You may wonder why San Francisco software companies outsource. Silicon Valley is the land of hopeful tech startups and prosperous tech giants like Google, Salesforce, and Apple, and in recent years, there has been a major trend towards “local development” meaning onshore and basically built in your backyard. Proponents of in-house only software development argue that the highest quality can only be found in the US, specifically in San Francisco. While some companies like Facebook, built their core product in-house, other San Francisco startups are looking for a high quality but lower cost option. The answer to this eminent need? Outsourcing.
The Talent Pools
To start off let’s take a look at what the market for software development in San Francisco looks like. The Bay Area is host to between 14,000-19,000 active tech startups compared to the US metro average of about 4,000. This has created a big draw for developers to head west for ample work opportunities. Some software developers in San Francisco are paid up to $250,000 annually. Alongside this hefty salary, developers can expect some attractive perks and equity packages to make the commitment well worth their while. While this number is stifling, it’s not the norm for the rest of America. In fact, the national average for software developers is a measly $91,000.
So Why Do Software Companies in San Francisco Outsource?
From this we can extrapolate a few things; the market for software development in San Francisco is heavily saturated and growing (The projected percent change in employment for this profession is 17% from 2014 to 2024- that’s 10% greater than all other occupations). Because the market is so saturated, this makes hiring and retaining developers extremely difficult for San Fran tech companies, because all of the Silicon Valley is looking to hire the same people. The competition for talent includes thousands of startups as well as the big guys like Facebook and Google. This competition for talent inevitably increases costs. Who incurs the brunt of that cost? You. C|net has found that the steepest competition between tech rivals is not for market share, but to find and retain the most skilled workers.
Take a look at the salary growth for software developers in California over the last six years. There has always been a premium on Silicon Valley software development and apparently, that trend is also not dying out. Over the last two years, there has been a 10% increase in salary for software developers in Silicon Valley.
It’s Not What You Think
Because the cost to develop in the Bay Area is so high, California tech companies are looking for an alternative (and their customers may not even know about it). The best option has been outsourcing their work to offshore software developers. InformationWeek says that Silicon Valley tech firms are even more likely to offshore than the average U.S. technology company. As many as 64% of tech companies in Silicon Valley outsource services or production outside the U.S.
Another important factor to account for is the cost of living in the Bay Area. San Francisco is one of the ten most expensive cities in the U.S. Which means overhead for office space, even for a small startup, is not cheap. The caveat employers face paying their developers a salary that is attractive enough to retain them and allows them to live a commutable distance to the office. Need proof that living in the area and working for a big tech company is not as easy as it seems? Read this girl’s story.
Choosing to Outsource
With so much competition in the California tech vault, it’s no wonder why San Francisco software companies outsource. We’ve said it before, we’ll say it again, in-house development is SO expensive! In-house development may be a good fit for some of your product needs but it may not be the best fit for your whole product.
You may be asking yourself, “why would I use a Silicon Valley tech talent that I pay a premium for when I could outsource?” I’m asking many of my colleagues the same question. In my experience, outsourcing has proven to be wildly successful, Agile, and a fraction of the San Francisco cost.
There are outsourcing partners who use all kinds of offshore software development models. Pick the one that’s best for you and run an experiment to see if you can find a model that works for you. Companies who are built on outsourcing know how to manage your project effectively, keeping you in the loop on every detail.
Benefits of Outsourcing Your Software Development
Active management. You can have an actual conversation with the actual developer actually building your product.
- Cost savings. You don’t have to pay for your SF tech company’s deluxe coffee bar
- Faster production. Less competition means more time for your developers to dedicate to your product.
- Top talent. Outsourcing development means you get to choose from a global range of developers rather than just those in between Mountain View and Santa Clara.
Whatever your options are on the Silicon Valley tech scene, there’s no denying that it comes at a high price. While some argue that Silicon Valley is the only place to have your software developed, those embracing a distributed workforce are using the money they saved in deciding to outsource to build better features into their software.
At Zibtek, we offer custom software solutions for businesses of all sizes. Our digital strategy, design, and custom software development solutions have helped a wide range of clients to meet their goals—ask for a free consultation to find out whether we can do the same for your business.