Companies lacking experience in collaborating with external partners often contemplate whether they should initiate a cooperative relationship with a software development partner or continue exclusively expanding their software development capabilities through internal hiring.
Arguments for Exclusively Internal Hiring
There are several reasons why companies prefer exclusively internal hiring. These include the intention to preserve knowledge within the organization, the assurance of having dependable internal resources, the ease of integrating new hires into the company culture, potential cost savings, protection of intellectual property, the convenience of working in the same location, and the preference for using a local language such as German or Dutch.
Changing Landscape and Weakening Arguments
In today's business landscape, these arguments for exclusively internal hiring are not as compelling as they once were. Due to the high turnover rate in the IT workforce, iIt has become increasingly challenging to retain knowledge internally, even with internal employees. Remote work has become the prevailing norm, making physical location less relevant.
Cost Comparison: Internal Hiring vs. External Partnership
When considering the overall costs beyond just salaries, such as bonuses, recruitment expenses, management overhead, employee training, sick leaves, office space and equipment, partnering with an external company can often demonstrate comparable or even lower costs compared to internal hiring. A comprehensive cost analysis reveals the potential cost-effectiveness of collaborating with an external company for software development needs.
Transitioning from Internal Hiring to Collaboration with External Partners
Typically, companies with a strict preference for internal hiring only begin considering external partnerships when they find themselves overwhelmed with workload that exceeds their capacity to hire enough engineers and meet project deadlines. In essence, they turn to external partners as a last resort when they have exhausted all other options. Serengeti, for example, has collaborated with numerous companies in such circumstances. After unsuccessful attempts to hire engineers internally, these companies initiate a cooperative relationship with external partner to address their software development needs.
Discovering the Benefits of Long-Term Partnership
What becomes evident after a few years of collaboration is that a strong partnership is formed, wherein the client recognizes the numerous business benefits that we bring to the table. Even when they reach a point where they have the capacity to hire engineers internally, they choose to maintain the cooperation with us. This highlights that the initial collaboration, driven by necessity, evolves into a long-term commitment even when it is no longer binding. Throughout this cooperation, we have observed that we can assist the client in achieving their business goals in various areas beyond simply providing engineers that their internal HR was unable to successfully hire.
The Benefits of Combining Internal and External Software Development Teams
Achieving a balance in software development by combining both internal and external teams allows the Client to mitigate risks associated with resources. If internal engineers leave the company, the presence of external team members with the necessary business and technical expertise ensures that valuable knowledge is preserved and can be transferred to newly hired engineers. Moreover, when there is an expected or unforeseen need for significant team expansion, relying solely on internal capabilities can present challenges in terms of scalability. In such cases, an external partner provides the scalability required to rapidly grow the team.
Furthermore, internal teams often lack flexibility, as hired internal engineers tend to remain with the company even after projects are completed and the workload diminishes. In contrast, an external partner offers the desired flexibility. During periods of reduced work, it is more advantageous to downsize the external team while retaining key external engineers to maintain knowledge continuity, rather than dismissing engineers who were hired during high-demand periods.
Another crucial aspect is that an external partner brings specific knowledge that the customer may lack simply due to limited exposure to certain technologies. This expertise could encompass areas such as microservices/cloud migration, mobile development, machine learning, DevOps, or modern frontend technologies like Angular or React. By collaborating with an external partner, the client gains access to this specialized knowledge, facilitating the successful execution of projects involving these technologies.
Leveraging External Expertise and Knowledge Sharing
Having an external partner with strong expertise in specific technical domains proves to be highly valuable for the successful project delivery and the education of internal engineers in the process. Additionally, partnering with an external company serves as an avenue for knowledge sharing and improvement.
The collaboration between the external partner and the client’s teams allows for the exchange of knowledge and experiences, leading to the identification of opportunities for enhancing standard software development practices. For instance, an external partner can offer suggestions on improving test automation, SCRUM events, DevOps environments and more, drawing from their extensive experience working with various companies. Software development companies often serve highly successful clients who are experiencing rapid growth and require their services. Leveraging the knowledge acquired by the external partner while working with these exemplary companies provides valuable insights into effective software development best practices.
In summary, a competent software development partner brings value beyond simply providing additional developers. They contribute to scalability, flexibility, risk mitigation and knowledge transfer, fostering an environment conducive to growth and improvement of software development practices.
Strengthening Software Development Capabilities
The primary focus of a successful product-based company lies in creating an exceptional product with a strong product-market fit and selling it effectively. This forms their core capability. Conversely, a software development company's core capability centers around possessing extensive technical knowledge, employing excellent software development practices, and fostering a reputable presence and connections within the software engineering community, enabling them to hire successfully. These areas demand a significant investment of time and resources from software development companies.
Given the distinct focal points of product companies and software development companies, their respective core capabilities complement each other remarkably well. By collaborating and leveraging the strengths of both worlds, they can harness the best of each domain. Product-based companies can benefit from the technical expertise, development practices and industry connections of software development partners.
Finding the Best Approach - Internal Development with External Partnership
So, is it better to develop software internally or to rely on an external partner?
Developing software completely internally or completely with an external partner is not a good option. Based on our experience, the optimal approach is to have an internal software development department while strengthening it with the support of an external partner. This is especially important for high-growth companies.
The project was co-financed by the European Union from the European Regional Development Fund. The content of the site is the sole responsibility of Serengeti ltd.
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