Does your startup really need to hire in-house developers?

When it comes to scaling your startup’s Web development resources (or lack thereof), it seems like you can never have enough assistance. But for startups, which is really better: in-house talent or outside agencies? And at what price?

In order to find out, I asked a panel of 12 successful founders from the Young Entrepreneur Council (YEC) the following question: What are the pros/cons of hiring an agency to do development work, vs. having all your technical talent in house?

Here’s what they had to say about whether or not to outsource technology development:

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1. Agencies thrive on innovation

An agency has many different talents at its disposal that can be harnessed to produce a best-in-class product. It’s tough to build an in-house team that has enough variety in skills and experience to replicate this.

Developers get bored with one project after a while. They like variety, and it’s tough to offer the variety a developer craves while focusing on only one product/project. Once your product is built, it’s a good idea to bring the maintenance in-house. This helps you own your code moving forward, and it gives you more options later on. – Andrew Howlett, Rain

2. Outsourcing lacks security and long-term focus

Outsourcing technical development brings the benefits of expertise, reduced recruitment costs and concentrated focus executing on deliverables. However, outsourcing development also carries the risk of exposing data, and it lacks long-term focus on customers’ needs.

If you’re looking to build a platform or tool that is the core of your company, it’s ideal to have in-house talent that aligns with your big vision, but if you’re building a one-off app or tool, it’s safe to go the agency route. – Doreen Bloch, Poshly Inc.

3. Outsourcing minimizes distractions

Considering that your core feature code base is going to be with you for the life of the product, I firmly believe primary product features should be developed in-house. However, there are times when your internal team may lack expertise in a specialized area, or it may be a distraction for the development team to work on certain tasks. At that point, it makes sense to outsource development. – Adam Root, Hiplogiq

4. In-house teams cost more

Hiring an agency is usually less expensive, and you can utilize them only when there’s a problem. Having a team in-house means a quicker response time, but higher costs. – Andrew Schrage, Money Crashers Personal Finance

5. In-house work should reflect your core compentency

If you are a technology company, your technology competency needs to be in-house. If development is ancillary to your business (because you are brick and mortar), then outsourcing makes a ton of sense. You can’t outsource core competency. – Adam Lieb, Duxter

6. Agencies are low cost

Some of the most popular products today were outsourced in their initial days: Alibaba, Fab, Digg and Skype. When creating the first instance of your product, keep the costs low, and go with an outsourced provider that understands your requirements best.

The most important thing for you at this moment is to get your product in the hands of the customer as quickly as possible. Once you see a real demand for your product and continue to see traction, you can then take over the development and maintenance in-house. Get the horse first, and then build a cart. – Rahul Varshneya, Arkenea LLC

7. Outsourcing allows your team to focus on marketing

The most important part of any business is getting customers in the door. If you can’t do that, then you can’t exist.

That being said, customers are the first thing your company should be thinking about. Many times, entrepreneurs who are starting up are very product focused, which can certainly be a good thing and a way to drive customers.

However, there’s a risk there as well. If you spend all your time managing the product and the development of your product, then who’s out getting the customers? If you have an agency creating the product, you can be laser-focused on marketing. – Dave Nevogt, Hubstaff.com

8. Agencies offer flexibility

If you are unsure of how much work you will need over the next six months or longer, then it may be better to rent. That way, you can learn what kind of team you may need instead of committing to something you are still unsure about.

An in-house team will make financial and strategic investments that may be more difficult emotionally if you need to cut costs or pivot the business. – Derek Capo, Next Step China

9. Agencies excel at one-time projects

The length of the project is a good way to determine what you need. If it’s a one-time project with a completion date, hiring an agency is a good way to go. But if it’s an ongoing need, you should probably go in-house.

And, it’s worth noting that most projects need more updates and maintenance than people realize. The best solution is to work with an experienced techie to help you secure grade-A technical talent. – Laura Roeder, LKR Social Media

10. Agencies lack ownership

Agencies are like baby-sitters. They take care of the project, but they have no love for it. In-house developers are like surrogate mothers. They have a sustained and intrinsic sense of responsibility for the project (i.e., your baby) and grow to love it as their own.

But, the responsibility difference extends to employers, as well. So while your responsibility to a baby-sitter/agency ends with payment, surrogate mothers/employees require long-term investments in their health, happiness and well-being, which are huge (but worthwhile) expenses. – Manpreet Singh, Seva Call

11. Freelancers stay competitive

Freelance/independent developers are often exposed to the best and newest in the technical world because they aren’t bogged down with retainer client work (that often only requires variations on a theme), and they must remain competitive to gain future work. This can create a substantial competitive advantage to those staffed in-house at an agency. – Adam Cunningham, 87AM

12. Both have their advantages

Agencies require minimal management. They are great for one-off projects, and they are easier to contract than hiring talent. However, domestic agencies are pricey, and international agencies may sacrifice on quality.

Furthermore, they are less agile and have longer product cycles that require more documentation and usage assumptions, which still requires an in-house tech to properly manage. In-house development gives you more day-to-day control, and lean software development is far more feasible. There is also more individual accountability, and your in-house team is fueled by passion.

However, in-house talent is hard to come by, and you may have retention and management problems. – Chris Mirabile, Healthy Hand

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, the YEC recently launched #StartupLab, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses via live video chats, an expert content library and email lessons. 

Image credit: Kzenon/Shutterstock