If you have an idea for a new app or website, the first question running through your mind might be: "Do I hire a third-party development company or a freelancer?" The decision you make will influence the entire process and is crucial for a quality end-product and its success.

What's the difference between hiring a freelancer vs. a third-party development company?

A freelancer is a self-employed professional offering a set of services on a per-project basis. Generally, freelancers will work on multiple projects for different clients. You may look through platforms like Upwork, Toptal, Guru, Freelancer.com, PeoplePerHour, and Fiverr to find freelancers.

Third-party development, on the other hand, means that you hire a separate company to complete the entire project using its own team to deliver the tasks. Such companies employ various experts like developers, designers, analysts, and testers, offering a complete package.

Freelance development is often seen as a more cost-effective approach, and is therefore a popular approach for those who are new to software development. In fact, the Indian freelance industry, which is regarded as one of the largest in the world, is estimated to reach $20-$30 billion by 2025 driven by factors like flexibility, independence, and cost. This growth will also be driven by startups that hire freelancers due to lower costs for equivalent domain expertise.

When should you hire a third-party development company?

Choosing a third-party development company must be a carefully planned decision based on the following factors:

Do you have a competent in-house project manager (PM)?

If you're hoping to hire freelancers, it's crucial that you can provide them with a competent and experienced PM who can align your company’s vision, mission, and strategy. Without a PM, you expose your project to higher risks.

In case you are unable to allocate an experienced PM, choosing a third-party agency led by a qualified project manager may be a wiser option. That company's PM will use modern processes and techniques to manage the entire project.

Project complexity

You can determine the complexity of your project by asking key questions about your objectives and build conditions. Some of these include:

  • Is it the first project of this kind for you?
  • How big is your target user base?
  • What is the total number of key functionalities in your project?
  • Are all the project requirements clearly documented?
  • Are you targeting multiple geographies?

If you find that the project will be highly complex after answering these questions, then opting for a development company may be a better choice.

For example, a local coffee shop or photo studio requires a website with some simple and standard functionalities, which can be done by a freelancer. However, projects requiring advanced technologies like machine learning, blockchain, artificial intelligence, and the Internet of Things are complex, and using a development company is a better option.

Specialized industry knowledge

Development projects in certain industries require more in-depth industry knowledge and expertise. For example, developers must have specialized knowledge if they are working on a project for the financial services industry that requires compliance with payment processing regulations.

Finding freelancers with an in-depth knowledge of the appropriate industry might be difficult. In comparison, development companies offer expert teams with industry knowledge, making them a more viable option.

Software development life cycle (SDLC) model

The SDLC model chosen for your project will also influence your decision. As an example, if your project requires the agile model, it becomes necessary for the developers and customers to work closely together.

Implementing close collaboration amongst various team members with freelancers is not a viable option. Therefore, outsourcing to a third-party company will facilitate the collaboration required for the successful completion of the project.

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When are freelance developers a better option?

Freelancing is not always a bad choice. Choosing freelancers in the following two situations may be beneficial for you:

Your project is simple

If you require a simple website or app offering standard functionalities, an entire development team is not necessary. A freelancer can use WordPress or a website builder like Gator by HostGator, Squarespace, GoDaddy, Shopify, or BigCommerce to deliver a simple, functional website.

You need to add one or two specialists to your team

If you already have an in-house team of development experts but lack certain skills, outsourcing that work to a freelancer is a good option. It will allow you to stay in control and avoid inefficiencies. For example, you may not have an experienced scrum master, and this may be outsourced to a freelancer.

Pros of hiring freelance developers

Affordability

Most freelancers work from their homes and have lower overheads and other administrative expenses. Therefore, these professionals are an affordable option, especially if you outsource to overseas freelancers.

Temporary contracts

Freelancers work on a project-to-project basis, which allows you to hire them for the duration of your project to complete the required functions and tasks. You may rehire their services again if the need arises.

Flexibility

Generally, freelancers have flexible working hours. This is a huge advantage, especially if you are situated in different time zones.

Focused expertise  

Every freelancer has a certain set of skills and expertise. Therefore, you may choose professionals with the specific set of skills that are needed for your project.

Cons of hiring freelance developers

Limited availability

Freelancers work for multiple clients on short-term contracts. Therefore, if an unexpected issue comes up that requires immediate resolution, your freelancer may not be available, as they may be working on other projects.

Data misuse

When you work with freelancers, you may have a non-disclosure agreement (NDA) to safeguard confidential data. However, there is still a non-zero risk that the freelancers may unintentionally or intentionally misuse your sensitive information.

Quality

Some freelancers may only want to complete a project as quickly as possible to minimize their efforts. They may overlook some important aspects of the project, thereby impacting the quality of the end result. There is also the risk that a freelancer will simply disappear, making it difficult to rely on them over the long run.

Pros of hiring a third-party agency

Team of professional experts

A freelancer is only a single, self-employed professional with limited skills. In comparison, a development company will be able to provide a team of experts with a broader range of skills based on the requirements of your project.

Stability

Third-party development companies are legal entities. You can verify their reliability by reviewing various documents. This ensures stability and eliminates the risk of disappearing resources.

Seamless management

You can coordinate with a third-party team's PM to ensure the project is progressing in the right way. A development company ensures timely deliveries, high quality, and greater professionalism.

Cons of hiring a third-party agency

Cost

Compared to freelancers, development companies have higher payroll costs, administrative expenses, and other overheads. Therefore, hiring a third-party agency for your project may be more expensive.

Lack of communication

If a software development company is based in a different time zone, there may be delays in communication. It is also possible that company will not provide the detailed communication expected of a single developer, which may result in delays and costly deviations.

Best practices for hiring software development companies and freelance developers

Quality check

With development agencies, you want to verify that they are capable of delivering quality results. You may hire a consultant to do the legwork and shortlist potential vendors. Alternatively, you may ask to conduct a technical interview to understand their expertise and skills.

For individual freelancers, you might ask them to complete a personalized test that ensures the potential candidates have the necessary coding skills.

Collaboration

When you hire a freelancer or a development company, especially in another country, cultural issues may crop up. Software development is collaborative, and expecting overseas vendors to exactly understand your preferred process may be difficult.

One way to mitigate such risks is to write down detailed requirements and specifications in advance. Choosing Scrum is also recommended, as it promotes transparency and helps you organize the project with an emphasis on communication amongst the various team members.

Logistical issues

In many cases, vendors are in a different time zone, which can create multiple challenges. Developers may have to work at odd hours, which could reduce the quality of their output. Hiring an in-house PM who acts as a coordinator between you and the vendors is one good way to avoid this.

At the project conceptualization stage, you need to understand if you have the management skills and in-house expertise to work with freelance developers. If not, then consider hiring a development company with a team of experienced professionals.

Ask yourself questions like:

  • What skills do I need from the developer?
  • How much time can I spend researching the various available options?
  • Can I write detailed technical specifications and judge the quality of the written code?
  • What is the importance of feedback and collaboration for the project’s success
  • How much budget do I have for the project?

Replies to these questions should help you determine the best option.

If budget is no concern, then there is not much comparison between freelancers and third-party agencies. For serious, highly complex projects, freelancers are not a good choice, and working with a development company is more beneficial.

There is no single hiring strategy that is best for all applications. Several variables, such as technical challenges, maintenance and updates, complexity, and project duration will affect your final decision.

Crowdbotics can help you hire individual developers or take over your entire project as a managed app build. This enables us to support a wide range of application development strategies and find the best fit for our clients. To determine which approach is best for your project, get in touch with us today.