A software engineer outstaffing roadmap for founders and execs of Series A startups.
INTRODUCTION
It has surely been a roller-coaster ride over the almost two years since the pandemic started. And what’s unique about this is that it was worldwide and, thus, has affected the entire world in a similar fashion. I’m sure you know best what’s going on around you, in particular, but I’d like to outline some basic aftermath.
Looking at the economics and industries, the software sector definitely ‘ate the world’ during the pandemic, with superpowers accelerated by huge investments and a generally new set of software products. It’s the age of tools that make remote work accessible, especially for engineers. Software teams have learned how to be efficient and ensure all work is completed on time. It’s a global trend of autonomy — society is becoming more decentralized, and it’s not a trend only driven by technology like blockchain. The iconic Burning Man event was run by independent individuals, without organization (BMORG), this year. There were around 20,000 people in the Black Rock Desert, fully organized into a makeshift city.
Everything that uses software has seen a drastic growth — I mean everything. Fintech, health tech, logistics, e-commerce, data platforms, you name it — everything has been growing, and the growth won’t be any slower in 2022. But the fact that it’s a global phenomenon means that the software (believe me or not) needs to be built everywhere in the world.
Now, a bit about who this article is for. I bet there are all sorts of free data and research available about outstaffing software engineers and software outsourcing, covering a more global perspective. But for a Series A startup, things are going to be different than they are for a Fortune 500 firm. Consider this a quick reference to outstaffing that is specifically tailored for Series A startups.
THE MARKET IS HOT
We know that the United States is on the frontlines of building software and creating value through new technologies and workplaces, but in the “new normal,” all countries are in the same boat. It’s not only the US that suffers from software engineer shortages; it’s everywhere in the world. Let’s put it the right way: there are almost always lots of engineers, and maybe even good ones, but the main challenge (according to the tech leaders) is getting qualified ones.
It’s common to think of outsourced staffing as a scenario where fair-priced remote engineers from overseas are hired to work on US-based projects. But some of our industry colleagues all shared with us the same observation: the salaries of software engineers overseas are increasingly rising. And a high salary is not enough on its own; engineers are being hired by US companies and getting a variety of incentives. Yep, some engineers in Central-Eastern Europe are getting paid almost the same salaries as engineers in the US. So things are starting to look the opposite — get the engineers from overseas, not because rates are cheaper, but because there are almost no qualified engineers on the local market.
Of course, one could argue that I didn’t do my homework, and finding an engineer is relatively easy in the US. I can't agree more. But every company has its own situation. Time to market, cash available in the bank account, and competition make the game hot. We’ve seen companies, at different stages, outsourcing software and outstaffing software engineers to avoid competition for talent for certain projects or skills. It just makes sense for some companies to gain a competitive advantage by adding a skilled engineering force as an outstaffed team.
But outstaffing (and outsourcing) should not be done overnight, just because there are tons of outsourcing companies (even if one has dozens of Linkedin offers at $25 per hour). It’s like choosing a partner or investor (e.g., for your series A round) that you’ll work with hand-in-hand over the next few years. The market is hot, and it’s not easy to get engineers, even overseas.
PLANNING FOR OUTSTAFFING
If it feels like it’s time to consider adding remote teammates to your team, stop and ask yourself — do we really need them? It’s the first of many questions that need to be answered, so let’s take a look at them.
Companies outsource software and use outstaffing services for a variety of reasons, and we won’t go deep into those, but mostly it’s to do things like: add new skills, complete temporary projects, boost the in-house team by outsourcing repetitive and routine tasks, etc.
Let’s assume your company is really looking for engineers, and you are considering an outstaffed employee as an option. Here are the questions worth discussing first.
Who are the stakeholders of this project? Do they support using outstaffing services from third-party vendors? These are the people who can think through the criteria for vendors and would also help with assessment and approval. Someone also needs to champion the initiative.
Do you have the in-house capabilities to use outstaffing services? At the very least, there should be a team that is going to use and manage the services. By this I mean, someone should be responsible for communications and project management. Do you have those folks who can effectively work with remote engineers? Do you have effective processes in place to manage the remote teams?
When do you need the outstaffed team? If the answer is “yesterday” — the game is already lost, but good luck finding engineers overnight (it’s worth trying). When hiring outstaffed software engineers, it’s not only about the engineers; it’s also about the company they actually work for. The price of choosing the wrong partner is high here, too. It’s best when outstaffing is planned for at least two to four weeks beforehand, if not a few months.
To ensure this is addressed, don’t be naive. No outstaffing or outsourcing firm has engineers sitting idle, waiting for your message. In 99% of cases, matching will take two to four weeks (but yes, you still have that 1% chance to find a free engineer ready to start).
If you have firm answers to the questions above, you have the answer to the question “Do we really need them?” If you’ve got your mates voting “yes,” in-house capabilities, and it’ll be sometime before you actually need engineers — you’re safe to proceed forward. Of course, every situation is unique and different, and I bet you can make the best decision at your own discretion.
A tip here is: try talking to folks in the field, the outsourcing and outstaffing companies — you might get some great inputs.
LOCATIONS & RATES
It is hard to imagine outstaffing software engineers from the US, as the original method was to outstaff from overseas. And it’s not only price, although the prices are high. It’s more that companies in the US almost never offer outstaffed engineers, as project-based development generates more revenue, due to the added value of industry or vertical knowledge. I can hardly believe that a fully US-based company would outstaff you an engineer. So, let’s make things easy and not consider the US as a destination to outstaff software or outsource engineers.
That said, some US-based companies outsource to the local market, usually due to compliance requirements or complexity. For example, health care organizations cannot outsource software from overseas. I’m also aware of US-based companies with delivery offices located overseas, but these companies are not considered as having their workforce fully present in the US, and not all of these companies provide outstaffing services.
So, let’s review more realistic examples of sources for Series A startups to get outstaffed software engineers. The common destinations for this are Asia, Central-East Europe (CEE), and Latin America. While some countries possess a high proficiency in English and some do not, it’s definitely not the only criteria for choosing an outstaffing partner. By the way, Western Europe is in the same boat as the US. They have plenty of stuff to build internally; that’s why you don’t see many software firms from Germany reaching out with proposals of outstaffing services. And their rates are high, too.
CEE
One of the destinations that have become a hotspot for outstaffing, relatively late, is the Central-East European countries. Many of these countries have a strong university focus on STEM fields, high English proficiency, and encourage innovation, resulting in talented developers who can provide a wide range of expertise and skills. As a plus, CEE cultures are similar to those of the West, allowing for easy communication and collaboration with US-based teams. Companies can access a deep talent pool and higher-end, innovation-oriented developers, and, due to their extensive experience working remotely, onboard them quickly.
CEE Rate Trends for 2022
Since the software development market has grown so hot, CEE outstaffing rates have increased slightly over the last year. However, there are still many skilled developers available, and you can find more affordable rates by looking outside of the major metropolitan areas.
ASIA
Traditionally, software outsourcing and software engineer outstaffing have always been associated with India, where lots of skilled engineers. Actually, India has the biggest pool of software engineers for any kind of budget, skill-set, or function. So the only challenge is to sift through all the companies to find a really good one.
Much of Asia also has advanced English proficiency and puts an educational emphasis on STEM disciplines, making it a viable outsourcing location. And, in addition to India, many other Asian countries have highly skilled developers and offer excellent outsourcing rates.
While business etiquette and soft skills have had quite substantial improvements lately, a good tip for those looking to outstaff from Asia is to find out whether or not you’ll have direct access to engineers with who you can communicate with. And it’s not just Asian outstaffing companies that only provide a PM who can speak English, we have seen the same thing in other locations too. “Body shops” are everywhere, but you need an enterprise-grade outstaffing partner.
Asian Rate Trends for 2022
While quality Asian engineers are in high demand, there are still a lot of them available, especially in India, Pakistan, and Bangladesh. So prices have not risen as much as you would expect. However, as demand continues to grow, you can expect rate increases in 2022. Some Southeast Asian countries, specifically Vietnam and the Philippines, saw rates drop, due to a surplus of talent. But software sector growth has caused their prices to begin rising again, and they will likely continue to do so into 2022.
LATIN AMERICA
Its proximity to the US makes Latin America a prime destination for outstaffing. The time zones are compatible, cultures are similar, English proficiency is high, and it’s easy to travel to for in-person meetings. It’d definitely be on my list if I was supposed to choose the outstaffing partner from a certain location. LatAm has a comparatively large pool of software engineers that are at the same professional level as engineers in CEE.
LatAm Rate Trends for 2022
Like the other locations I’ve mentioned, LatAm outsourcing rates are rising, due to increased demand. Rate increases are also being driven by US firms hiring directly for local R&D centers and paying higher-than-average salaries with additional bonuses and incentives.
And by the way, technology is not location-specific. Whether you’re hiring Ruby on Rails, Python, Go, or React developers, any location may have the exact caliber of engineer you’re looking for.
CHOOSING A PARTNER
Choosing a partner is a strategic business goal. It requires your team to make some critical business decisions, as discussed above. While the search may start from a reference or from surfing the web, it makes a lot of sense to pay attention to a number of key factors before making a decision.
What tough calls are you willing to make when selecting a partner? Are you willing to make any calls at all?
Things to pay attention to:
Value over price
A focus on cost, at the expense of quality, ultimately comes with increased risks and added stress of partnering with a less skilled, less stable, or less efficient partner. If you’re building an A+ team, low quality not only affects the product but more importantly, can affect the company’s culture and the team’s motivation.
It’s true that every startup has its own budget and method of choosing a partner, based on their current situation. Software developer positions with a rate of $100 per hour in the US can be outstaffed, from most locations, for just $55 per hour, at the same standard of quality. For companies with lower budgets, a variety of fairly priced options are still available. And it doesn’t necessarily mean that low-price translates into low quality; sometimes teams can save money by spending a little more time on the product requirements (PRDs and SRSs) to ensure all is documented and passed over to the outstaffed team. But, in reality, that doesn’t work well for Series A startups, as the pace of the business requires every individual to contribute in a self-sustaining model. Such savings just don’t pay off.
There is almost no such thing as a definable good price. It’s unique for every company, but it’s good to know that the median price tag ranges somewhere between $35 and $75 per hour. At this level, you can have confidence that your outstaffing partner will deliver cost-effective, high-performing solutions.
It’s just a global tendency of companies in need of software engineers to be willing to pay slightly higher prices in exchange for quality. Don’t cut corners, and don’t put your partner in that position. It’s an age-old saying: “you get what you pay for.”
Employer Brand
The outstaffing partner with 100+ employees does more than you could do (in most cases) in terms of employer branding because they have existed that way from the very beginning. I’m sure you do a good job, but your partner can do it at scale. A good partner is constantly contributing to the community by open-sourcing the software, running meetups and conferences, and making their company a great place to work. This exact partner is who you need because this ensures the great potential for a long-term partnership and an outstaffed team that feels happy shipping new features to your product. So, pay attention to things like this.
Business environment
Does the potential partner have a robust business environment, and are they easy to do business with? They might have Slack and Jira in place, but more importantly, are their processes solid in software development and even sales? A great partner ensures that the engineers are vetted in accordance with your job descriptions and assessment requirements. It’s always part of the partner’s job to ensure the fit is perfect, and they also help to onboard the engineers. Sales are part of the project, as the sales team always ensures the compatibility of the two parties trying to do business together — if you like their sales, you are more likely to like all the rest.
It is in the partner’s interest to ensure their investment is worth it — yes, their time costs something too — and a great partner is open to sharing expertise in certain areas, like remote team management, organizing meetups, employee training, and employer branding, to name a few.
Some other tips include:
- Is the partner flexible enough? — Treat the outstaffed team as your own and discuss with the partner how to effectively create incentives, perks, or even bonuses.
- Reviews and case studies — I’m sure you do it first thing, but just in case, reviews and case studies are good sources for getting a sense of who a partner is. Don’t brush off a company that hasn’t done anything specifically in your industry or domain. Lots of software development and outstaffing companies are industry-agnostic, and they might have a successful blueprint that is widely adopted across industries.
- Time Zone Overlap — Do you really check that all your US-based employees are online eight hours a day? It’s good to have engineers online all the time, but it’s not really that important. Work has shifted toward a result-oriented mode; the delivery was completed — period. The rest doesn’t matter much. You may have a need for engineers to stay a bit longer on days of releases or something, but this is always discussed on the standup calls. The golden ratio is somewhere between two and four hours of work time overlap.
- Account Management — Account execs are always in between the client and outstaffed engineers. They’re your best friend and conductor of the improvements, feedback, and reports. AEs ensure that engineers do a great job and are happy and fulfilled. A good AE will check with you to see how things are going, find out whether or not you need more talent, and signal you at any opportunity to scale the team and optimize the process.
Of course, don’t forget about intellectual property, rights to code, innovation, employee solicitation, etc. Read the contract carefully, or get one of yours (prepared by a lawyer) signed by the partner.
AFTER THAT
Even after you choose your partner and all is going as it is meant to be, the work is not over. Most of the time, the outstaffed team is self-reliant and can have minimal touchpoints with your company, but you can always upgrade the process to make it more efficient, reliable, and engaging.
Effective remote team management is vital, and analyzing the digital footprints that developers leave is the key to success. Let’s have a quick overview (these tips can also be implemented for in-house teams):
- One of the basic rules is to lead your developers from the first day you hire them, starting at the inbound interview. It should consist of a well-prepared, standardized set of questions and a set of tasks to give the candidates.
- It’s good to have a special person or team responsible for onboarding. They should be in communication with new hires from their very first day, answering their questions, showing them around, and sending them interesting information.
- As your company grows, at some point, you’ll probably realize that you need to collect all the information about the company and its history in one place, so that your team members can easily find answers to common questions.
- A developer should only be focused on a single task at any given time. This allows all participants in the project to understand exactly what each developer is doing right now, at every point in the process.
- We usually present reports to our customers stating the hours we spent on each particular task or function. It is very important to present the report on time and ensure that it is accurate and error-free.
- Developers don’t spend all their time writing code. They often use chats to learn important details, ask questions, and discuss issues. Their Slack activity can also answer your questions about what your developer is currently busy with.
- Remote team culture often lacks a personal element, and holding internal, online meetups is a great practice to foster friendlier relationships among team members.
- JIRA has one of the must-have tech tools for remote employees. It’s called “remaining estimate,” and it helps developers understand how much time they have left to solve a problem.
- We recommend practicing early code review and writing the tests ahead of time. This allows you to send a pull request for review at the moment the main functionality is written, while the developer is still focused on the code.
- Github is a wonderful contribution activity tool that can help you analyze your developers’ performance. We do around 90% of our projects on Github.
- Each developer should send their work to the repository at least once a day. We developed a system that monitors the daily activity of our developers in all repositories. If the system finds that a developer has not made a commit in the last two days, it sends a Slack notification to the developer and their managers, team leads, and account managers.
These are just a few examples of what an effective remote team management system looks like. Your own research and your team are always the best resources when it comes to talking about improvements, and a professional partner can be a great additional source of quality information and talent.
SUMMARY
“Software development outsourcing is a thing once again” and it is not shameful to outsource software development and outstaff software engineers (lots of companies have been doing it for years) for Series A startups, as this is the structure of doing business in the new reality, and it ultimately opens the way to a competitive advantage.
As companies move more and more of their business processes to the cloud, remote work is becoming much more feasible, even practical. And given the fact that many businesses are seeking to expand their diversity and inclusion practices, it just makes sense to look to outstaffing partners who can provide that new perspective and fresh talent that these initiatives seek to bring in.
Following the steps in this framework will help you get the outstaffed software engineers who are right for your company. Good luck!
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