When Not to Hire a Software Development Company

First published on
March 5, 2018
Last updated on
September 18, 2023



In all honesty, it is our main vested interest to promote our services as a software development company as well as we can. As it is with any other businesses. Hiring such a company is a big step and a serious deal, and under some certain circumstances and scenarios, it is actually counterproductive to do so.

How? – You ask. Well, to start with, ordering the production of a professional website, a mobile app, a game, etc. demands a clearly outlined business plan, market analysis, and technical specifications. Secondly, it costs a lot, even if you outsource. And there are more instances when it is not yet relevant to look for a software development company to hire.

Based on our market experience, we’ll talk about several situations grouped together, in the hope this could help you to determine the right tactics for your projects and/or approach software agencies better prepared.

1. No demand, no validation

Often, entrepreneurs rush to arranging meetings and making plans after having a brilliant idea one day. And they’re often brought back to reality by a splash of cold water. Say the idea is to launch a dating site. Then you find out that the market is saturated. A dating app? You have Tinder and a dozen others. A dating app for gays? Ever heard of Grindr? Ok, a dating app for elderly, for pets, for single parents?… Yes, those apps exist too.

The point is that soon after you begin researching your product niche, you may come to realize there’s no actual market demand for the product. Either the market is full of products that are already popular, or the opposite where nobody seems to be interested.

*There are some marketing tips on how to create a demand for new products, but that’s another story for another time.

Consequently, if you don’t validate the product and the users (by analyzing competition, studying social trends, surveying target audience, etc.) and hire a software development company, you risk:

  • Stretching the process for too long
  • Ending up with a product no one wants to use

2. No specifications

If there aren’t clearly outlined documentation/technical specifications for the project, what will be the guidelines for developers, designers and project managers? In fact, when approaching a development company, probably the first thing they will request is documentation. As most of them work on multiple projects simultaneously, documentation is valuable both for work efficiency and keeping track of all aspects.

Ideally, project specifications should cover all the components/areas that make up an application. If not, it should focus on business logic and business rules at least. Developers need to know how a product should work, why that way exactly and end-user expectations. In technical terms, specifications would include:

  • Installation
  • Server environments
  • Database and file system
  • Code deployment
  • Troubleshooting
  • Updates

Considering various possible software project documentation types (such as vision statement, software requirements, project management plan, iteration plan, release plan, success metrics, coding standards, testing plan, user manual, etc.) and check how ready you are to start developing an item of software.

Example of project documentation for a software development company.

3. Low budget

Software development is costly. Even the outsourced, or so-called offshore development, and if you think it is 2 or 3 times cheaper than local, you’ll be surprised. If you check Clutch or do a quick online research, you’ll see that the average project size at development companies is $25,000. So, if your budget is below $10,000, there’s no sense in hiring a company.

Why project cost estimation is important while working with a software development company.

If you still do, you’ll run out of money half-way, as serious software projects tend to cost above $50,000, and that is even by a moderate estimate. Of course, some companies may offer lower rates or even give an estimate that fits your budget – all trying to lure you in. As practice shows, this ends in exceeding the estimate and you have to pay extra. For low budget projects, it is optimal to hire 1 to 3 freelance developers and try to produce something basic.

<blockquote><p>A software project needs a budget, not an estimate.</p></blockquote>

4. No prior experience

As you have already figured out, hiring and working with a software developing company is a complicated deal, requiring, besides money, time and effort, also a certain business experience in this area. Therefore, we would not recommend approaching a development company, if it is your first digital product and you do not have any experience in software projects.

Otherwise, the cooperation will be slow and painful, which basically equals failure. In our day and age, it is all about fast delivery and optimization. Also, most first software projects fail, which is OK in terms of gaining experience, learning the ins and outs and preparing for a big “icebreaker” project.

Especially for non-technical people, who have to learn how to communicate tasks to developers properly, as well as how to validate a project idea, what tools and technologies are suitable, how to evaluate and choose a software company, etc.

5. Fixed price model

When it comes to software development, two pricing models are most widely used: Fixed price and Time-and-materials. To describe it briefly, an agreement to fulfill the project for an initially agreed sum versus charging for the amount of actual work (i.e. hourly rates) plus compensation for materials.

Here, you need to know that most software development companies work by the T&M model, charging hourly per developer. While fixed price suits small projects with set requirements and short-term tasks, T&M allows more flexibility and client involvement throughout the development. Most software building takes time, faces technical challenges and requires changes on the go.

Fixed price software development expectations.

Bottom line: if you really and definitely plan to work with fixed price, it’s better not to hire a software development company.

6. Good at HR

One of the reasons software agencies get hired is because they have all the expert developers skilled in certain languages and frameworks under one roof. It simply saves time and facilitates good management. Although, if you are really great at hiring, can find developers, assemble and run the team with no trouble, then you don’t need an outside company.

When you’re an insider to software development business, then you’ll probably know the right engineers for your project personally or by reference. The only caution herein would be the feasibility for a long-term commitment by your team.

When you DO need to hire an SDC

Based on the above-listed situations, we can summarize why you would need a software development company and when it’s relevant to hire one:

  • When you want to deliver a product to market faster than you’re able to do yourself
  • When you need assistance and expertise of professionals to help you build the best product
  • When you have a proper budget, starting at $25,000, and you want to get the most for what you pay for
  • When you’ve validated the market demand, the product/service, user expectations and prepared the documentation according to the business plan
  • When you want to be involved in the process to manage and supervise
  • When you want to outsource software development to reduce expenses and find talent easier
  • To benefit from the two-way partnership because companies are also interested in projects to succeed.

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