CTOs face the crucial task of scaling their development teams to meet market demands. According to a recent survey conducted by Deloitte, overall, the confidence in scale-ups remained high in 2023, with 52% of CTOs stating that they are confident to continue or accelerate their growth trajectory. Expanding a company further depends on overcoming various business obstacles, most of which are shared by all organizations.
The choice to expand the development team should not be made carelessly. It necessitates rigorous examination, strategic planning, and consideration of crucial criteria such as necessary skills, available talent pool, project time frame, budget, etc.
CTOs face many challenges in scaling up a development team for efficient management of an entire project. Some of these challenges include premature scaling, technical debt mitigation, software prioritization, and budget constrictions.
Research conducted by Startup Genome shows that in as many as 70% of cases, scaling too early is the cause of start-up bankruptcy.
However, if needed, CTOs have a few options to scale up a development team. They can grow an in-house team, hire an outsourcing partner, or opt for a combination.
In this article, we will cover:
- Signs when to scale up your business
- Strengths and weaknesses of in-house teams or outsourcing services
- Which factors to focus on before scaling the development team
- What to decide on - in-house or outsourcing?
- What to do if you’re unsure about outsourcing teams
Table of Contents
Five Signs to Scale Up Your Business
If a business makes a profit, it doesn't mean that CTOs should start considering scaling up the development teams. Other elements must be considered for making such decisions, including investment availability, demand for the product, brand value, future business predictions, and much more.
There are five distinguishing signs telling you it's time to take the next step and scale up a business. These signs include:
Turning Down Potential Business Opportunities
When not giving the required attention to users, businesses may lose customers and cause a bad reputation in the market. That is why, whenever user feedback or the market shows the need for various functionalities that are crucial for application growth, a software development house should be able to deliver them.
If your current in-house team struggles to deliver new features within a reasonable amount of time or due to a lack of expertise, a decision should be made on whether to scale up or stay with current developing capabilities.
Surpassing Previous Goals
One of the duties of a CTO is to use facts and numbers obtained from past performances and then develop future goals that reflect those projections along with the marketing department.
If the CTO's team struggles with deadlines and doesn’t have the time to take on new projects, it might be a perfect time to consider the in-house team growth or hiring an outsourced team.
Strong Cash Flow and Repeatable Sales
In addition to profit, repeatable sales and current client application growth are other appropriate signs to decide if the business needs scaling.
To grow a software development team, there needs to be a good reason for that like additional business opportunities. And if a business has cash in the bank that can be easily and quickly accessed to not only pay the operational expenses but also cover emergencies or a downturn, this is a sign to take the next step.
The Need for Improvements
One of the biggest challenges of scaling up for small and mid-sized businesses is adding new processes and procedures without overloading the existing organizational structure.
Just to grow the company, you as a CTO need to make sure that it won't compromise on quality, customer happiness, or overextend its employees.
An Atmosphere of Minimal Risk
Don't scale up your core business unless you're ready. Don't let your company's growth and profitability be jeopardized just because you want to aim high too fast.
The signals encouraging you to scale up are not always clear-cut. Develop a business strategy, analyze the market, and predict if scaling can bring you benefits in the long run.
What Should a CTO Do Before Scaling the Development Team?
As a CTO, it is crucial to consider and evaluate factors that impact the overall business operations before deciding whether to scale the core business. A CTO should focus on these factors:
Long-term Strategy
- List all business objectives
- Create a long-term core business strategy aligned with the company’s long-term goals and scalability
Project Requirements
- Evaluate the scope of the software development projects in-house
- Design a timeline for the completion of the projects
- List down the skills required for project and other business operations
Internal Resources
- Determine if your in-house team has the necessary skills and capacity
Cost Factors
- Evaluate and compare the financial obligations to hire within an existing in-house team or an outsourcing company.
Time Constraints
- Consider project timelines and the need for a faster ramp-up period
Security Concerns
- List down and evaluate the sensitivity of the project and data security concerns. It is the job of the in-house project manager to keep in check while the project is being developed and to ensure that no security leakages happen from any team member. Some projects forbid collaboration with a third-party company.
What to Consider When Deciding Between In-house vs Outsourcing Team
Many CTOs struggle to choose between in-house expansion and outsourcing as there is no definite answer to which one to opt for.
Although IT outsourcing is projected to grow by $98 billion by 2024, the decision to scale an in-house team or find an outsourcing team for project management largely depends on the environment a CTO chooses to work with and the long-term goals a business strategy predicts to achieve.
Here are some of the most notable strengths and weaknesses we believe are important to consider when hiring in-house vs outsourcing.
In-house Software Development
Strengths
Creating a company culture with growth possibilities: Developing a strong corporate culture is one of the main advantages of having in-house employees. With hiring in-house, choosing employees by hand who best represent the company's ideas is possible.
You can be sure that your in-house staff members know the company's goals, overarching plan, and character.
Additionally, well-planned growth possibilities motivate people to deliver more value and make them more engaged in business success.
Overcoming language barriers faster: When a company outsources software development projects, it frequently happens that teams from other nations will be working with them.
These teams may have different company culture, values, and even languages which may occasionally lead to project delays and communication disruption.
When you operate with an in-house staff, this problem may also happen. Nevertheless, you have a higher impact on the people you choose and you can eliminate this issue when building your in-house team.
Communication ease: When in-house team members work together daily, they can establish enduring professional bonds. Internal teams get to know one another's work habits and procedures.
Most of the time, discussing a problem in person can be done without setting up a meeting.
Weaknesses
Recruiting the right individuals is a challenge. Although assembling a strong in-house team can be advantageous, it's not always easy.
It may be challenging to locate the correct talent in the developer market while remaining under budget due to intense competition.
Significant time investment: Developing an in-house team frequently takes a larger time commitment especially when finding people on the local market. The hiring procedure is sometimes far longer than the combined onboarding and training phases.
A person must grow so you need to have ready-made processes or a Devpath for them to learn.
We don't want to underestimate the costs. In-house is usually more expensive than collaborating with a software outsourcing company.
Limited talent pool: It is far more difficult to find the right in-house developers for your team, especially in the local market. Also, conducting a talent search, identifying suitable candidates, and ensuring their training might take a great deal of time.
Software Outsourcing Partner
Hiring a large team of developers can be quite expensive once a project is completed. Depending on the workload and ongoing activities, you can scale up or down resources when working with an outsourced team.
Strengths
Gain access to a larger talent pool: With an outsourcing partner, a CTO can access a large pool of talented developers who work as a team and can deliver their work much faster.
By removing geographical restrictions, software development outsourcing allows you to access a talent pool of exceptional professionals who already know themselves and do not need time to get to know each other.
Expert domain knowledge built-in: Organizations must consider more factors than specialized skills when hiring in-house talent. Companies need to think about domain expertise and locating highly qualified workers.
Developers and engineers must understand the industry and its requirements. It might be rather challenging to find applicants with this degree of expertise. According to TalentNow, 86% of IT experts with a decent skill set are already booked, which makes hiring a skilled individual much more difficult.
However, you may collaborate with a team that specializes in your business and has domain expertise built in if you pick your outsourced development partner wisely.
Weaknesses
Like anything else, using an outside partner for software development has drawbacks. But if you pick the appropriate partner, you can avoid most problems.
Trust issues: CTOs are worried that external staff may not be as engaged as the in-house team. This lack of confidence may badly impact development. Finding the right company with a perfect cultural match is crucial for this reason. The best way to verify the outsourcing partner is to go through their reviews and testimonials on websites like clutch.co
Reduced control: When collaborating with external development teams, it may feel like you don’t have control over what they do. However, when using the right communication tools and discussing development regularly you can avoid it.
In many cases, this calls for a shift of viewpoint. Outsourcing services providers should have the same sense of fellowship as your staff when working together. Trust and honesty are the cornerstones of every business's success.
Hindered communication: When working with an outsourced workforce in a different time zone or place, communication might go wrong. Setting limits, clear expectations, and open lines of communication early on will help to prevent this.
Summary
Scaling up the business is a strategic decision for CTOs, and choosing between in-house teams and outsourcing services needs careful evaluation.
Only after evaluating current requirements, budget, and timeline for the project completion, a CTO can better decide whether to hire in-house employees or outsource the project development or if a combination of both can also work.
Importantly, if you’re unsure about outsourcing teams, you can always conduct thorough due diligence on a company. When you find the right outsourced software development partner, it should feel like an extension of your in-house team members. However, finding the right partner is not an easy job for any CTO.
Assessing, evaluating, and planning the workload, leveraging required experience, adopting agile techniques, investing in skill development, and monitoring past and current performance and future demands can help you scale up your business and development team.
