Freelancers vs. Software Outsourcing Company: A Complete Overview

Linh Nguyen

Linh Nguyen

Learn about the pros and cons of hiring freelancers vs. engaging a software company, and find out what is the right solution for you.

With the never-ending growth of the tech market, the demand for app and software developers has increased steadily. Because of this, it is not always feasible to find more high-quality local talent. Thus, businesses ranging from small start-ups to large corporations are looking for development solutions elsewhere by hiring freelancers and software outsourcing companies from all over the world to work on their projects.

Software development projects, depending on complexity, often take quite some time to be completed and often require a range of different skill sets, which may not be immediately available in the local talent pool. Thus, a lot of companies are starting to outsource their work, especially to other continents.

As you probably already know, there are pros and cons to both freelancers and outsourcing companies. So, we will dedicate this article to ease your decision-making process in hiring freelancers or working with software development outsourcing companies.

Freelancers vs. Software Outsourcing Company

Freelancers

Freelancers

A freelancer is a self-employed person with specific skills – in this case, software development, with growing demands from employers. There are currently more than 57 million freelancers in the US. It is estimated that more than half of the working population in the US will turn to freelance work over the next five years. When you choose to hand over your project requirements to a freelancer, there are both benefits and drawbacks.

Pros of hiring a freelancer

Pros & Cons of hiring a freelancer

  • Flexibility - Freelancers are incredibly flexible in terms of working hours, starting date, and ending date. Rather than being salaried by a company, they will earn what they work for. There might be a small contract needed, but most of the time, the process to hire a freelancer is stress-free. This is advantageous to businesses that are looking to hire freelancers on-demand, with no strings attached. Generally speaking, you list a job, the freelancer finds it and accepts it, the freelancer gets paid, and you both move on to your next project.
  • Independence - Freelancers can carry out the work from their skills and experience without relying on a team or waiting on a teammate to share the workload. From the start of your software development, freelancers hit the ground running with your project instead of someone who depends on dedicated teams to assist them. A new employee who joins a software outsourcing company requires more hand-holding more than any freelancer does.
  • A variety of options - 53% of youths between 18 and 22 years choose the freelancing route. Millions of freelancers on platforms such as Upwork and Fiverr, which make access to freelancers globally very easy. It is possible to interview and hire a freelancer from any corner of the world at an affordable price.
  • Freelancers are usually the better option for really short-term projects - The majority of freelancers make their living with short-term projects which they are best suited for. Businesses consider freelancing services for software development projects that may require only a few weeks to complete or less complex projects. This eases the need to hire and train a new employee just to be out of work a few months later.
  • Reduced costs - Freelancing saves businesses high costs compared to hiring new employees, especially when not in a permanent position. Since freelancers are not officially employed, the employer is not obliged to pay for their taxes, medical insurance, and work equipment. All the client pays for is the successful delivery of services.

Cons of hiring a freelancer

  • Work quality uncertainty - Not all hired freelancers are keen on their level of work quality. You cannot always check the certifications or the authenticity of a freelancer's skills and experience. Some freelancers are in for some quick cash that whether the project is a success is not their concern. Also, with how easy opening a new freelancer account is, they are not worried about failing or gaining a bad reputation for their work.
  • Concern about confidentiality - Companies with a high amount of classified information and great security concern need to be careful when outsourcing services to freelancers. There is an increased risk of data leakage that may impact a company negatively. It is, therefore, vital to sign non-disclosure agreements (NDA) with any new freelancer. In addition, not all freelancers use their real identity, so you must figure out how to confirm their identity before signing the project.
  • They may disappear - It is frustrating when freelancers disappear with no communication whatsoever concerning a project in progress. It mainly happens when you work with unreliable freelancers or on a shady freelancing platform. Therefore, businesses must conform with the freelancers regarding their ability to complete the project and have definitive insurance beforehand to minimize the impact of the potential loss or delay.
  • No maintenance and support - The developer's contract ends with no further maintenance responsibility after developing a particular software, website, or application. If the person is good and the code is readable, hiring other freelancers to fix bugs and do maintenance occasionally is possible. However, it is much more difficult when the only person who can understand the code is the developer. Moreover, there might be hidden bugs that are not visible at launch or in the short run. It may even drive you to start another project from scratch.
  • Disorganization - Freelancers can be loaded with work from various clients and, in the process, misunderstand the initial goals, forget about deadlines and ask for additional working hours. Simple problems can eventually lead to mistakes in the end product or lower the product's quality.

Software Outsourcing Companies

Software Outsourcing Companies

There are various reasons why companies choose to outsource their IT services from outsourcing teams and companies. The main reasons are:

  • Lack of expert software developers to build and maintain the software development project.
  • Software is critical to business needs; however, there is not enough time or funds to build in-house dedicated teams.
  • To enhance the service quality.
  • To cut costs while keeping the quality up-to-expectation.

A software outsourcing company is a third-party service provider that is highly skilled in all simple and complex tasks related to software development. A software development outsourcing firm is recognized under legal laws and is obligated to local and international trading and labor laws.

Pros of hiring a software outsourcing company

Pros & Cons of hiring a software outsourcing company

  • Up-to-date technologies - There is stiff competition among existing software outsourcing service providers. To stay one step ahead, they must ensure that they are up to date with trends in technology and offer clients the best services. It is relatively easy to find dedicated teams of unique talents such as machine learning experts and IoT specialists in most of the top software development outsourcing companies.
  • Time-saving - It is common knowledge that if more people work on a project, it will be much faster. While this is not necessarily true, outsourcing work could be a great time-saving benefit for any company if tasks are allocated accordingly. Outsourcing companies also have various dedicated teams of talents in multiple areas, making fulfilling requirements faster and easier than hiring a single freelancer.
  • Expertise - A software development agency has extensive work experience within all software requirements. In addition, they have to get acknowledgment from their clients or past projects to keep up their reputation; hence, they are more likely to complete your project up to expectation.
  • Access to more talent - It is no secret that if you hire a software outsourcing company to work together with your in-house developers, you will have access to a broader pool of talent that can undertake and complete the tasks within the project at a much faster speed. In most cases, if the operational responsibilities are distributed well between the different developers, the chances are that you could greatly benefit from hiring a software development outsourcing service.

    Outsourcing companies often offer dedicated teams and a whole cycle of services ranging from business idea estimating, project consulting, business analysis, and structuring strategies. This makes them an ideal business partner for start-ups with no in-house developers and enterprises and big corporations.
  • Risk reduction - Seeking services from an outsourcing company is very secure since they are registered companies that cannot disappear, unlike freelancers. Freelancers can disappear with closer to no risk, except not being paid. You have no idea whether all the work will be completed on time or if they will leak your data to your competitor.
  • Clear deadlines - It is easy to monitor the progress of tasks assigned to outsourcing companies. In the agreement, both parties can decide on daily, weekly, or monthly progress reports. It is, therefore, easy to monitor the provided information and contact the project manager for any clarification. All software outsourcing companies care a lot about their reputation. This makes them highly responsive to meet all the set deadlines. In addition, since the budget has been set since the start, the client does not have to worry much about unpredicted overtime expenses.
  • Maintenance and support - The best outsourcing companies aim at building long-term relationships with customers to sell their services. They are always the first to offer maintaining services, creating/developing products, fixing bugs, suggesting modifications of functionality, and other services. Outsourcing companies have dedicated teams that provide ongoing maintenance to support your project. Freelancers lack the time and equipment required after project completion.

Cons of hiring a software outsourcing company

  • Poor management kills benefits - Like any other organization, a software development outsourcing firm requires good management at its job. If the person who serves as the entry point for projects lacks professionalism, projects are likely doomed from the beginning. To manage one or several dedicated teams, a manager for such a company requires the following skills:
    1. Clear communication
    2. Transparent workflow
    3. Quick responses
  • Problem of choice - The list of available software outsourcing companies is very long, and it keeps on increasing. It is, therefore, difficult to decide on the best company, especially if you do not know whatsoever about software development. The best way to make this choice is to view customer testimonials and look at finished projects by the company you may be considering.

    A lot of research has to be done to determine who has the best services or offers the best prices. Yet, there never is a definite answer to these problems.

The contrast between freelancers and software outsourcing companies

The table below quickly compares freelancers against software development outsourcing firms.

Software Outsourcing Company

  • Higher prices
  • Wide area of expertise
  • Strict legal standards
  • Accurate time project estimation
  • Possibility of a long-term relationship
  • Obliged to deliver progress as agreed
  • Provides ongoing support and maintenance
  • Suited for all sized projects


Freelancer

  • Lower prices
  • Specific area of expertise
  • Concerns about confidentiality
  • Unpredictable
  • One-time job
  • May disappear with project incomplete
  • No support or maintenance after completion
  • Mainly suited for small short-term projects

How to choose between freelancers and software outsourcing companies?

How to choose between freelancers and software outsourcing company

There is absolutely no wrong choice when it comes to selecting one between these two. What matters is the factors that influence the software development processes. Freelancers may tend to lag behind deadlines, but they are cheaper and much more flexible. They are also readily available on various freelancing platforms. Software development outsourcing services may be more expensive, but they offer dedicated teams and assurance of high-quality services, support, and software maintenance after completion.

The task determines your choice in this situation, whether it is a simple or a complicated one, a short term project, or a long-term one with a lot of maintenance needed.

Topics: Software Outsourcing