Internal Team - is it worth it?

As fast-growing companies navigate the challenges of scaling up, the decision to hire an internal team or opt for an outsourced dedicated team becomes crucial. Many businesses that have experienced exponential growth in the past two years often face disrupted internal processes and unsatisfactory digital product performance. This is particularly true for companies whose internal teams and user bases have multiplied rapidly. Here’s why an outsourced dedicated team might be the solution your company needs right now.

The Hidden Costs of Internal Teams

Recruitment and HR Expenses

Building an internal team isn't just about salaries. The recruitment process involves significant costs, from advertising vacancies to the time spent on interviewing and onboarding new hires. According to industry analysis, the average time to hire an employee is around 44 days, during which time critical projects can be delayed. Additionally, the ongoing cost of HR support, training, and benefits adds to the financial burden.

Risks of Poor Leadership

Hiring a bad CTO or tech lead can have devastating consequences. Not only does it impede growth, but it also necessitates another costly and time-consuming hiring process if the initial hire proves ineffective. Poor leadership can lead to misaligned team efforts, project delays, and increased turnover rates as talented team members become frustrated and leave​.

Overhead and Infrastructure

Internal teams require office space, equipment, and other infrastructure. These fixed costs remain constant even during periods of low project demand, leading to inefficiencies and higher operational expenses​.

The Benefits of Outsourced Dedicated Teams

Cost Efficiency

Outsourcing to a dedicated team can be significantly more cost-effective. These teams often operate in regions with lower labor costs, offering high-quality services at a fraction of the price of maintaining an in-house team. This model allows businesses to avoid the high costs associated with recruitment, training, and providing benefits.

Flexibility and Scalability

Outsourced teams provide the flexibility to scale resources up or down based on project needs. This adaptability is particularly beneficial for managing fluctuating workloads without the long-term financial commitments of hiring permanent staff.

Access to Global Talent

Outsourcing opens up access to a global pool of talent, ensuring that your projects benefit from the best skills and expertise available. This can be particularly advantageous for complex or niche projects that require specialized knowledge not readily available locally​.

Reduced Management Burden

The outsourcing firm takes on the responsibility of managing the team, which includes training and upskilling. This reduces the management burden on your internal staff, allowing them to focus on core business activities and strategic initiatives​.

Cost Comparison: Internal Team vs. Outsourced Dedicated Team

Internal Team Costs

• Salaries and Benefits: For a mid-sized tech team (5 developers, 1 project manager, 1 QA engineer):
  • Average developer salary: $100,000/year x 5 = $500,000
  • Project manager salary: $120,000/year
  • QA engineer salary: $90,000/year
  • Benefits (20% of salaries): $142,000
  • Total Salary and Benefits: $852,000/year
• Recruitment Costs:
  • Average cost to hire per employee: $4,000
  • Total recruitment cost (7 hires): $28,000
• Infrastructure and Overhead:
  • Office space, equipment, utilities: $15,000/employee/year x 7 = $105,000
• Training and Development:
  • Average training cost per employee: $2,000/year x 7 = $14,000
• Total Internal Team Cost: $999,000/year

Outsourced Dedicated Team Costs

• Hourly Rates:
  • Average hourly rate for outsourced developers (Eastern Europe): $50/hour
  • Team configuration: 5 developers, 1 project manager, 1 QA engineer
  • Total weekly hours: 40 hours/week x 7 = 280 hours
• Annual Cost Calculation:
  • Total hourly cost: $50/hour x 280 hours/week = $14,000/week
  • Annual cost (50 weeks): $14,000/week x 50 weeks = $700,000

Additional Considerations

• Flexibility: Outsourced teams can quickly scale up or down, adapting to project demands without long-term financial commitments.
• No Recruitment or Infrastructure Costs: The outsourcing provider covers recruitment, training, and infrastructure expenses, further reducing your overhead.

Conclusion

By opting for an outsourced dedicated team, your company could save nearly $300,000 annually compared to maintaining an internal team. These savings, combined with the flexibility and access to global talent, make outsourcing a compelling option for fast-growing companies struggling to manage their expanding operations and customer base.

It's time to rethink your strategy—can you afford not to?

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