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Ask HN: How do SMBs afford such expensive software engineers in the US?

• 55555 5y ago
  > However, if we looked up average household income, these countries aren't too different from the US. And I don't believe American coders are twice the better than coders in the other countries. This isn't very relevant. The USA is a much larger market. It's a little bit richer than most european countries, but the total number of customers to sell to is 4-8X larger, and you can also sell to much of the rest of the world when your product is in English. The engineers who work for non-FAANG are not a part of those high salaries. The average is not a useful number, as many are either well below it or a well above it. But yes, in short, it's hard to hire US engineers due to them being so well-paid. This is why SMBs offshore their engineers from the rest of the world.
• dave_sullivan 5y ago
  A lot of reasons, although a big one is probably the difference in profit margins between a FAANG and most of the rest of the economy. FAANGs have more money and a respect for the value good software engineers represent, so they pay more.
• flowerlad 5y ago
  > And I don't believe American coders are twice the better than coders in the other countries. Maybe not twice as better, but they are definitely better. How can they not be? America has been the immigration destination of choice, of the top coders from around the world for 3 decades.
• PaulHoule 5y ago
  In the same town I have seen programmers doing similar work can have an 2x or 3x difference in pay. I’ve even seen some working w/o health insurance (turned down a job offer years ago over that) although the AHA helps with that. Also the offshore devs are at a disadvantage because of distance, different time zones, language familiarity (not only for client comms but to read the docs), cultural familiarity, agency problems, etc. (I don’t like working for an outsourcer if it means I can’t tell the client the truth about why the project is late - the truth might be less bad than what the client imagines but it still could be bad for the relationship.) The south Asian miracle comes from liberal application of management, more people, lots of documentation - it can work wonders but doesn’t always and adds overhead.
• mardiyah 5y ago
  What is SMB
  • NonEUCitizen 5y ago
    "small and medium-sized business" https://www.salesforce.com/blog/what-is-an-smb/ https://www.salesforce.com/blog/what-is-an-smb/
  • bboylen 5y ago
    I was wondering too - thanks for asking
  • lvs 5y ago
    A dreadfully frustrating file transfer protocol.
• mooreds 5y ago
  I have worked for a few of these. Some things they do: * have smaller staffs * hire younger/entry/intern level staff * outsource to cheap freelancers * outsource to agencies (onshore, nearshore, offshore) * buy saas solutions and glue things together with tools like Zapier * use no-code tools like Excel rather than building software * skimp on software process (no staging, no version control, etc) If the average is 100k, and there is one FAANG developer making $500k, you could have 10 folks making 50k and still have the average work out.
  • phone8675309 5y ago
    I can echo most of these. The small business I started my career with had a small staff, hired me directly out of college (I started there two weeks after I had my degree), moved all of their infrastructure into the cloud so they could scale on demand, did a lot of work with Excel, didn't use version control until they got bit my a major outage due to the owner developing in production and not having a backup, and finally implemented a staging process for changes after that. This was all before the rise of SAAS, but I can imagine they're using more of that now.
• GianFabien 5y ago
  In my experience, SMBs don't hire expensive software engineers. Medium businesses use Excel and packaged software and consultants. Small businesses use Excel, cheap packages, open source and SaaS solutions. Basically their focus is on their business. To them computers and programs are an expense to be minimised. Most small business owners I've met would rather buy a new car for themselves than update the office computer or software.
  • kingsuper20 5y ago
    > In my experience, SMBs don't hire expensive software engineers. I've definitely seen that at the 'S' end of the scale. Programmers who have been there for years, often with no formal education, the codebase looks like them. They tend to be stuck in those jobs.
• SonOfKyuss 5y ago
  Your average non-tech SMB will hire consultants as-needed or go with off the shelf products. Tech-focused companies (assuming they are startups) use VC money and stock options to try and compete for talent.
• omarhaneef 5y ago
  Do SMBs hire software engineers? Software is the ultimate scaleable write once and run everywhere resource. An SMB just runs software already written. The one exception is an SMB that specializes in writing software aka the startup and they usually have to hand out equity and/or pay reasonably well.
  • H8crilA 5y ago
    A ~250 people company is still medium sized, and a lot of those would have some (small) IT staff.
    • oneplane 5y ago
      I suppose that depends on where you live. Some business-sizing is money-based, some is physical-size based, some is headcount-based. In the EU the standard seems to be less than 250 headcount or less than 50 million revenue. But the states within the EU might have different rules.
  • detaro 5y ago
    Plenty SMBs are making physical products running software, have software supporting manufacturing, ... Plenty SMBs producing software are not "startups".
• ozim 5y ago
  Funny thing is that now US corporations are reaching out to hire developers in other countries as well. Pay for devs in EU is going up as well because of that. Local software houses are loosing devs because of that. US based companies with VC money are showering devs with cash. They don't do that to cut costs anymore but to just have developers.
  • kyawzazaw 5y ago
    my previous company has an entire branch in Ukraine. Less need to comply with EU labor laws but equally talented professionals
    • ozim 5y ago
      There is no need to comply with any EU labor laws if you hire developers as contractors or "one person company". Company from US just gets an invoice directly from developer as this is B2B arrangement. The rest is up to that developer if he wants to work 12 hours a day or else. There is also no real "legal way" that they could hire a dev as full time employee if they don't have entity in EU. So there is not much risk, well only that dev might suck, but that is different discussion.
• michaelje 5y ago
  As an Australian working in tech, I can assure you software engineers don’t earn $30-$60k on average. Most people in teams I’ve worked with are on $100k+
  • someperson 5y ago
    You are correct, but the original post clearly used US dollars, but it's not clear you did. So for the context of this discussion I note that $100,000 Australian dollars is $75,000 US dollars at current exchange rates (and 100,000 USD is 132,000 Australian dollars).
  • deleted 5y ago
    [deleted]
• PragmaticPulp 5y ago
  SMBs don’t hire any employees, including software engineers, unless that employee can generate more revenue than they cost to employ. The higher compensation of software engineers means that they won’t be hired for smaller tasks. Generally, SMBs don’t hire software engineers at all unless they’re in the business of making and selling software. Smaller software engineering tasks are contracted out to vendors and custom software shops that may already have similar products that can be adapted to a customer’s needs rather than developed from the ground up. The high software engineer salaries force a sort of efficiency on the market. Smaller startups that want to develop software might offer engineers some ownership of the company, or additional perks like remote work and shorter hours to attract them to jobs that don’t pay the highest software engineering salaries. There are also many junior developers outside of big cities who have salaries more in line with the $60K range you listed. These are not talked about often on HN but they exist.
  • phone8675309 5y ago
    > There are also many junior developers outside of big cities who have salaries more in line with the $60K range you listed. These are not talked about often on HN but they exist. I was one of these for many years in the late 2000s when I first started using Hacker News. One of the things that I think people in the Hacker News bubble seem to miss is that programming/software engineering is a passion for some and just a paycheck to others. There are a lot of fields where a job being just a paycheck to you aren't looked down on - a lot of people in the Hacker News bubble look down on that. My work at that company was just a paycheck while I gained skills on the weekends and eventually started my own consulting company. I credit reading Hacker News for showing me that the best way to start a company is, well, to just do it. I worked for a company that needed a developer to keep their pile of ETL logic and server code working as the data formats they acquired from various government agencies and the requirements of their downstream customers changed. I joined right out of college with a salary during my first three months of $48k with the understanding that it would be increased after the first three months - it eventually settled at $56k for the first year. It was a small company that fluctuated between 3 and 8 full-time employees, not counting management. I made a respectable living during the recession in 2008 because my work still made the company money - I was the only full time programmer there at the time. My ending salary with the company in the mid 2010s was $72,000 in a large south-eastern city where that was above the average salary in the area - in line with CoL. The flipside of making money in a recession when there are still paying clients is when the business loses out on a major contract to a competitor when there's no recession on. Despite riding out the entire recession (with only a small cut to salary due to a four day work-week instead of a five day work-week), the loss of a major contract by my employer meant that the previously stable funding source that allowed me to continue working dried up there. Less than a month after that I was let go, and had to move cross-country to find stable employment as a software contractor. I eventually joined that company full time and my consulting activities have slowed down significantly. More to the question of this topic - after they let me go, they had two people at the company - the owner, who was the president of the company, and the owner's wife, who was the business manager. The president of the company, who was previously my boss, started maintaining the things I worked on, and offered me some 1099 remote consulting work when occasionally overwhelmed as a way to pick up some of the slack. That's how his small business handled having a software engineer when needed - occasional contracts to fill the hole.
• bbarnett 5y ago
  I can't imagine any software dev, working for 30k in Canada. That's close to minimum wage in most provinces, even poverty level in many cities.
  • phone8675309 5y ago
    It beats shoveling shit in Saskatchewan or dealing with any customer in a retail shop (remember those?).
    • bbarnett 5y ago
      Like at the end of Office Space? Desk jobs are fine, but can also be mind sapping horror shows. And who feels justified, working for 1/2 or 1/3rd what most peers are making?
• IkmoIkmo 5y ago
  A few thoughts: 1) SMBs don't necessarily hire that many software engineers. Hell, even tons of large companies barely do. I work at a multinational (100 countries) which mostly buys off the shelf software, and uses basic tools like Excel to run a ridiculous amount of internal business processes. 2) Non-software companies tend to hire software companies, not software engineers. Due to the economies of scale that comes with companies producing and selling (standardised enterprise) software, salaries of software devs aren't that big of a problem necessarily. A company like Trello for example built a collaboration tool with 10s of engineers that has something like 100 million users. The numbers aren't exact, but the order of magnitude is. Beyond that, you'd be surprised how large the nominal income differences are for US/EU companies, individuals, households etc. The extra money doesn't translate into much better quality of life in the US (due to the crappier working hours, the no legal holiday rights, crappy parental leave, no cheap universal healthcare or tertiary education, poor public transport, no walkable cities, inequality, more energy-intensive economy blablabla), but purely on a nominal dollar basis the US really outearns Europe by quite a large margin.
  • gifwithaj 5y ago
    The anti-American scree at the end here is hilariously inaccurate. The "inequality" has a kernel of truth- but that's why having a high salary in the US is amazing. I'm an average developer at an unglamorous company you've never heard of. I have unlimited vacation and lots of company holidays. Parental leave is full pay for 5 or 6 months, my monthly healthcare costs are the same as a single hour of wage if I was paid hourly, which thankfully I'm on salary because I really only work about 30 hours a week. My city isn't very walkable overall, but my high salary means I can live in the area that is. Oh, and despite buying everything that I want I still save so much that I'll be retired at age 40. And again- I'm not special or unique or lucky or privileged. I went to a public school in a poor area, got a job by applying to a public listing with no connections, and haven't had any lucky IPO or investment win, just plain boring salary at a plain boring company writing CRUD applications. Western Europe gives a better quality of life than America if you're low income. America gives better quality of life if you're high income. Eastern Europe is mostly lower quality regardless of occupation.
• OzzyB 5y ago
  Haven't you noticed the rise of all these SaaS companies in recent years? That's because SMB can't afford software engineers (expensive or otherwise), let alone commit to developing complex software, so they simply goto mysaas.com and select a Plan.
• throwaway6734 5y ago
  >Software engineers in all other major countries earns about $30K - $60K on average. These countries include: Japan, China, Australia, Germany, Canada. How are salaries so low there? How do they plan on having competitive tech markets?
  • rmah 5y ago
    They're not, the author's assumptions are out of date. $30k is what a mid-level software engineer at a major firm in India will make.
  • serial_dev 5y ago
    These numbers don't seem to be correct. I have around 5 years experience, living in Munich, immigrant, and I earn around 95K (USD). There is no indication that my salary is significantly above average amongst software developers with similar experience. Not a FAANG company, and I earned this money both at a startup and both at an established German company.
    • fuzzy2 5y ago
      Munich is very expensive so you get appropriate money. Rural areas pull down the average a lot. As a software engineer (not architect, senior, team lead or whatever) your salary is at the very top.
  • monkeybutton 5y ago
    Its a struggle. >graduates from the Universities of Toronto, British Columbia and Waterloo in 2015 and 2016 revealed 66 per cent of software engineering and 30 per cent of computer science students were leaving Canada for work after graduation. https://beta.ctvnews.ca/national/business/2021/5/21/1_5438494.html https://beta.ctvnews.ca/national/business/2021/5/21/1_543849... I wonder how accurate the quoted average salaries are for Canada though. The high end is what a junior developer with no work history can expect after graduating. Senior developers here regularly make 100k+.
    • kyawzazaw 5y ago
• Youden 5y ago
  Fundamentally, software engineers aren't a commodity. They're not all created equal and they have their own desires and preferences which factor in to what they choose to do. The FAANGs in the US will hire basically anybody, provided that person passes their interview process and is willing to physically relocate to one of their offices, which are usually located in major cities that have high costs of living (e.g. Bay Area, New York, Seattle, Boston) and therefore high compensation. But there are many, many competent people in the US who aren't willing to move to one of these major cities, who can't pass the FAANG hiring bar, or don't want to. Those people may be willing to accept a lower-paying job because that suits them better. It might also be worth considering if the role you're thinking of as "software engineer" is actually a "software engineer". Does an SMB really need a "software engineer"? Maybe what they need is a "software developer", which on average receives a lower salary.
  • analog31 5y ago
    I don't think there's a consistent definition of "software engineer." At one place where I worked, you automatically got the "engineer" title if you had a bachelors degree. This was also true for the distinction between "designer" and "engineer" in the hardware engineering disciplines, and "manufacturing engineer" in the plant.
  • phone8675309 5y ago
    > But there are many, many competent people in the US who aren't willing to move to one of these major cities, who can't pass the FAANG hiring bar, or don't want to. The flip-side to this is that, if you're in the middle of nowhere (and demand on-prem), it's harder to attract junior developers for the things that they typically cut their teeth on to move up. This often makes maintenance activities, smaller design and development work, and adding a few extra coders to a project more expensive than they otherwise would be because senior talent is more expensive.
  • stephenhuey 5y ago
    Regarding the competent people who don’t want to, I’ve met many. I remember meeting a guy a dozen years ago who did a lot with C++ and a Beowulf cluster for a very large research hospital and even then his salary was much lower than it could’ve been, so I asked him why he wasn’t at a FAANG (before the acronym existed), and he told me it was because in his current job he could own all his outside work, whereas Google would’ve made him sign his ideas away. I’ve also worked with a very bright developer at a large investment bank and although both of us left long ago, he eventually set up a company doing the most mundane IT consulting (printers and networks for law firms, etc) so that he could focus on his side passions of teaching classes at a local HackerSpace and soddering his creations together there for no money whatsoever. I’ve met a lot of people who are more brilliant or better engineers than a lot of Googlers I know who simply do not desire the job, even if it meant getting paid many times more. Some very talented FAANG people I know wish they were starting their own thing but just don’t know what else to do. Nothing wrong with working a job till inspiration strikes you, though!
• analog31 5y ago
  Many SMBs are wary of the cost of software development, and avoid it. The "magic of software," that you can just write a program and have it start printing money [0] for you, is in most cases a pipe dream. Instead, software is usually just like any other business activity, in that it could be a net asset or liability, often depending on how it affects other parts of the business. In addition, if you don't understand software development, you can't manage it, and it can eat you alive. [0] either through sales or increased productivity if it's software for internal use
  • denton-scratch 5y ago
    > it can eat you alive Software development projects are incredibly risky. Estimating development costs is an unsolved problem. I've worked for major software company that cancelled a 5-year development project, employing >200 coders. Government projects seem to be particularly prone to huge cost overruns; I suppose it's because there usually isn't any single stakeholder, because the specification was written by a committee, because the funding is provided by taxpayers who can't choose to withdraw funding, and because "events, dear boy" result in changes to the goals of the project. I'm really talking about major projects; small projects can usually be cancelled with little harm.
• rossdavidh 5y ago
  As a freelancer who has worked for several SMB's, I feel qualified to answer. For the most part, they don't. They may hire someone like me for a project, for a few months, and then perhaps an agreement to do a few hours/month of maintenance afterwards. But they don't normally hire a full-time, permanent employee who's a software engineer. In cases where they do, it is because that is fundamental to their business, i.e. they're a software company or something similar. There are also SMB companies which provide IT services for other SMB's, which also bill on an hourly basis. It essentially is several SMB's each paying part of the bill, and that IT services company works for several of them. I should note that, for small companies, something similar often happens for accountants, payroll, and other HR functions; they contract with a company that does this kind of thing for several small businesses.
• Popegaf 5y ago
  Does anybody have stats on the average or media profit for SMBs with software developers per country? I'm willing to bet the differences across countries have something to do with that. Most other countries (and economic unions like the EU) don't have a homogeneous market, which is mostly due to language and history, as well as infrastructure. Companies in the US can optimally target ~300M clients in the US alone with a digital, English offering. that number just rises if you're willing to go to other English-speaking countries. If you were to compare that to a company in say Poland, Thailand or Argentina, either your product won't reach most people because the infrastructure simply isn't there, and the market can be quite small too. Some countries are also notoriously difficult to start a business in due to worker's rights or burdensome procedures. Other regions in the world couldn't do/haven't done enough to provide a stable, slightly homogeneous market, due to old rivalries, foreign influences (Afghanistan, Venezuela, Chile, Egypt, Jordan, Kenya, Iran, Iraq, etc.) or just straight up negligence and arrogance.
• clipradiowallet 5y ago
  I've contracted and consulted for several SMB's in the past, and none of them had software engineers on staff. They would get software built/maintained via an agency that used contractors, or less often, by managing their own contractors without an agency's help. Several SMB's had employees that had a job title unrelated to SWE, but still did lots of SWE tasks. Often these would be one individual maintaining an intranet portal, or some UI program for data entry that sales staff used.
• pcmoney 5y ago
  Be careful with averages. Sure FAANG engineers can commonly make $200-600k. But the last equivalent tech co I worked at had 3 per 1,000 applicant acceptance rate (sure they probably also had a lot of people applying without a prayer) I wonder what the median is? Also beware of survivor bias. At successful, public TechCos equity compensation typically grows over time due to the rise in stock price (if it doesnt the pay quickly becomes more average and/or the company goes bust) You can easily have an L4 engineer making L6/7 money because their start date and RSU pricing was lucky. Absolutely nothing to do with their skill…
• brundolf 5y ago
  What are SMBs?
  • Matthias247 5y ago
    small and medium businesses
• AtlasBarfed 5y ago
  SAAS exists to serve these companies pretty well. The cloud has helped even more with getting services procured for less than the granular cost of a full time employee. It's a big paradigm jump to go from SMB with mostly externalized functions/SAAS to getting economies of scale with your own major IT department, assets, and facilities. I've argued for years that MBAs need to be trained on the fundamentals of IT as much as finance and accounting: large enterprises are all IT organizations now, and good IT is a major major competitive advantage in the marketplace and a primary source of large economies of scale and efficiencies. The biggest example of this is Amazon, which essentially competed in the retail space as a very well run software/IT corporation. And now they dominate not just online retail but the cloud.
  • AtlasBarfed 5y ago
    I'd like to qualify my remarks on amazon: they are a very well run software/IT firm... from the persepective of competing IT execs in retail. Really they have a CIO as a CEO, and that's the difference between them and their non-IT CEO competitors. Bezos tried to solve everything with software.
• gmays 5y ago
  My wife owns a ~$1M business in retail. She's never hired a software engineer and primarily relies on SaaS, though I research/setup everything for her. SaaS solutions these days are pretty robust. Some examples of what she uses: - Shopify + a number of add-ons to run the store, including Shopify running on iPads + bluetooth scanners for the POS. - WordPress + Gravity Forms to run the jobs site with an automated job application flow. - WordPress + Gravity Forms for custom order flows. - Quickbooks - Nest for remote security system - Shopify email marketing (used to be Constant Contact) - Google Workspace for email/docs - Misc. apps like TSheets for employees clocking in-out. - Facebook/Instagram for marketing, including weekly Facebook Live shows they started during the pandemic and continued because people love them. They have thousands of products so inputting/maintaining inventory, adding images and unique descriptions, etc. is still cumbersome (e.g. getting CSVs from vendors).
• deleted 5y ago
  [deleted]
• jlawer 5y ago
  I would say in Brisbane, Australia the average pay for a Mid level is a $110k AUD package, with seniors being $130k AUD up. Keep in mind Australian listed salaries are often BASE. On top of this you need to factor an additional 9.5% superannuation (A kind of mandatory retirement savings) that must be paid. Project labour charge out rates start at $150 AUD an hour for a junior. Seniors can cost over $300 an hour. We are a high labour cost market. Firstly most companies don't roll their own software, a lot of stuff is done with off the shelf products, and maybe some outsourced customization (especially in the web space). Custom software is typically only developed if 1.) there is a pressing need and 2.) there is nothing that can already fit the bill and 3.) it will result in a large enough business benefit to cover the cost. Now there are things SMBs that do create software do to get better efficiency. Firstly teams tend to be smaller, often with a push for everyone to be "Full Stack". Originally this was Backend + Frontend, but this is often including DevOps, QA and more. Teams will often require everyone to work in every skill area at least at a junior level. Secondly there is a push in a lot of organisations for more then 38 hours of work a week in anywhere that is billing out staff.
• France_is_bacon 5y ago
  I work only with small businesses and they don't hire people. For example, I'm doing a custom project for $6K. It will take me a few days, but $6K is much less expensive than hiring a full-time person for $60K or $100K or $200K or whatever. Also, there's really not too much software that a small business needs. Quickbooks. Excel. Salesforce/Zoho/whatever for the CRM. A website. What else does a small business need? When they have special needs, they just get someone like me. It's not like every business is building a nuclear reactor and needs various monitors and alarms and stuff, whatever they even do with reactors, I don't know. There's all kinds of outsourced tech support - phone or onsite. MSPs. Everyone says to find a niche and fill it and that is how you can be successful, but everyone knows this, it is no secret, although so many people do, as if they are the only ones that know about it. But anyways, as a result, there is specialized software for everything imaginable. Damn difficult to find a niche that someone's not trying to exploit. Name an industry, a sub-industry, a sub-sub-industry, a sub-sub-sub-sub-sub-sub-industry and there's specialized software for it.
• softwaredoug 5y ago
  I’m perplexed by the opposite. Why do SWE salaries stay so low on average in developed countries outside the US? (Or maybe they don’t? Or maybe it’s not an apples to apples comparison?)