement of your project.

Whereas, while hiring in-house, your employee will have a greater buy-in to your company and the knowledge and skills developed by working on your projects is kept in-house and is available for use at a later stage. All in all, the initial investment may pay-off sometime later. 

3. What skills do you already have? What skills will you need?

Assessing the skills that your company has can help you pick the most-suitable option for your business needs. When you carry out a thorough skill-gap analysis, you are bound to get clarity about the type of skills/resources that you already and the skill-set that you lack to develop the project efficiently.

Nevertheless, the decision also depends on the longevity of the project and whether you will need to continue using these skills in the future.

To give you an example, if you need to build an app, which is a one-time job, but don’t have the technical expertise in-house, finding an external party to do it for you makes more sense. However, the current lack of expertise can be overcome by providing adequate training to your resources or hiring resources with the right skillsets will pay off in the long run when you decide to take up app development as a regular activity.

It is not just important to understand the skills but also the skill level required to perform the task. If you’re looking for a particular task to be done, you can find a local specialist or hire in-house but if you’re looking for more comprehensive services, an outsourcing company is a better bang for your buck.

Before you pin down a decision, it is best to first assess the market availability of the role to avoid bearing any unforeseen costs

For instance, if you struggle to find the right outsourcing option, the time and money you save on recruitment may end up being pumped into finding the right outsourcing model instead.  

In this case, it makes more sense to train your employees and recruit internally.

4. What are your long-term goals?

Whether you are looking for a quick fix for your skills gap or you need a more permanent solution depends on the long-term goals of your business.

In the first case, outsourcing is an obvious selection, however in the latter case you may have to invest well initially in order to train your employees, equip them with the right skillset and continue doing so in order to reap rewards in the long-term.

Sometimes outsourcing provides the leverage you need to excel and achieve your short-term as well as long-term goals in the future by helping you focusing on your core business. However, it also doesn't mean you must outsource forever; it just means that you need to outsource tasks in a timely manner without the rush of doing it right and eventually hiring a resource in-house for tasks that significantly impact the long-term goals of the organization.

However, some small businesses benefit the most either by upskilling their own in-house team or hiring experts in-house. Hiring in-house is especially beneficial if the long-term goals are closely aligned to the role. Having dedicated in-house personnel who are a part of the company daily, allows the small business owner to exercise better control over the cost and the quality.  

5. What fits best with your company culture? 

Culture is an extensive concept in entrepreneurial organizations, but it is also one of the most powerful drivers of entrepreneurial performances and decisions. Every organizational change, including the decision to outsource or recruit in-house, involves technological, organizational and personal factors. Among these factors, people are undoubtedly the most difficult element to deal with. This is mainly due to the fact that people are generally more comfortable with what they have learned or already know, while they show resistance towards the change, particularly towards uncertainty and what is unknown or risky.

In organizations with an integrative culture, shared values facilitate both internal integration and external adaptation; in fact, these kinds of organizations emphasize the values of caring for employers, customers, and society, which help for the internal integrating process, and values for innovation and high performance, which help for the external adaptation process and make decisions such as outsourcing fairly easy. Moreover, the continuous learning culture of the organization also allows an outsourcing vendor to transfer skills to the rest of your workforce, adding further value to your organization.

Inversely, organizations with hierarchical culture do not found their aims and operating logics on shared values but on the formal rules and the coordination mechanisms based on hierarchy and strict supervision. In these situations, the employers seem to be less ready to innovate and change. They tend to find a greater sense of security in continuity and are less willing to assume the risks and the uncertainty deriving from the change. In such cases, the decision for outsourcing can be a difficult one to drive. In fact, introducing an outsourcing vendor in such cases may bring internal conflicts to the company as permanent staff sometimes find it difficult to work with outsourcing vendors such as freelancers or could have difficulty fitting with your company culture.

Therefore, your company culture plays a significant role in your decision to outsource or hire in-house resources.

In the end, it all depends on the type of your business.

If you decide on outsourcing there are several factors that you must keep in mind before finalizing your outsourcing partner. Likewise, make sure that you have the necessary budget for recruitment, training and infrastructure if you decide on hiring an in-house resource.

All in all, the ultimate decision of the route you choose should be based on your requirement, budget, skills gap, long-term goals and company culture.