Pagepro Blog

CTO Guide

Calculating Cost and Benefits of Hiring React Agency vs In-house React Developer

Posted on .

Calculating Cost and Benefits of Hiring React Agency vs In-house React Developer

Introduction

Meet Bran and Juliette.

Bran is a startup CTO, and Juliette is a huge IT company CTO.
Bran just bootstrapped funds on his life project for National Health Care. He wants to build the biggest medical assistance portal in the UK, which is in high demand based on the research he did.
Juliette’s company did similar research, with the same result, so she got a green light to execute pretty much the same idea as Bran.

Bran is a back-end developer, and he is hesitating with a front-end technology, but after a quick comparison between React, Vue, and Angular, he choose React, to have more freedom with the execution.
Juliette’s decision was pretty simple and straightforward. React or nothing. Even though she doesn’t have anyone working in this technology, she always wanted to build her own internal React team.
Bran is calling a React Agency, and Juliette is calling her HR Department.

Two years later, Bran and Juliette became the biggest competitors, and one day, they jump on each other at the coffee place by accident.
They see what’s coming, and the conversation is inevitable, so they start talking about who did a better job and how they both approached the challenge with the medical assistance portal.

They sit down, take out a piece of paper and start writing down the calculations, pros, and cons.

Juliette’s Company

Juliette followed a recruitment process from the article on How To Hire a Good React Developer and she pulls out some calculations first.

The median annual salary for React.js developer in the UK is around £60.000 (London £70.000).
Juliette’s office is in London, so she wants to hire only locals.
She is also familiar with the research of Joe Hadzima on what’s “the real cost” of employees, which is around 1.25 – 1.4 times the salary. Research has been done for the US market, and the biggest difference here is National Insurance, but that’s also the reason why it varies.

Her calculation includes:

  • Recruitment expenses
  • Basic salary
  • Benefits
  • Space and equipment

 

Recruitment expenses

Recruitment is considered one of the biggest pain points of CTOs in those days. It takes a lot of time, effort, and the costs are also high and sometimes hard to measure.

To calculate how much Juliette spent on a single developer, she had to consider:

  • Headhunter, HR agencies, or HR department costs
  • Cost of advertising the job offer
  • Costs of relocation (she found a good match in Liverpool)
  • Her own time for managing the recruitment process
  • Team time spent on interviews and onboarding

 

Employee benefits

We can point out a few most important benefits. Some are crucial and demanded by the government, and some are just fancy and demanded more by the market and developers themselves.

You may find some of them quite exotic, like the play or chillout zones, but they are becoming important factors and arguments to attract talented people more often.

The shortlist could be as follows:

  • Social security
  • Healthcare
  • Retirement contribution
  • Holiday
  • Days off (parental, personal, sick days)
  • Memberships (gym, cinema tickets, etc.)
  • Free food
  • Trainings and conferences
  • Playrooms (chill rooms, quiet rooms, etc.)

 

Space and equipment

Technology probably won’t ever stop, just exactly like demands on good software and hardware from a talented team.

Good people hate being slowed down by the lack of the newest technology in the company, which brings another big pain point to Juliette’s list.

 

Pros and Cons of having an internal React team

“Don’t get me wrong, it’s very convenient and efficient to have your own React team” – says Juliette, but after a short discussion with Bran, she also had to agree with a few cons.

Pros

  • Easy / face to face communication
  • Higher team engagement and dedication
  • Fast feedback with the ability to make quick changes
  • Better management, control, and coordination
  • No language barriers

Cons

  • High and complex costs (as mentioned above)
  • Time-consuming management
  • Unpredictable vacancy needs (dismisses, sickness, parental, etc.)
  • Need to motivate
  • Constant employment competition (other companies)
  • Limited growth opportunities for in-house developers

 

Bran’s Agency

Calculations

Bran has chosen a React development agency with an hourly rate of £35 for a mid-level developer.

This is:

£35 x 160 = £5.600 monthly
£5600 x 12 = £67.200 annually

Making a quick price-wise comparison:

In-house
Annual rate Lowest Highest Average
UK £75.000 £84.000 £79.500
London £87.000 £98.000 £92.500

Note:In-house costs are still per one developer only.

Outsource
Annual rate Average Difference
UK £67.200 £12.300 (15%)
London £67.200 £25.300 (27%)

 

Pros and Cons of hiring React Agency

“I prefer the freedom of choice. I also like to know what I’m paying for, and be able to focus on my work while having back of developers on-demand.” – says Bran and pulls out his own pros and cons list.

Pros

  • Better cost-wise (as above)
  • More efficient budget planning (no unexpected leaves or needs to fill the vacancy)
  • More options to find highly skilled people
  • No time spent on hiring, motivation, coordination, and management
  • No commitment needed (when the project is done, cooperation is done)
  • Faster end delivery
  • Ability to quickly scale up and down the team

Cons

  • Possible language barrier
  • Possible slower communication and feedback (time zones)
  • Possible security and confidential risk
  • Agency’s marketing skills can turn out to be better than development skills
  • Messy code can make you dependent on further agency work

 

Summary

Remember

Developers change jobs often.

As you can see, the choice is hard and highly dependable on the needs, situation, and also personal preferences.

If you want to have more control over people and build your own team, like Juliette, just make sure you don’t use salary only to measure the true cost.

If you want to have more control over what you are paying for, and access more talented people, like Bran, it’s best to search for a good agency as a partner. Once you find one, you will probably get yourself a nice external team for longer.

Last, but not least – remember that developers change jobs often. They want to try new stuff, learn things, work on different projects, and join the best possible teams. Remember that you are competing in a talent attraction war with global brands like Facebook and Uber having offices in London.

This is why building a great team and attracting talented developers is a huge challenge.

 

What about you?

Do you know any combo that both Bran and Juliette could use?

What a CTO should look for in a developer or agency? Which model is better and when?

Write what you think in a comment. I’m curious about your opinion.

Mariusz Marcak

Mariusz Marcak

http://www.pagepro.co

There are no comments.

View Comments (0) ...
Navigation