Quantity vs Quality Software Agencies

I have spent my entire career working for software development agencies – 1 year at Xhibit, 8 at Vuria, and now 4 at Vincit. In those 13 years, I have experienced a fairly wide range of approaches to the agency model. In general, there are two types of agencies: "Quality" agencies like Vincit that focus on giving the best possible product, and "Quantity" agencies like Vuria who are less focused on quality and instead focused on completing as many projects as possible. There is a middle ground as well, but that's a very tough spot to settle into and remain stable.

In this article, I will go through some of the benefits and downsides of both styles as both an engineer and a client and hopefully shed light on when to choose which.

What is an agency?

A software development agency is a company that specializes in designing, building, and maintaining custom software solutions for clients across various industries. Essentially, the agency hires a staff of software engineers and graphic designers and then sells their working hours to other companies, often (but not always) those without internal software engineering teams. Different agencies will offer different services and have expertise in different areas and technology stacks.

How do agencies make money?

There are a variety of ways but the three most common are:

1. Project work – A client hires the agency to build a project – a mobile app, an e-commerce storefront, a marketing website, an embedded system – and the agency fulfills that order over the following weeks/months.

2. Staff augmentation - This model has many names but essentially a company with an internal team will hire an agency to fill certain roles on that team with engineers with expertise in a specific field. In these projects, the client runs the project and the agency is just another team member.

3. Ongoing service - An agency is hired to provide monthly support which can be maintenance, security work, new features, etc. In this model, the client will generally purchase a minimum number of hours per month.

Additionally, there are two pricing models: Flat Rate where a price is agreed upon up front and Time & Material where an hourly rate and a starting budget is agreed upon up front and then consumed hourly.

Why hire an agency instead of your own internal engineers?

Generally it is because the project is looked at as a large up-front cost and then insignificant ongoing costs. If you're going to spend $200,000 in 4 months to build the project out and then only intend to spend $10,000 annually on support and maintenance, it doesn't make sense to hire an employee. For a company without internal technical resources to start, building out that team with competent engineers can also be extremely difficult. Further, a company with internal engineers often needs to scale up or down rapidly or needs specific expertise for a short project but not long term support.

An agency already has a vetted team of engineers available for a company to use.

Quantity Agencies

Quantity agencies like Vuria focus on selling a lot of projects for low amounts. This results in low margins, but because they sell so many projects, they rarely have significant difficulties unless they try to grow in any significant way. Most agencies doing WordPress work fall under this category, but not all.

Benefits

1. Cost certainty - Many Quantity Agencies will work on fixed-fee contracts. You agree to pay them $10,000 and they'll give you X, Y, and Z.

2. Speed - A Quantity Agency is generally focused on getting projects done quickly to maximize the margin on the often-fixed-fee deal, and to move onto the next project.

3. Smaller - Quantity Agencies often take on smaller projects than Quality Agencies. For example, if someone else built a mobile app 5 years ago and they need to update it so it doesn't get pulled from the App Store, a Quantity Agency would be more than willing to take on a 1 week, $8,000 project to do so where as a Quality Agency would pass.

Downsides

1. Speed - The speed at which these agencies work generally result in lower quality products that take shortcuts to be produced cheaply.

2. Wait - While the agency will generally move quickly with your project, it's possible for projects to fall between the cracks where they need a specific engineer who isn't going to be available for a few months.

3. Technical Focus - These agencies are generally focused on a specific tech stack or two. In many cases, they are very good with those stacks but if they are tasked beyond them, they may struggle or try to use what their used to.

4. Engineer Face Time - Clients will generally have less face time with the engineers on the project, if any at all. Instead, they'll work with a project/account manager and possibly the head of engineering who will act as the go-between and provide customer support.
   
   The exception here are agencies who regularly take on any work that comes their way, like my old agency Vuria. At Vuria, every project was fairly unique and often required different tech stacks. As a result, a lot of the engineers there became "jacks of all trades." For example, at Vuria I worked in PHP, ActionScript, Java, Python, Ruby, Objective-C, Swift, and JavaScript/Node.js, worked on everything from mobile apps to ERPs to dashboards to devops to IT, and contributed quite a bit on the marketing/SEO service side. It's difficult to know if an agency is like this from the outside, however, so I wouldn't count on such an agency having a wide variety of skills available.

Should I work for one?

It depends. In my opinion, the environment is incredibly good for a junior developer who learns by doing. The environment will be chaotic, you'll work on multiple projects each week, you'll rapidly learn different technologies and techniques and how to build quickly, and you'll often contribute outside of just development. It's also great for individuals – like myself – who thrive under pressure and when they have a dozen different things on their plates.

If you prefer to focus on a single task for long periods (i.e. longer than a few weeks at most) then I wouldn't even consider it. Client relations can also be a bit of a headache when your 20 person team has 120 active clients at any given time. And if I'm being honest, you don't get that same feeling of relief when a project launches – in other agencies, you'll take the rest of the day off and go out with the team for drinks but at a Quantity Agency, you're starting on the next project immediately.

These types of agencies suffer from a lot of employee burnout and churn. Some people will really thrive in the environment, but many will never be satisfied.

Should I hire one?

If you're looking for to build a small website or mobile app, then a Quantity Agency will likely provide the best bang for the buck. They're predictable, they know how to work on such projects and with such clients, and they'll generally do it quickly. However, you should be aware that this will not be the highest quality end-product and will likely not last as long as a product from a Quality Agency.

Quality Agencies

In contrast to a Quantity Agency, Quality Agencies typically work on far fewer projects at any time. They'll sell one large project that will occupy multiple employees for months at a time. These projects will be higher margins, but can be more difficult to sell which can lead to some instability in the company.

Benefits

1. Quality - As the name implies, the end product from these agencies is generally much higher.

2. Expertise - Agencies that focus on quality and have a sizable team (50+ engineers) will generally have experts on staff in a wide range of disciplines. This means that if you come to them with something obscure, they likely have someone to work on it.

3. Client experience - This type of agency relies heavily on recurring business and often will give the white glove treatment to clients to keep them happy.

4. Employee experience - The higher margins lead to higher salaries, better benefits, and a better work/life balance.

Downsides

1. Cost - This type of agency often charges significantly higher rates. In the end, you get a much better project that typically validates that cost but it may be difficult to swallow when you see one agency charging $200/hour and another charging $115/hour.

2. Time - The project timeline will generally be longer and depending on what type of expertise you need, may not start immediately because the experts are busy on other projects.

3. Patience - Because these agencies typically book their engineers for months at a time, they are less able to adapt to downtime caused by the client. Unresponsive or unprepared clients will likely see engineers disappear from the team as time goes on.

Should I work for one?

For the most part, working at an agency like this is similar to working for a product company except for two things – compensation is significantly less and you'll get a completely new project every few months. If you like the occasional change of pace, it might be for you.

Should I hire one?

If your budget is $100,000 or higher or is more complicated than a content-heavy build, then yes. If it's less than $50,000, then no. Agencies like this don't do well with smaller projects but provide great value for medium sized projects. On larger projects ($1,000,000 or higher), it can really go either way and at that point, I would recommend the staff augmentation model.

Middle Ground

Some agencies offer both models, especially much larger ones. Big consulting agencies like Deloitte, Accenture, and Capgemini often have different teams targeting both. If your company is already working with such a consultant, it's hard to argue against them even if the final product is often a little underwhelming for the premium price tag.

Others, like Vuria, will target small projects at a high volume and then have a few comparatively large projects with good margins that are longer term. If you're able to be one of those clients, the agency will give you the absolute best it is able to and treat you well. If you're an employee working on those types of projects, you end up with the best of both agency models.

Summary

There's nothing inherently wrong with either the high-volume Quantity Agency model nor the costly high-value Quality Agency model. Both serve fairly distinct purposes and markets and depending on your project or employment needs, they will both serve you well.