15 Critical Factors to Consider When Choosing an IT Service Provider

Wednesday, August 3, 2022

15 Critical Factors to Consider When Choosing an IT Service Provider

Hey everyone. I’m Alex, a co-founder, and CEO of an IT agency Altence

When communicating with potential clients, quite often I hear the same question  — how and why our development team is better than freelancers? This is where I usually go through a list of unbeatable factors, demonstrating the benefits of working with an experienced team. So I decided to come up with a comprehensive article on how to choose the right IT service provider. 

Since 2014, I’ve worked in 5 different tech service companies apart from being a freelancer. Today, I’m sharing my experience to help you go through the wilds of choosing a tech service provider. 

In this post, I want to dig deeper into how the size of the IT vendor affects the whole development journey and product launch. Let’s compare services providers of all sizes — from different angles from a client perspective — to see who to entrust your project to. 

The 3 most common sizes of IT service providers

When it comes to finding developers for your next great product, there are 3 most common sizes of your future partner:  

  • one-man companies (simply freelancers) 
  • small businesses (up to 50 people on board) 
  • medium-large companies (50+ employees) 

You surely noticed that I merged medium-sized companies with large enterprises. I did it on purpose. From my experience, there’s no big difference in processes between these two.

So let’s start comparing — to unpeel the unknown behind the work of technology service providers.

#1 Expertise

Freelancers must be highly experienced in their domain. Otherwise, they’ll be struggling to find projects. But what happens quite often is that freelancers juggle multiple similar projects simultaneously. They don’t have time and not even a need for ongoing self-education. For customers, this usually means getting not the most optimized solutions, which entails additional development costs.

As for small companies, building a good core team is a crucial point — to keep the company growing around it. Therefore each member is passing several-steps interview processes to validate their soft and hard skills, together with a rely-on attitude. And if a candidate gets hired, they fully understand their role – of representing the company and actively taking part in its growth.

Unlike large companies, where basic knowledge and experience (or probably just excellent soft skills) are often enough to get hired. Often, interviewers are more focused on closing urgently-needed jobs rather than on the contribution employees can bring to the company. I’m not saying that big companies do not have high-level experts, but on average people here are less interested in self- and company growth.

As a rule, small companies have strong engineers with comprehensive expertise in the modern tech stack, who know how to provide reliable, cost-effective solutions.

But if your project requires an extraordinary solution or specific knowledge – you’re more likely to find needed expertise in large companies.

Freelancers Usually experienced in most-used technologies
Small teams - Comprehensive expertise in modern tech stack
- Lack of knowledge specific and rare technologies
Large companies - Highly experienced in specific technologies
- For popular technologies, provided quality may significantly vary

# 2 Quality

Both freelancers and small businesses care more about the quality of the solutions they provide. This is dictated by the fact that they care more about their reputation as references and word-of-mouth are important channels for getting new clients.

Larger companies surely care about quality standards, but from my practice, this we-care attitude relates mostly to key clients. Don’t really expect an exclusive treatment unless you’re a big fish for them.

#3 Price & Rates

If you’re on a low budget and need the cheapest option, freelancing mid-level developers are what you should be looking for.

Strong experts can ask 3X or even 5X more than their mid-level colleagues. These rates are pretty much comparable to the rates of large companies. 

As a rule, small agencies will ask up to 2X less than big companies. That fact can be easily explained by tax preferences, the absence of bureaucracy and middlemen, flexible internal processes, etc.
So as a business owner, you may want to go the extra mile to find the best value for money.

#4 Project budget

The larger the company — the larger the budgets they want. If your budget is less than $5,000 (or you need a one-time service) then, most likely, freelancers are your only option. 

Small teams are ready to jump to your project with a budget starting from $5,000 to $10,000. For large companies, the usual budgets start from $50,000 to $100,000 and they focus on corporate clients only.

Project budget starting from (approximate numbers)
Freelancers can work with any budget
Small teams from $5,000 - $10,000
Large companies from $50,000 - $100,000 and up

Note: All numbers demonstrate the most common range of prices & rates and may vary, depending on industry or project.

#5 Project duration

The longer the project — the bigger company you can choose as a service provider.

If you need one-time help or your project duration is quite short (approximately 2-3 months) then likely only freelancers are available for you. 

If you are working on an MVP, then it’s smart to turn to small agencies for tech help. For long-term projects, large enterprises become an option as well.

Project duration starting from (approximate numbers)
Freelancers any duration
Small teams 3+ months or MVPs
Large companies long-term (1+ year)

Note: All numbers demonstrate the most common practice and may vary, depending on industry or project.

#6 Project start time

When freelancers are taking on a new project, obviously they start right away. Unlike companies who usually take some time before starting. 

Depending on the project, start time varies for small and medium/large companies. Large enterprises allocate more resources for early starts (and team scaling) — due to the bench developers. For smaller teams having a bench is a luxury, so expect a waiting period before devs proceed with your project.

Project start line
Freelancers within a few days
Small teams usually takes more time
Large companies small period of time

#7 Delivery time & meeting the deadlines

Both freelancers and small companies are more motivated to meet deadlines — in order to save valuable reputation and maybe get a reference later. They may even overtime to meet the required deadlines. From what I’ve noticed, freelancers overtime more frequently, as doing all the work on your own may lead to misestimating the tasks.

Medium and large companies hire managers for the purposes of planning and on-time delivery. Therefore overtime cases are much rarer. Another fact worth mentioning is that developers in large firms are less motivated to overtime — as quite often they don’t care about the project in their off-hours. 

Freelancers - motivated to overtime
Small teams - motivated to overtime
- less mismatch the deadlines
Large companies - less motivated to overtime
- less mismatch the deadlines

#8 Staff turnover

Freelancers should be good self-organizers and properly manage their work-life balance. Otherwise, they’ll get buried under all the projects they have to handle. And being overwhelmed is the point where you may lose your provider, as they give priority to other more profitable projects. As a project owner, you should always keep that case in mind, because losing your existing freelancer may cause serious delays and additional costs.

For small teams, a dedication to the company is much stronger. From what I’ve seen, staff turnover isn’t typical for small firms.  Here’s a real-life example – in 3 years in the company of 20 engineers there were only two cases of developers leaving the company or changing the project.

In large companies, lead-position engineers (team leads, tech leads, managers, etc) rarely switch to another company or a project. What usually keeps them in their spots is their unwillingness to deal with getting out of their comfort zone. With a solid background, high salaries, and understandable yet predictable processes, they feel easy where they are. Unlike junior, middle, and sometimes even senior developers, who are jumping from company to company, constantly looking for better working conditions and higher salaries.

#9 Team mood

Many ignore this point until they encounter its negative impact on the whole development process. So I advise considering it, even if not in the first role.

Small teams are more solid and cohesive. Everyone understands their impact on team productivity and stays involved in the overall performance of the company. 

For larger companies, things are not so rosy. Likely, developers know only their teammates and a manager. They are detached from the company as a whole, and nothing drives their personal interest in its overall growth.

#10 Team scaling

Another point that gets unnoticed until you run into the impossibility to adjust a team to the growing needs of your project. 

If you’re working with a freelancer, scaling a team turns out to be another challenge and definitely requires additional efforts and costs for, in fact, finding a team.

Small companies are more flexible but may still need additional time to find the in-need devs with the required skills, especially when specific expertise is needed. 

For large IT service providers, fast team scaling is a cushy job due to their bench and staff, packed with all types of technical skills.

#11 Management and process organizing 

Freelancers are self-managers, estimating and prioritizing tasks on their own. And, like said above, this often entails misestimates — the most frequent reason for delays. 

Small teams often don’t have on-board managers but are ready to offer them upon request. 

In large companies, managers are commonplace since there are established processes for working with a large number of projects, which requires accurate planning together with efficient use of resources.

Whether you need project management or not completely depends on your product. If you have a large project then a qualified manager is a must. For a project team up to 10 members — likely not.

#12 Tech stack

As a rule, freelance developers are focused on the most in-demand technologies. So requiring additional technologies or frameworks on the go may become a bottleneck for developing your product.

Small companies usually have a primary specialization in particular technologies, combined with a secondary focus on others. Plus, they can always find the needed experts if the project requires so. 

Large IT providers are ready to offer a comprehensive technology stack and can easily hire super unique specialists per request.

Top & Popular Programming Languages in 2022 by Stackoverflow Ranking. Source

#13 Bureaucracy

Unforeseen obstacles and urgent matters will arise during developing your product. And this is where bureaucracy in all its glory may step in to play.

In small firms, you’re more likely to reach out to C-level executives, who can help resolve your problem, compared to large companies where you may be redirected several times before you get to talk to the right decision-maker.

Bureaucracy together with established inflexible processes can significantly slow down the entire development process, thoroughly pushing back the release dates. Therefore, you shouldn’t write this point off when choosing a provider for your project.

#14 Software, services, devices

At certain stages, the availability of all kinds of devices and software may become crucial for delivering high-quality products. For example, testers may need the latest iPhones to see whether your app runs smoothly on all models. 

This is where freelancers usually yield to companies. The larger the company – the bigger variety of software and devices it runs. 

If this point sounds related to your project, ask about it at the very beginning. 

#15 Security policy

Businesses in certain areas (like Healthcare or Banking) are deeply concerned about privacy and security issues at all stages of their operation. So if you, as a business, want to be sure that your project source code and user data are securely protected — turn to medium and large companies.

What I’ve witnessed is that larger companies are more likely to have security policies that are actually strictly followed. Starting from internal servers to security personnel and e-locks on the room doors.

Final thoughts

As a business (and project) owner, you’re now all equipped with things to consider before jumping on board with a certain tech vendor. 

Choosing the right IT provider may be crucial for the success of your project. Consider all the mentioned factors, surely stressing most mattering for you. As your project evolves, some factors will come to the first roles, and others — lose their relevance. 

If you need a particular hint on choosing an IT service provider, or are not really happy with your existing one, reach out to me at [email protected] for free advice.

Alexander Rudnik
CEO and Co-founder
August 5, 2022

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