No man is an Island, entire of itself; every man is a piece of the Continent, a part of the main; if a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friends or of thine own were; any man's death diminishes me, because I am involved in Mankind; And therefore never send to know for whom the bell tolls; It tolls for thee.
John Donne, Meditation XVII
English clergyman & poet (1572 - 1631)
John Donne, Meditation XVII
English clergyman & poet (1572 - 1631)
EXECUTIVE SEARCH & STAFF AUGMENTATION
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The competition for qualified leaders is fierce and the best candidates could be across town or across the globe. Executive search consultants know the terrain. Since the 1950s, executive search has been a specialized form of management consulting where firms identify, evaluate, and secure leading candidates. Today, firms have the resources and experience to expand beyond search to leadership advisory services—providing a wide range of executive talent solutions to help companies achieve a competitive advantage. MiSolutions operates at the top of the profession. We are committed to our clients’ success, partnering with them to provide deep expertise in industries, functional roles and geographies in which their customers operate. MiSolutions Consultants have to be expert advisors, because as partners we understand what is at stake—the value of success and the cost of failure. |
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What Is IT Outsourcing?
Outsourcing is the process of engaging a third-party individual or organization outside of your company, either locally or internationally, to handle certain business activities for you. It is a common business practice that allows companies of all sizes to grow as and when they need it, without major risk or investment.
IT outsourcing is the practice of hiring resources from outside of an organization to handle certain information technology functions.
The most commonly outsourced IT functions include:
- Web development
- Hosting
- Software and application development
- Website/application maintenance or management
- Technical support
- Database development and management
- Telecommunications
- Infrastructure
- Mobile App development
What exactly prompts companies to hire people that work for third party organizations? Why do companies outsource? Here are a few common reasons that can help explain the trend:
- Cost reduction. Often, outsourcing means saving money. This is often due to lower labor costs, cheaper infrastructure, or an advantageous tax system in the outsourcing location.
- Access to skills that are unavailable locally. Resources that are scarce at home can sometimes be found in abundance elsewhere, meaning you can easily reach them through outsourcing.
- Better use of internal resources. By delegating some of your IT development work to a third party, you’ll give your in-house employees the opportunity to focus on more meaningful tasks.
- Accelerated business processes. When you stop wasting time on mundane, time-consuming processes, you’ll be able to move forward with your core offering a lot faster.
The Benefits of Outsourcing
- Reduced expenses. You get to enjoy significant cost savings when you outsource to a country with lower production costs: a lower cost of living for employees, meaning lower salaries, as well as lower infrastructure and operational costs.
- Highly qualified & experienced team. Outsourcing allows you to reach professionals that may be in short supply or unavailable locally.
- Considerable time savings. When you partner with an outsourcing vendor, you don’t have to advertise for, interview, select, and train new in-house employees, all of which can be very time-consuming.
- Ability to scale faster. You’ll be able to work with new clients and take on new projects without having to spend time on the processes described above.
- Uninterrupted workflow. Your business will function round the clock thanks to the time difference between the in-house team and the outsourcing vendor’s team.
IT Outsourcing Models
Apart from outsourcing types based on the location of the outsourcing company, there are also a few outsourcing models that can describe the relationships between the client and the IT outsourcing vendor.
Workforce augmentation (staff augmentation) is a strategy for filling skill gaps that allows businesses to hire top-level specialists for short- or long-term projects while also being able to avoid the costs of hiring new full-time workers.
Workers added through the staff augmentation model are employed by the staff augmentation vendor, which means you don’t have to worry about infrastructure and other costs related to having full-time workers, nor do you have to spend time on recruitment. However, the new staff members act like your employees, meaning you’re the one supervising, leading, and managing them.
Project-based outsourcing is a strategy that allows businesses to partner with vendors that have exclusive expertise that is lacking in-house.
Project-based outsourcing works best if the type of work you are outsourcing isn’t the core function of your company. It is also an appropriate solution if your project’s requirements aren’t likely to change during the development process.
Dedicated Development Center (DDC) is an outsourcing model in which a company locates its dedicated resources in a different country to gain access to larger talent pools and benefit from lower labor costs and/or taxes, while maintaining full control over the work process.
It is possible to open a dedicated development center on your own, but this has obvious disadvantages. For one, you’ll have to do the recruitment in a largely unfamiliar locale and learn the ins and outs of local labor laws and taxes. The alternative lies in partnering with a company that provides recruitment services, office facilities, and keeps your developers on their payroll for a fixed fee.
Because of all the risks involved, opening a dedicated development center on your own is only worthwhile if you are going to hire at least 40 new people at the outsourcing location. Otherwise, partnering with an out-staffing vendor makes a lot more sense. Another less risky option lies in partnering with a vendor who assembles the workforce, then buying out the team and opening your own office.
Decision Matrix
Do you have in-house specialists with requisite technical background to supervise and manage the development process?
Yes — Staff augmentation/DDC
No — Project-based outsourcing
Is the project long-term?
Yes — Staff augmentation/DDC
No — Project-based outsourcing
Are project requirements likely to change significantly during the development process?
Yes — Staff augmentation/DDC
No — Project-based outsourcing
Why Choose us as your IT partner?
1. Highly Experienced & qualified team of technical expertise.
2. Robust Processes & Tools
3. Customer Centric Approach
4. All time zone support.
5. Dedicated Project leads for each project.
6. High quality and Reasonable Price guaranteed.
How much does it cost to Hire a Programmer ?
Software development spending represents a sizable portion of a company’s annual expenses. Salaries for developers can represent 50% or more of the annual IT operating budget. It’s in the company’s best interest to ensure that software development dollars are spent wisely. MiSolutions wants you to fully consider the direct or “obvious” costs of attracting and retaining in-house programming talent as well as the NOT SO OBVIOUS costs that are very real and relevant.
The not-so-obvious costs include:
- Recruiting costs
- Benefit costs
- Onboarding costs
- Retention costs
The Cost of “The Hunt”
In Many regions, the pool of programmer candidates is low and the competition for qualified talent is high. The use of 3rd-party recruiting companies, who charge large fees (25% of annual salary or more), is common.
Even without the expense of a third-party recruiter, company staff inside and out of the IT department will spend weeks, perhaps months, scrutinizing resumes and conducting interviews to find properly qualified programmers.
Fully Burdened Employee Costs
When your finance team thinks about the cost of a programmer - the TOTAL cost they calculate will be a dollar figure much larger than the employee’s salary. In-house employee costs go well beyond base wages. The Fully burdened cost of a programmer (or any employee) will include cost of benefits including:
- Employee taxes
- Insurance
- Paid time off
- Retirement and savings contributions
- Paid time off allowance (vacation, etc.)
Other Overhead Costs
In most circumstances, you also want to consider secondary cost factors.
Supervisory Expense Time
Management time is not free. Most supervisors must split their time between true supervisory activities, and other business-contribution activity. For each programmer you hire, there will be additional time expended for management of the employee: one-on-one meetings, mentoring and coaching, scheduling work assignments, managing reporting, etc.
Allocation of Office Space
Office space (don’t forget furniture, phone, internet, etc.) is usually a scarce commodity for most companies. Providing work space for a newly hired programmer is a cost you should be able to quantify. This is especially true if you are thinking of adding staff headcount to fulfill new - or expanding - software development needs.
Tools
Your software engineers will need computers, data center computing power and storage (cloud or otherwise), and of course software development and testing tools. All of these tools for an employee will be purchased by your company. Usually, your new-hire expenses for tools will be a combination of one-time purchases and a subscription fee (typically with a minimum one-year commitment).
Onboarding Costs
Onboarding costs are often overlooked in calculating costs for hiring a programmer. Managers, HR representatives, members of the software team, and even key users will all be involved in bringing the new programmer up-to-speed. There will be loss of productivity - not only from those involved in onboarding and orientation, but as the programmer slowly acclimates to new work assignments. For many companies, the onboarding of a new employee can be one of the most disruptive activities of the week.
Retention
OK… you (somehow) find a qualified person, hire them, put them on the payroll, get them properly tooled, and now they are fully oriented and assimilated.
Are you going to be to ensure they stay with you - and stay relevant to your needs?
- Are you prepared to keep their compensation competitive with the local market?
- Are your career advancement opportunities attractive?
- Is there anything about your work office environment, commute time, etc. that might disincent someone from staying on?
- Are there any special certifications they need, which require regular re-training?
- Are the technologies (software platforms, package versions, coding languages) evolving, so that further education will be needed?
Internal Expense for Employees Compared to Software Development Outsourcing
When you use outsourced software development, the hourly rate of Programmer is your full cost to engage that developer.
Don’t allow yourself - or your management team - to dismiss the option of outsourced software development as “too expensive” because of an incomplete comparison of outsourcing rates to internal labor costs. You can’t simply divide your in-house software engineer’s weekly wages by 40 and compare this to offshore, nearshore or onshore hourly rates. Make sure you perform a true “apples to apples” comparison between the cost of in-house development and outsourced application development. It’s very important that you use the full cost of an IT employee as the point of comparison to outsourcing costs.
One of the key advantages of outsourcing software development is how it allows companies to leverage the services of vendor whose core competency is developing high quality business applications. Software development companies have, by necessity, invested in the people, tools, security and other technology required to run a business whose mission is to produce software for other companies.
In Conclusion
The cost of your next programming hire is not just the cost of their salary. There are clear cost outlays for recruiting expense, benefits, tools, work area, and ongoing training. There are also more subtle costs in “people time” as supervisors, IT staff, and others expend time in recruiting, hiring, onboarding, managing, and retaining. Again, the cost of a programmer is not limited to the dollar-value of their wages… this is only a portion of the total cost.
Outsourcing the software development and IT is a business strategy that every company should consider. It has the benefits of allowing the organization to focus on core competency, improve flexibility, increase ability to scale, and reduce costs. MiSolutions has proven experience in providing expert software development talent---through outsourcing. Our clients save thousands of dollars using our services, while increasing the effectiveness of their software development activities.
