Getting Your App Built: Hiring vs Contracting

 

In our last post, we walked through some pros and cons of using an individual contractor vs. an app development shop. What if you think you want to hire somebody longer term? When should you think about hiring a programmer to work for your company instead of hiring a contractor?

Hiring a programmer in-house

Pros of programming in-house:

  1. Familiarity – If you employ a programmer, they will become familiar with your product and codebase, which can streamline development. Additionally, they will become familiar with your company culture and you will become familiar with their working style, which can improve communication if you are a good fit.
  2. Long-term solutions – An in-house programmer will be more likely to think longer term because they know they will anticipate with you a year from now. (Note, however, turn-over in tech positions is much faster than most other industries, so maybe don’t expect them to be there 3 years from now.)

Cons of app programming in-house:

  1. Time – Hiring will typically take months and months to execute. Most people who are unfamiliar with the process dramatically underestimate how long it takes to find a programmer to hire full-time. Industry wisdom says that there are 5 job openings for app development for every one programmer. Consider how you’ll compete with other companies if you want to attract top talent. Not only do you need to offer a generous compensation package, but programmers also like to choose companies they find interesting because they have the luxury of choice.
  2. Expense – Competing to attract a quality programmer will require a lot of money. If you want to hire a senior developer who you are sure can see the big picture, solve complex problems, and build a strong foundation, you’re going to need to dig deep into your pockets. If you take a gamble on a more junior developer, you risk that person getting way out of their depth when they run into bigger problems. If a junior developer doesn’t write clean code, you’re going to end up paying a lot more for somebody to go back and fix or redo what you already built, if you have to add more functionality later.
  3. Uncertainty of Quality – It’s difficult for most people to tell if a programmer is any good. You can look at past work and past employers, but there is only so much certainty that can give you.  A computer science degree from 5 years ago can approach irrelevance in today’s fast-moving, constantly changing landscape.

Contracting with an app development shop

Pros of a development shop:

  1. Dynamic scaling – If you need a lot of horse-power now while you build a prototype, you can get exactly that. If later on, you just want maintenance and some small new features, you can get exactly that. Working with a app development shop means you can scale up and scale down at will.
  2. Accurate pricing – With the right shop, you’ll pay a lower rate for basic code and a higher rate for app architecture and big-picture problem solving. Different development tasks require different levels of expertise. With an app development shop, you only need to pay for expertise where it is really required.

Cons of an app development shop:

  1. You get what you pay for – If you choose to work with a very inexpensive development company, you risk ending up with poor-quality work that nobody can build from in the future. An overbooked company may build something that minimally meets your requirements, but will fall apart if you try to add anything or make any changes later on. You should also watch out for companies that don’t make you a priority. You need your development team to take your deadline as seriously as you do.
  2. Uncertainty of future relationship – If you alienate your development team, they can choose to stop working with you. If you are constantly adding features not in the original contract or if you are late on your payments, a development shop does not have to put up with you beyond fulfilling the current contract. 

An in-house developer can feel like a terrific luxury, but you have to be prepared to spend time and money finding the right person. Contracting out to a development shop allows you to get exactly the level of work you need, for an accurate price. That means you can get your prototype out quickly and then fine-tune as needed down the road. Considering the resources you would like to devote at this time will help you make the right decision for your company. 

Thryv is here to help.

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Choosing App Development Services: Individual Contractor vs. Development Shop

Your business needs an app. You’ll need specialized help to build this app, but before that, you need to know what kind of help you need. Hiring the right person or company to build an app can be daunting. It’s also something that is best done right the first time.

Let’s begin with a very basic question: Do I need to find the right person or do I need to find the right company? 

You have a lot of options. Matching your business needs to the right development choice will get you the right work for the right price, so let’s examine the pros and cons of an individual contractor vs a development shop. 

Individual Contractor:

One person, who can take your app from architecture to visual design to programming to setting up a server and then making it all work together.

Pros:

  1. You will probably under-pay for some aspect of development. A single contractor will be doing many types of tasks, but an hour of app architectural design would normally cost more than an hour of bug-testing. Since the contractor probably gives you one average rate, some of their work will be a bargain.
  2. It’s easier to get on the same page if you’re only working with one person. If you already know exactly what you need, then you only need to make one person understand. An app development company may give you a project manager to translate your vision into different tasks and explain those to others, but that might be overkill if you already know exactly what needs to be done and just need somebody to execute.

Cons:

  1. You will probably over-pay for some aspect of development. If you are paying an average rate for all development tasks, you’re probably paying too much for some of the more basic tasks.
  2. It’s hard to find one person qualified to do everything you need. Everybody has strengths and weaknesses. When you hire a lone contractor, you are paying for them to use both their strongest and weakest skills. Finding somebody whose weakest skills are still good enough for your project will take time and discernment.

App Development Shop:

A team of people who work together to build your app, each acting within the area(s) of their own expertise to deliver an expertly-crafted product to fulfill your needs.

Pros:

  1. You will have the right people working on the right parts of your project. You can have a project manager to understand what you’re doing, an architect to structure it, and junior developers to write clean code that you can build from in the future.
  2. You have a whole team of experts to make sure you have a strong foundation. A team has more internal accountability and may be less likely to do slap-shod work that nobody else can build from or understand. If you think you will ever want to add to or improve your app, you need to make sure that there is more than one person in the world who could possibly understand the structure of the code.
  3. You can get projects done more quickly. This is common sense, but is worth stating. If more people are working on your app, they can finish it more quickly. If your deadline needs to be moved up, a development shop is more likely to be able to apply additional resources and get it done.

Cons:

  1. You have to trust the company you are working with. If you don’t have enough experience building apps to feel comfortable with just a single contractor, you need to find a company that is capable of taking your project from idea to reality with less input from you in between. That’s a big responsibility and you should find a company you feel good about. 
  2. Big development shops only want big clients. Smaller development shops are definitely an option for almost any size app, but the big development shops mostly work with large corporations. Keep an eye out for our upcoming article on how to know what size development shop is right for you!

An Important Choice

What type of development provider you go with is an important decision to make, but also very dependent on your situation. Review your options, and keep these factors in mind to make the best choice.

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Google Play Indie Success Story Interview

In AppMaster’s podcast Google Play Indie Success Story with Elliot Schrock, host and marketing consultant Steve P. Young digs in to find out how some app developers are getting more success using Google Android revenue, and the hard lessons learned about choosing an icon for your app.

Founder and Mobile Architect Elliot Schrock is interviewed this week on the Appmaster.co podcast about his approach to market research, and user analytics… but on the way, he reveals his philosophy of taking care of users, applying the Golden Rule to app design, and his love of open source code.

And there’s a plug for one of the go-to apps on his phone you probably haven’t heard of. Hint: it makes you a better, more successful person.

Don’t miss his insights on:

  • App store SEO
  • User behavior
  • Selling apps
  • Prototyping and minimum viable products
  • Competitive research
  • Efficient coding

It’s just 36 minutes (which flies by), including the intro and outro.

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The Hidden Costs of Low Quote Dev Shops: Overbooking

Sometimes, selecting an app development shop is like buying a plane ticket. At first, a lower price can be appealing, until you realize the airline has to make its money somewhere, and it’ll probably be a nasty surprise. Much of the time that comes from opaque baggage fees, convenience fees, upgrades, overbooking, and simply cutting corners on quality.

Many of those issues also appear in working with low quote dev shops. Let’s consider ‘overbooking.’

Many low-bid dev shops will hire developers (often overseas) and pay them a flat salary. Unfortunately, this incentivizes taking on more projects than is reasonable to pressure employees into working long hours so they can pay salaries and make a profit at the same time. Let’s look at an example.

The nasty surprises

Suppose a dev shop pays a developer $50,000 a year—less than half what you would normally pay for a domestic US developer. If they charge clients $25/hour for that developer, then 40 hours a week will allow them to break even for that developer. It follows that the way to profit off that developer is to get them to work more than 40 hours a week. The incentive, then, is to put that developer on as many projects as possible, so they’re working as many hours as possible. In this example, for every 10 hours a week over 40, the dev shop will make an additional ~$12,000 a year.

We at Thryv see this a lot when we’re rescuing projects that have gone off the rails. It’s not that overseas developers are worse than domestic ones, it’s that anyone who’s working 100 hours a week is going to make mistakes. The code will be ugly, poorly organized, and fragile just because whoever was working on it had ten other projects to get to. It’s unreasonable to expect that sort of code to be usable long term, and for startups lured in by the low price, this kind of mistake can have devastating consequences when it’s used as a foundation for the company.

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Fixed Price vs. Time and Materials

First, let’s define Fixed Price and Time and Materials (T&M), as both terms encompass more than just what one immediately thinks of.

Fixed Price most often takes the form of a flat cost for the entire project, but can also take the form of a cap on hours/total cost, or even be piecemeal, flat fee pricing for individual features. There are also many ways of splitting up the flat cost over the course of the project, but ultimately, if the contract results in one amount of money being paid for the end result regardless of what happens throughout the project, then it must be considered Fixed Price.

T&M, on the other hand, is about sticking close to the incremental cost of the project as it progresses. Often this means the service provider will charge hourly, daily, or weekly for the services they’re providing, along with the material costs in that time period.

When shopping around for an app, many entrepreneurs balk at trying to do things under a T&M agreement. After all, how can you make sure your app stays within budget?

Unfortunately, fixed price projects often end up costing more money than T&M. This almost always comes from one root cause: no matter how much we wish it were otherwise, projects rarely end up being fixed in scope from the beginning. Whether it’s because something important was entirely forgotten or simply needs to be changed, projects of any kind are never perfectly planned from the beginning. This has a couple of consequences.

Consequences of Changing “Fixed Prices”

First, when something needs to change, you may need to recalculate the quote, sign a new Statement of Work (SoW), or renegotiate the contract entirely. As we all know, lawyers aren’t cheap, and even if you don’t need legal help to adjust the contract, you’ll still be wasting valuable time.

Second, any contractor who’s done more than one project knows that uncertainty is a part of the job. This is often built into the fixed price quote given, so even if the project does go perfectly to plan or even just under budget, the client never sees that benefit. The best companies I know always try to under-promise and over-deliver, but a fixed price means that even if they’re weeks ahead of schedule, the client sees no change in the cost.

Finally, in effect, fixed prices transfer all risk to the service provider, rather than splitting it between client and service provider in a collaborative manner. As a result, the service provider has a fiduciary obligation to the business’s stakeholders to charge the maximum it could potentially cost, which isn’t ideal for anyone involved. In fact, when working with an experienced service provider, it always results in a higher cost for the client than T&M would.

Time and Materials

T&M projects avoid these pitfalls. Change is easy to manage when you’re simply paying for an expert’s time, and if the project is done early or more cheaply due to unforeseen circumstances, the client will reap the rewards. Every project we’ve worked on has seen some point where the client realizes they need X other feature as well, or doesn’t need Y screen, and with T&M these changing requirements can be effortlessly incorporated. Indeed, the client is able to respond to market changes in real time, which has repeatedly made a difference between having a fighting chance and utter failure.

But what about when the project drags on and on? Often, the whole reason clients look for fixed price quotes in the first place is to try to cap costs incurred due to the contracting company making mistakes. So what happens when a project goes off the rails?

Unfortunately, in most cases, fixing the price won’t protect against going over budget. Let’s look at an example.

Suppose a client engages a company for a fixed price app, for simplicity’s sake, it’s 50% up front and 50% when it’s delivered, with weekly product demos over 12 weeks. Week one comes and goes, and the company has nothing to show for their work due to ‘unexpected difficulties.’ The following week, they’re able to show a very rudimentary prototype of week one’s tasks. In the third week demo not much has changed in the prototype, but they assure the client that they’re ‘making progress.’ At the end of the fourth week, they tell the client that it’ll probably take 24 weeks rather than 12.

What can the client do? They’ve paid for 6 weeks of a 12 week project, but now the quote has doubled. It’s clear the company is in over their heads, but they probably aren’t willing to stick to the original price, and obviously not the original timeline. The choices are grim: pay double what was expected—for what may very well prove to be a shoddy product— or, start fresh with a different company and a loss of 50%, or sue (we at LithoByte have worked several times with clients that have had to cut their losses in this way and came to us to help complete the project).

If, on the other hand, the project were T&M and paid bi-weekly, at the end of the fourth week when the client gets hit with the updated timeline, they’d only be down a sixth of the cost. With T&M, you’re able to minimize your losses should something go wrong.

Why LithoByte

This is why we at LithoByte rarely recommend a fixed price contract. T&M allows us (or any provider) to give you maximum flexibility while keeping costs low and, ultimately, minimizing risk. The next time you go looking for a quote, by all means ask for a cost estimate, but do yourself a favor and make sure you make the contract T&M.

 

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Should your app development be with an independent contractor?

Getting a app written, tested and released is a challenging process. Your options are many. Let’s consider whether you should hire an independent contractor to write your app.

Reasons to hire an independent contractor:

  1. Low cost… you’re paying just one person, at whatever lowest rate you can negotiate.
  2. One person to deal with… communication is direct and efficient.

Reasons not to hire an independent contractor:

  1. You need an expert… but not for every line of code. The trouble is, you either hire high, or low. When you have easy, repetitive code, you just need a lower cost coder. But for knotty problems, experience breaks out of the box. With an independent contractor, you’re either paying too much for some parts of your code, or your programmer’s out of depth.
  2. Speed. If you need a fast release, or a fast update, you need a group of programmers to share the load.
  3. The back end, and the design. Finding one person who can provide an API to a server, and an artful UX-optimized interface, to say nothing of a solid app released for both iOS and Android—is a rare thing. If you don’t find that, then you’re no longer dealing with just one person anymore, regardless.

Solution

Consider a company like Thryv, where you’ll be assigned a project manager. Communication is direct and efficient.

Thryv has access to a range of talents. These will work on your project as variety of tasks demands. And you’ll be billed by a sliding scale that fits the skill and efforts of the contributors.

 

 

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