Posted on: 11 07 2024.

The Cost-Effective Power of Outsourcing In Platform Engineering

Author: Chris Noordyke, General Manager & Chief Revenue Officer at Comtrade 360

 

In today’s digital age, companies often grapple with the budgetary challenges of designing and developing software. Traditionally, many have opted to handle these large-ticket items internally or by hiring new staff, due to the initially perceived high costs of outsourcing.

However, it’s crucial for business leaders to dig deeper into these costs to understand their true implications. Are these expenses really exorbitant, or does outsourcing ultimately save money by leveraging external expertise?

The Hidden Costs of In-House Development

Many companies establish an internal technology design and development rate, usually around $100 to $125 per hour. While this might seem reasonable at first glance, additional employee expenses such as benefits, paid time off, management, and corporate overhead can quickly increase this “loaded” cost to $150 per hour or more. This translates to approximately $300,000 per employee annually. Moreover, these figures do not account for the employee’s productive time percentage, often referred to as “billability” in consulting firms.

The True Cost of Full-Time Employees

Hiring full-time designers and developers extends beyond their salaries to include productivity rates and managerial oversight. Managers and supervisors contribute to the overall cost through their wages. Productivity must be considered as a percentage, meaning if an employee is only 65% productive on your project (equivalent to 26 hours a week), there is a stranded cost of 14 unutilized hours. Additionally, costs related to technology tools, systems, licensing, maintenance, IT support, training, and processes must be factored in.

The Financial Advantage of Outsourcing

Outsourcing design and development tasks to external experts might initially appear more expensive, with rates ranging between $200 to $250 per hour, corresponding to around $450,000 annually. However, this fee often includes a complete service provided by top-level professionals who offer specialized expertise and an external viewpoint that can significantly accelerate and improve project results. This means you often get a full team rather than a single employee, with solution architects, designers, content strategists, software architects, and developers all collaborating on a successful outcome.

These professionals work within teams familiar with each other, often having collaborated for years. They use well-understood systems, tools, and processes that ensure high-quality, consistent, and efficient deliverables. Their only learning curve is the client’s unique initiative, allowing them to get up to speed quickly and deliver value in days and weeks rather than months.

Benefits Beyond Cost Savings

There are several additional benefits to outsourcing development tasks, including:

• It aligns you with field experts and ensures you pay for deliverables rather than mere employee presence.
• Working with a team of experts can also help professionalize your internal team and amplify the desired impact on your business.
• External teams are often more motivated to maintain high productivity and innovation as their continued engagement depends on their performance and work quality.

This setup increases the likelihood of project success without the added burden of employee management and overhead costs.

Attracting Top Talent

There is a significant difference between a typical corporate environment and a dynamic setting like a digital transformation studio or advisory firm. Highly skilled design and development professionals are increasingly opting to work in these stimulating environments because they offer the chance to contribute to various projects for innovative startups and exciting brands. This trend highlights the importance of outsourcing when seeking builders and innovators rather than employees focused solely on day-to-day operational tasks.

Business leaders can also breathe easier knowing they’re not paying for employees who aren’t actively working on a specific initiative. Without a high-performance culture and management program, you won’t reap the full benefits of full-time team members.

Conclusion

In today’s fast-paced world, businesses must keep up with the rapidly changing digital landscape to stay competitive. One way to achieve this is by re-evaluating their development processes. Outsourcing development work to specialists can help companies effectively manage costs and leverage expert skills that may not be available internally. This ensures higher quality output and positions the outsourcing company as an attractive place for leading talents seeking diverse and challenging projects. Outsourcing can be a strategic move to promote innovation, cost-efficiency, and overall business growth.

Learn more about how Comtrade 360 can help you here.