ROI of Working with a Digital Agency

Published on August 24, 2021

Your team determines it needs a digital product, like a customer-facing app or a custom CMS/CRM tool. Or maybe you already have several digital products and want to consolidate the management of them, such as getting your Salesforce data to sync with your app.

What’s the first step you’d take to get that product built?

If you are like most organizations, you’ll turn to your HR department which either hires the talent directly or works with a recruiter to help them “put butts in seats.”

Often, companies don’t know of another option. If you’ve never worked with a digital product agency before, it’s not likely to be the first or second thing to come to mind. (Side note: that’s why we have our marketing work cut out for us.)

There are many reasons why it makes sense to work with a digital product team over hiring an in-house team, and we’ve talked about those benefits in previous blog posts, but this post is about one clear, tangible benefit.

If we’re being honest, it’s the benefit everyone cares the most about:

Cost savings.

You’ll find plenty of articles that break down the general costs of working with digital product agencies versus hiring your own full-time team. But we don’t want to put similarly vague numbers out there. We want to be transparent and visually show you the value of working with an agency, using numbers pulled from actual client projects of various sizes.

When will I see a return on my investment by working with a digital product agency instead of hiring my own team of developers?

First, some data. Depending on your location, hiring just one software developer in the US can cost between $137K and $173K per year for salary and benefits. For the sake of calculating ROI, we used $150,000 since it’s a nice, round, middle-ground number.

Since most projects need both an iOS and Android developer, or a web and server developer, we doubled that $150,000, so to hire both, you’re looking at around $300,000 a year.

To compare that spend of $300,000 per year, or $25,000 monthly, to the cost of working with a digital agency, we looked at the development costs of two recent projects.

Client A: A funded startup building an app-based business

This project needed advanced iOS and Android apps to launch their business. It also needed an admin web dashboard (which requires a front-end web developer) and server development (which requires a server developer). Taking these four positions into account, we compared the cost of hiring this team internally versus the actual costs of working with an agency like JMG.

Here’s the visual.

As the green bars show, the cost savings of working with a digital product agency were immediate. For the number nerds out there, here’s the exact data we used to make this visual.

Notice the Cost Savings once outside the Development Phase? This is where the financial impact of working with a software agency pays off. Once an app or website is launched and is in maintenance mode, you can reduce your contracted hours with an agency and put that budget toward marketing and sales.

Another value of working with a software development agency is that the team isn’t composed solely of developers. Take our team's composition at The Jed Mahonis Group, for example. Clients get access to our entire team of developers, plus our QA staff, project managers, and business strategists, all roles vital to the success of a custom digital project.

Client B: A large organization with an existing technical team

Now let’s say you’re an enterprise-level company that needs full-time attention on an innovative mobile development project. When can you expect to see ROI?

This particular client brought their own team to the table, which included server and web developers, a project manager, and QA testers. However, their team had a talent gap: they had no one with mobile expertise.

They could’ve hired iOS and Android developers directly, saving them money initially.

Since the project needed the weight of multiple full-time developers, they chose to partner with a tech agency and save money on the long haul.

Let’s take a look:

This is often the type of client that overlooks digital agencies and approaches the problem with a mindset of: “If we need something done, we’ll hire someone internally to do it.”

This is also the type of client that benefits heavily in the long run from working with an augmented staff, or what we like to call a scalable development team because mobile development isn’t always a full-time gig.

After the development phase, which generally lasts about 6 months, contracted time with a digital product agency starts to go down as the app moves into support mode. With full-time staff on board, you don’t have that flexibility.

After 15 months, our client saw their ROI by working with an agency. Two years in, we’re still working with this client on their apps while they reap the financial benefit of not having to support in-house mobile developers since their apps no longer need full-time attention.

How does this work for JMG?

It should be obvious now why you would win: in the long term, most digital products don’t need full-time attention after the initial build. You save money by just bringing in digital product teams when you need a heavy effort applied to the problem, and once the big lift is complete, only apply a handful of hours each month to keep the lights on.

We win because we have enough staff that we're able to work on more than one project at a time. We’ve collected a talented group of developers, designers, project managers, and QA peeps, so you’re essentially sharing this pool of resources (and expenses) with other companies.

This doesn’t mean we’re any less focused on your project, but it allows us to be a more affordable option than hiring talent directly.

You’ve heard the “rising tide lifts all boats” aphorism. We form long-term partnerships with our clients because when they do well, we do well. This means we also make money even after development ends with a small, ongoing maintenance fee. We take care of all the “under the hood” issues that keep digital tools performing at their highest level.

Takeaways

While this post’s focus is on cost savings, a very tangible benefit, the biggest value proposition of working with a digital product agency is one that isn’t easily quantified: Having someone in your corner who will say “no.”

An employee may not have the courage to tell you why you shouldn’t implement a particular feature or choose one tech platform over another. Companies often come to development agencies with a failed project, so we’ve seen it all and fixed it all. Read more about why you want to work with a development team who will keep your project in scope.

This leads to our other key advantage: our experience level. When you hire internal staff to just work on your project, they obtain more domain knowledge in your area of business than we could. However, our team works on all kinds of iOS and Android apps, Ruby on Rails websites, APIs, Bluetooth integrations, Salesforce integrations, and more, so we have explored every corner of what a digital tool can do, and we can guide you in finding more ways your product can help you and your customers achieve your goals.

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So what’s your project’s projected ROI? Visit our Pricing page and make some rough calculations or chat with a developer for a more concrete number.