Managing costs in software development is vital when it comes to getting value for your stakeholders. That’s why it’s important that you bring in external talent that’s both skilled and cost-efficient.
Outsourcing can eliminate training costs and save time, as many external contractors will not need to be fully onboarded in the same way as full time employees. External contractors also provide flexibility around business expansion and can help compensate for fluctuations in demand.
One of the main benefits comes from the opportunity to access the specialised skillsets missing from your core development team. When part of your development cycle requires an expert set of eyes and there’s little benefit in recruiting, an external contractor may provide the ideal solution.
However, as with many software projects, there will be pressure from investors to minimise costs to achieve a greater ROI . That’s why it’s important to make sure you manage external contract costs in a way that obtains maximum value for both investors and the project’s stakeholders.
Here are some factors to consider:
Total cost
When you’re preparing your budget for independent contractors, you will have to make sure that their overall costs stay within the scoped cost of the project. It’s important to keep in mind that their rate might not be the only cost that they bring. There may be licencing costs, travel expenses and other outgoings that could send a project over budget.
Independent contractors do not always fit into a compartmentalised service spend as each project or work stream has unique variables. Those variables are why you’re engaging with an independent contractor who has specific expertise, ability or experience in the first place.
Your budget
The number of self-employed workers in the UK has doubled in size in 2019, bringing the total up to 4.7 million. This newfound diversity of talent, expertise and rates highlights the importance of shopping around when it comes to choosing an external contractor, as you may receive a wide range of different rates between them.
When you’re looking for a contractor, make sure that they include and explain their certifications, accomplishments, experience levels and how they factor into the rate that they’ve provided you. This will help you to decide whether you’re getting the value you need.
The value trade off
Of course you’ll want to identify an agency or a professional who is the best fit for your project. An external contractor should be able to articulate the value of their services to you with little friction. It’s also worth keeping in mind that it’s not always possible to compare the rates of external talent against the costs of your core team. External contractors may be more expensive in terms of pay, but they don’t have the additional costs attributed to employees such as pensions or National Insurance.
Visibility
It can be difficult to completely gauge the capacity of external contractors compared to your own employees. You don’t have full knowledge of their schedule and workload, making it hard to determine how much work can be assigned to them and whether it will be completed on time. Make sure to have a conversation surrounding workloads with any contractors you bring on to help you to better predict outcomes.
You can ask for periodical, evidence-based updates on their progress in order to more accurately determine the overall progress of the project and increase their visibility. Ultimately, you can’t improve what you don’t measure, so keeping track of task durations and value of delivery can help you to better manage costs during the project and in the future.
There are plenty of software tools available that help provide visibility – find one that works best for you.
Differences in process
Every company has their own culture and processes. They might align well with the contractor they work with or there may be friction. You will have little insight into how an external contractor was trained and how they handle different roadblocks in the development process. So make sure to have a conversation around how they like to be managed and how they operate so you can make sure they’re a good fit; an external contractor that fits well with your core team will help to save you both time and money.
During development, it’s a good rule of thumb to treat them as you would your own core team members. You need to make sure that any external contractors are well supported and well informed when it comes to your processes and culture.
By making sure you have appropriate processes in place for interacting with external contractors, you can manage costs more efficiently. But it’s also important to remember that working with outside expertise is an iterative exchange; making little tweaks to your processes here and there can then help to deliver better value in the long-term.
You may even find that a bank of skilled cost-efficient freelancers can be just as valuable as having a strong team of regular employees.
If you want to be certain that you’re claiming for all the eligible parts of your R&D spend, including any relevant contractor costs, talk to us on 0114 230 8401 or email [email protected]
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