Tuesday 14 April 2015

Direct Employment vs. Outsourcing to Technology Company


It's a common phenomena and perhaps human nature to take sides, when we debate among ourselves regarding certain topic and hence get involved in endless arguments! Similarly, the subject of 'Direct Employment versus Outsourcing to Technology Company' is something that is now going on for years. But, if we keep aside all our prejudices for a few minutes and think deeply we will understand the real essence of it all in a much simpler way.

Let me provide a real life scenario. You are a start up with an excellent idea that can capture the imagination of millions of consumer, which can become a big success story, provided you initiate and launch your technology product “in time” into the market. In such circumstances, what should be the next steps? Since, we all know having an idea is not an exception and thousands of intelligent people have them.  Actually the major hurdle in form of multiple challenges (Challenges of different shapes and sizes) comes before us when we start the process of implementing our idea in reality. It can be dilemma of choosing the right marketplace/demographic, then developing the quality product precisely as vision and then of course doing it in time (Just cannot help, but had to mention the time factor once again).

Let us elaborate these challenges a bit more. First is your geographical location. If you are located in a geographical area where it is difficult to find qualified and technically sound developers in your preferred technology (You have decided on this technology after doing a detailed market study) then what are the options left for you? Look for a developer who is willing to travel to your part of the country, who is probably excellent, work as per your advice and deliver in time? Well, if you are lucky enough you might get such a match. But what are your chances? Trust me, it’s less than 20%. For arguments sake I am considering you as one of this 20% lucky entrepreneurs then? Well then the next set of challenges crops up. We can assume that these are early days for your business start up and hence your wallet is not as healthy or fat as you would have liked. This does bring the following complications in the table, which we cannot ignore.

1. Relocation of the developer involves time and money.

2. Your IT infrastructure has to be ready before the developer joins.

3. You might be thinking a single developer will be enough to meet your technological needs, but in reality it's not so. For proper execution of your idea, you will need multiple skills which include but not limited to product design, planning, UI, database implementation, setting up architecture, coding, deployment and so on. Honestly its more complicated than we think initially.

4. The craziest part is the charge recruiters’ demand for such a candidate from you. Sometimes if you select a candidate introduced by a recruiter, you may end up paying him / her around 35% of the first year's salary of the hired candidate and that too in advance.

5. Though, you are already lucky as Obamacare will save you from draining out high medical insurance.

Such a scenario is also applicable, if you are providing web and mobile application services and there is a huge demand for the same in your part of the world and you have very good contacts.
I would rather choose to outsource such work after proper screening of the potential and technological prowess of the company in question through interviews utilizing video calls, checking their references and previous experiences and of course after signing a well written agreement document covering all the necessary clauses.

But what, if the work involved is in a technology where human resource is available locally? Yes, then you can opt for direct employment, if it is available at a cost which is manageable. My standpoint is, outsource your work when it is necessary, to a qualified technology company who even when located at a different geographical region are accessible through various modes of telecommunication as per your convenience and can provide you with quality skill at a reasonable price. Whereas go for direct employment when the resources are available nearby and is within your budget.

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