Your Contract Developers Are (Probably) Hosing You — Part 3, Types Of Contractors

This is part 3 of a series, “Your Contract Developer Is (Probably) Hosing You”, aimed at helping non-technical founders get their first product built. If you missed the beginning, start here.

There are three broad categories of contractors that you might hire to build your project: full service agencies, offshore teams, or freelance engineers. Each of these types has its pros and cons, and within each one you’ll find massive variation in capability, skill, and cost.

Full Service Agencies

These folks will give you the most service, and be by far the most expensive. You’ll have meetings with polished professionals that will sell you on the company. You can expect to sit in a nice conference room, watch sharp presentations, and be presented with a statement of work (SOW) in a sexy PDF with an eye-popping number on the last page.

In addition to the actual software development, they will offer design, project management, user testing and maybe other bells and whistles. Some of these will be non-optional overhead that they require on every project. You’ll get regular updates from your project manager and they will solicit your feedback and keep the team in the loop. You may rarely, or even never, meet the actual developers that work on your project.

The biggest downside to this model is, of course, cost. Just like your lawyer, only instead of the 70th floor views over the skyline, your are paying for polished tables lovingly made of bike tires and recycled old growth redwood, not to mention craft beer for the company dog parties.

I kid, of course, but this really is a boutique experience. The best if you can afford it, and possibly the fastest, and probably the way to go if you are very well funded but don’t have the ability or time to hire and grow your own software team.

You’ll find variation, but usually the absolute lower end of a project cost with these agencies would be at least $50k, at a billable rate across all of the people you have on your team averaging maybe $150/hour. A more realistic medium-size project could easily cost $150k or more.

Also, keep in mind that within this category, there is a range from relatively small boutiques to very large consultancies that specialize in projects for Fortune 500 companies. You’ll want the small end of that scale.

Offshore Teams

There are skilled offshore development teams for hire all over the world, from Bulgaria to Mexico to Kenya. Generally they offer much less in the way of design, project management, and warm/fuzzy handholding than you would get from a full-service agency. What they lack in service, they make up for in cost. Rates could be as little as $30–$50/hour, and with much less overhead. Almost all your spend will be directly on developers.

Sounds great, right? You just might be able to get that v1 built and out into the world before you spend the money your Uncle Nate gave you and max out your credit cards.

Slow your roll though, there are plenty of potential problems in this paradise:

• You’ll most likely be dealing with a timezone difference. Meetings will be at a time that is inconvenient for one or both of you, and turnaround time on emails or Slack messages may lag by the eternity of a full day.
• You should try to choose a team with a primary contact that speaks your language fluently, but still there may be communication challenges.
• Culture can vary widely. You should do some reading about business culture and customs in the country you select. You may find that “Yes, by next week for sure” means “There is no chance of that happening. But yes, I hear you really want that.”
• Competence and skill can vary widely. Further down we’ll talk about how to assess any potential contractor, but with an overseas team there is perhaps even a greater risk than usual of ending up with developers that just aren’t actually very good. There are absolutely gems out there too! But do you, as a non-technical founder, have the ability to tell who is who?
• Hopefully this will never matter, but legal recourse could be a real issue. There is no way to avoid developers having the keys to many of your important assets. If a local developer changes the password to your Heroku account or wipes your database or refuses to turn over your source code, you could sue them. And they know that, so they probably won’t do anything that stupid. If someone half a world away burns you, what will you do? We’ll talk more about how to manage these risks later in the series.

I don’t say any of this to suggest that you shouldn’t use an overseas team to build your product, but you should absolutely have your eyes wide open. You might also consider hiring or contracting an engineering manager locally to manage the overseas team on a part-time basis, acting as your liaison.

Freelance Developers

You can also find freelance developers, either locally or remote but in-country, that can take on moderate sized projects. They are usually a single individual, but sometimes can be a small team, or the developer might have a few friends they collaborate with on some projects.

Unlike an agency, you won’t get the slick business interactions or the wider sets of skills (UI/UX, QA, project management, etc.), surrounding the developers. Unlike an overseas team, you’ll have shared (or nearly shared) timezones, language, culture, and legal systems.

Hourly rates will depend on the experience of the developer and where they live, and could range anywhere from $50/hour for a total newbie in an inexpensive area to $200 or even $300/hour for a super seasoned pro in a major city, particularly if they are an expert in a specialty that you need. Even at the higher end though, they may be less expensive than a full-service agency because you have less overhead and more coding.

The upside of this option is that you can save some money without necessarily taking on all of the challenges of an overseas team. The downside is that, compared to an agency, you’ll have to do a lot more of the project management yourself, and you have fewer guarantees of professionalism.

In the next article in the series, we’ll talk about how, once you’ve chosen a category, to find developers in that category and then select the one you want to work with for the highest probability of success.

Reminder: This is part 3 of a series, “Your Contract Developer Is (Probably) Hosing You”. If you missed the beginning, start here.

About Michael: I’m a senior technical leader and startup CTO based in Seattle Washington. I’ve built everything from dinosaurs to sous vide cookers, and I’m looking for my next role.