Software development crisis
Software is not eating the world
All the business say that there are too few developers in our modern world. Large, medium and small businesses need the developers. Frontend and backend programmers, designers. Specialist’s rate can reach the $200 per hour!
However, the customers complain about the high price, saying that the development market is overheated. Those clients don’t understand one simple thing: mostly, developer’s price contains from the selling costs. Neither for knowledges nor expertise, but for sell. Clients are still buying the IT services in old-fashioned way. The one who sells better is making money. Despite the fact that the location of developers doesn’t matter in IT market, medium and large business prefer personal meetings with colorful and beautiful presentations, which usually won’t let to make the right decision.
Meetings with the customers, wearing white shirts, showing breathtaking presentations, fancy office in Central London or New York, the first lines in the rankings, expensive advertising — that’s the basis of “overheated” prices, not the lack of supply.
Let’s try to understand what is this market and what rules it works.
I suggest to divide the entire development market in five categories:
- Freelancers
- Prolancers
- Dev.Shops
- Boutique Agencies
- Integrators
Each of these groups is intended for absolutely different target audiences of clients, although they can overlap. It is not always possible to find clear criteria for differentiation of these groups, especially in the case of freelancers and prolancers. So I suggest to start with them.
Freelancers
The Freelance market is huge. Only in the US in 2016 freelancers have earned more that one trillion dollars. This is slightly less that the market capitalization of Google and Amazon combined. The largest platform in this market is Upwork, in addition to it there are many other smaller ones that have been mentioned by other experts, who have answered questions of finding a development team.
From the point of view of a customer, in any of the freelance platforms there is always a great deal of unpredictability and unknown. You order services and just hope for the best, sometimes you get lucky, sometimes you don’t.
On such platforms no one thoroughly checks the contractor. Also, no one gives guarantees that the work will be done on time — hiring a service provider you never know what can happen to them — they have to move, they got sick, they are going camping, and not everyone will warn you in advance, or will ask for an extra day, most simply cease to communicate and disappear for an indefinite period of time. The only risk the contractor is facing is their rating on a particular resource, but because there is huge number of these resources, he or she doesn’t particularly value this rating anyway.
Of course, it doesn’t mean that one should never use freelance sites. This is the only option on the development market where you can get the maximum return from the labor for the lowest price, if you are lucky, of course. But to be completely serious, the main problem, in my opinion is not in the freelance platforms, and not even that freelancers don’t value their reputation, but it is a problem of understanding that for he process of development, hiring just one person does not help at all. For the development one needs a team of people with different expertise, and to to hope that one person will be competent in all of these areas of expertise, or that they will quickly get on with unfamiliar people in a new workplace is absolute stupidity.
Prolancers
This is the “gold” that is left after the sifting of freelancers. It is a relatively young market, which is quite successfully conquering such companies like Toptal, Crew. The giant of the freelance market Upwork enters this platform, offering services through their program Upwork Pro — a new talent sourcing offering for mid-market companies and also enhanced service capabilities for Upwork Enterprise, the company’s offering for enterprise companies.
There are also new notable players offering new concepts, for example, a company Codementor X.
This market is not yet formed completely, the main challenges here are in two different spheres:
- search and selection of qualified labor
- and a fight for traffic i.e. attracting users.
In doing the latter, the most creative approach, in my opinion, is the use of independent landing pages for attracting users to websites, for example How much does it cost to make an app? — App Cost Calculator, or How much does it cost to make a website?.
On the whole, the Prolance market is much more predictable, but is also more expensive. In my opinion, the main innovations in development will be in this particular sphere. The only serious con is the fact that development is not a one person task, and there are less jobs are executed using the principle of waterfall.
There are more and more agile frameworks being introduced. But the mechanism of working with agile frameworks, as far as I know, has not been offered by a single platform. But this is where the future is.
Dev.Shops
I would conventionally divide this group in three categories. Two of them are ‘business as usual’ and experimental companies, that do the dirty work for others. The price for the services of such companies varies between the price of prolancers and the price of the services of unknown agency.
‘Business as usual’
The first category I refer to as ‘business as usual’. It is a team of several people who work on the development of customized software. There is a great number of such companies, therefore it is tough to choose any one of them, while the price is highly dependent on the region. If we are talking about the US — there’s one price, if we take India or Ukraine — the price is much lower, but problems arise with management, time difference and the lack of a unified process.
These aggregators unite developers and assign them different ratings. The best known of them are Clutch and Vendordb. They check dev.shops and gather reviews from clients.
‘Experimental companies’
The second category is experimental companies. The main idea of the experimental companies is to cut costs on white shirts and luxurious office spaces and expensive advertising , but in the same time do development process more predictable for the client. The main player on this market is Gigster — a company, which several years ago implemented and is still testing (I don’t know if they started to make profit) a ‘fixed priced projects’ model. At the same time, the buyer doesn’t know who they are working with, in other words, they are still buying a pig in a poke, and they are only interacting with the PM. While working on this article, I made a test order and the manager set the price of $80–90k for the project, which I know is priced around $30k in an unknown agency. Such high price really surprised me.
This category is also represented by Eulerr, which I am a founder of. My opinion can not be considered unbiased, but on the other hand, I created this company precisely because I want to solve problems and difficulties that I face in this area. Our main principal is to work with small iterations on a unified process. We try to bring the product to the market as soon as possible, and we deliver every two weeks. Personally, I believe, that small teams can achieve greater results that freelancers, because the teams have something to loose. At the moment we are working with teams from the countries of the former Soviet Union at a flat rate of $30/hr and $50/hr, let’s see what comes out of this.
Boutique agencies
I can speak very confidently about such agencies, because I have managed one myself. This is the best option for a company with a $100 million turnover, which would need to create an image product. Such agencies set hight rates for professionals, but in most cases provide high-quality results. Their specialization is more focused on design rather than development. One can find the list of agencies in any rating, but my personal favorites are: Fantasy, MadeBySix and of course IDEO, which is difficult to attribute specifically to this market, but in any case it continues to be a part of it.
The criteria for success of an agency is the number of awards it has from Webby Awards, Cannes Lions, FWA.
Integrators
These are the most powerful guys. The main players here are IBM, Accenture, Deloitte, EPAM Systems, Infosys, Cognizant, Capgemini. For example, Infosys alone employs about 250 thousand people.
Such companies only work on projects for transnational companies and the public sector. Their main specialization is complex back-end projects. All of them focus on working for T&M and sell people’s labor with 100% utilization.
Conclusions
Choosing a company, be sure that you will pay at least 50% of money for the selling manager’s shirt and office in the center of the city.
If you get the gist of my reasoning, then you will come to the following conclusions:
- To fulfill the tasks of small and medium-sized companies and start-ups prolancers and dev.shops and platforms are the best solution.
- For special extreme interests — freelance marketplace, Upwork.
- Being a large company you have no choice despite hiring a boutique agency and integrator.
