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IT talent-for-hire can give startups a big advantage without risking outside capital or IP, says author-turned-entrepreneur Dave Osh

The author Dave Osh is the Founder and CEO of Execuvite, an enterprise platform for outsourcing complex services to teams of multi-skilled freelancers. He is the author of Outgrow Middle Management.

One of the biggest trends in employment over the past few years has been the transition to a ‘gig economy’. The number of people working in traditional full-time jobs is declining while the size of the independent contractor or freelance workforce is growing.

The Freelancers Union recently reported that there are 53 million freelance workers in the US. That’s more than one-third of the entire US workforce, including independent contractors, temporary workers and freelance business owners.

The talent-for-hire model has been growing for decades but accelerated significantly during the 2008-09 recession. As unemployment rates climbed, many displaced workers carved out niches in the freelance economy, embracing the freedom of freelance work out of necessity. When the recession waned, companies of all sizes were slow to hire permanent employees, preferring to maintain flexibility by utilising more temporary staff, independent contractors and freelance workers.

Tech companies are leading the way

The use of freelance workers has always been common in creative fields such as writing, graphic design and photography, but IT has also been a growth area for independent contractors for decades. Tech companies of all types and sizes have embraced freelance and temporary developers. Even leaders such as Microsoft make extensive use of talent-for-hire, employing tens of thousands of independent contractors.

The main reasons for growth in temporary IT staffing are relatively simple: cost and flexibility

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Of prime consideration is cost: Adding permanent staff members to a development team locks an organisation into ongoing payroll costs. When you include the costs of recruiting, training, office space and equipment, the impact on the bottom line is significant. Once all the overhead expenses are totalled, contingent workers are generally less expensive than permanent hires.

Flexibility is the other primary factor driving the use of contingent labour by tech companies: Most developers are experts in a limited number of technologies, which may restrict the company’s ability to innovate.

In contrast, using freelance developers makes it easy for organisations to fill gaps in their development toolset. When new capabilities are required, companies are free to plug in developers with specific skill sets to work with any underlying technology.

But what about startups?

Can a newly-launched tech company really benefit from the use of freelance developers?

Most startups realise that they can save labour and overhead costs with a contingent workforce, but they wonder if the savings will be worth the perceived drawbacks. The answer is critical to startups because few will get a second chance if a freelance workforce in any way holds back the company.

Let’s take a look at the myths and facts surrounding three perceived drawbacks presented by freelance developers.

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Myth: Investors will not inject capital into a tech startup that relies on freelance developers

This goes right to the heart of a startup’s survival: getting out of bootstrap mode and attracting outside investment is a key component to most startup strategies. If investors were put off by the use of freelance developers, using a contingent workforce would be a non-starter for any startup that hopes to attract investment capital.

This concern derives from related myths that freelance developers cannot be relied upon to deliver top-quality products and that using outside developers endangers a startup’s intellectual property(IP).

Of course, it is true that potential investors want assurances that a startup can deliver the apps, tools or products described in its business plan, and they will insist that the company’s IP is protected, but very few investors will balk at the use of outside developers if they believe resources are in place to push development forward and protect their investment.

In fact, any concerns potential investors have about the use of talent-for-hire will be outweighed by the fact that using freelancers allows the startup to engage experienced developers with specialised skills that are needed to move the company to the next level. In addition, most investors want to see the company hold down costs during early-stage development.

The reality is that plenty of tech startups that make use of freelancers have attracted outside investment. Companies such as PayPal, Etsy, MailChimp and Vimeo are proof that using non-employee developers isn’t a deal breaker for investors.

Myth: Startups shouldn’t gamble on unreliable freelance developers

The reliability of freelance developers is another common concern shared by technology companies.

This myth breaks down into to two concerns: quality and timeliness. Of course, reliability is a concern of companies at any stage of development, but it is especially important for startups that may have all of their eggs in one make-or-break basket.

In reality, reliability isn’t a freelance vs employee issue — freelance developers can be just as reliable or unreliable as regular full-time employees. For proof, consider that just about every IT professional has had experience with in-house developers who lacked the skills needed to produce high-quality work and others who lacked the commitment to deliver projects on schedule.

The key to creating a reliable freelance development team are the same as the key to hiring a reliable in-house team: recruiting, training, and management. There is a temptation to view hiring freelancers as a quick and easy process, and that is true to some degree: hiring freelance developers generally goes faster than hiring permanent employees. Plus, if a mistake is made, it’s relatively easy to remove a freelancer from your team.

Startups can’t afford many mistakes, however, so they must apply a high level of diligence to recruiting the right freelance developers. Careful screening, skills testing and reference checks will help them identify highly-skilled professionals who can deliver great work with long-term reliability.

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Myth: Using freelance developers puts IP at risk

Few things scare a tech startup more than the thought of a developer running away with the code that holds the key to the company’s future. After all, a startup rarely has anything of value other than an idea and the technology or source code that will bring it to life. You can’t spend much time in Silicon Valley without hearing about disputes over ideas and code, often involving big-name startups such as Facebook, Snapchat, Pinterest and Twitter.

But does using freelance developers really make a startup more vulnerable to a loss of its IP? Not really. In fact, the risks of having IP stolen by freelance developers are just the same as the risks of having IP stolen by in-house developers. Once the idea is out of your head it is vulnerable.

The key, of course, is to apply the same level of care to protecting your core technology whether you are working with freelancers or an in-house development team. Careful screening and thorough background checks are essential whenever you are considering giving someone access to your intellectual property. And, of course, you should always have the necessary legal agreements — NDAs (non-disclosure agreements) and contracts — and patents in place before you share your IP.

When it comes to protecting intellectual property, the best advice is to consult with an experienced IP lawyer who is familiar with the needs of tech startups. That’s true whether you’re planning to use freelancers or in-house developers.

The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at writers[at]e27[dot]co

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