Why It Pays Some Coders to Simply Freelance

James Knight recently made an unorthodox career move for a 27-year-old coder: quitting a well-paid job writing software for Google to go freelance. No more catered lunches, gold-plated benefits or million-dollar views from the search giant's Manhattan office.

Knight is willing to sacrifice those perks because, he said, as an independent he's pulling down about twice as much as he did at Google, with more freedom. In March, Knight and his wife plan to hopscotch across Europe while writing code for a dating app and a self-portrait app, among others.

"I'd rather control my own destiny and take on the risk and forgo the benefits of nap pods and food," Knight says.

Amid an accelerating war for tech talent, big companies and startups alike are paying top dollar for freelancers with the right combination of skills. While companies still recruit many of the best minds, they're turning to independent software developers to get a stalled project moving or to gain a competitive edge. Sometimes, the right person can be the difference between a failed and successful product.

Last spring, Aaron Rubin hired a freelance coder through recruiter Toptal for about four weeks to help get ShipHero, his cloud-based logistics startup, off the ground. "To find someone that talented in New York in three days was never going to happen," Rubin says. "Every talented engineer I know has a job."

Independent software developers like Knight represent an elite echelon of the so-called gig economy-a 53-million-strong army of freelancers who now account for one in three workers, according to the U.S. Bureau of Labor Statistics.

The need for coders mushroomed when the iPhone's arrival in 2007 set off an explosion of mobile apps, with software seeping into fridges, watches and apparel, requiring ever more people to write the underlying code. Demand for software developers is expected to grow 17 percent between 2014 and 2024, or more than twice the average, according to the bureau, which estimates that the the U.S. will have 1 million more information technology jobs by 2020 than computer science students.

Big companies have resorted to "acqui-hiring," or buying out entire firms just for their engineers. Most have dedicated engineering recruiters, but finding the right people can be pricy and time-consuming. So companies have turned to a host of freelance agencies that specialize in finding top-notch coders.

Five years ago, Toptal, a self-described freelance network, had 25 programmers on its rolls and about the same number of clients. Today it represents thousands of coders (it won't specify how many) and has more than 2,000 clients including Airbnb, Pfizer and J.P Morgan. Rival agency 10x Management said the average budget for software-writing contracts has doubled in the past three years as the company attracts bigger and broader projects.

Toptal, a virtual company with no home base, accepted fewer than 3 percent of the 15,000 applications it received in the past two months, said Taso Du Val, co-founder and chief executive officer. The vetting process has four parts: an interview to screen for personality, a technical exam, a live coding test and a test project to evaluate the candidate in a real-world scenario.

Helder Silva, a software engineer from Portugal who has worked at Deloitte and other companies, passed the first two rounds but failed the live coding exam because he took too long to solve one problem. "You miss something and you get kicked," Silva says. "I get where they are coming from. They charge a large amount to their customers and they expect you to be as proficient as you can get."

With the tagline "genius on demand," 10x Management typically represents about 100 software developers; the New York-based agency receives thousands of applications every year. Co-founder (and former entertainment manager) Rishon Blumberg likens his clients to movie stars: "The demand for Tom Cruise is very large," he says, "but the supply is very small."

Martin Langhoff, 39, typifies the elite freelance coder. Having taught himself programming at age 9, Langhoff went on to become chief technology officer at the non-profit One Laptop Per Child program, where he managed a software and hardware team, industrial design, manufacturing and prototypes. Burned out and wanting to spend more time with his son, he joined 10x.

Langhoff sometimes can be found writing code aboard Persuasion, a 41-foot timeshare sailboat; he bartered access to the Jeanneau 409 by writing the timeshare booking software. Most recently Langhoff helped build a security product for a "major U.S. corporation," he said, a project that typically would take three years to complete. The 10x team took three months.

"We get called to do mission-critical things that will make or lose the company a lot of money," said Langhoff, of Fort Lauderdale, Florida, who said he makes 50 percent more money than he did working full-time. "It's like you get a seat at the New York Philharmonic. Now every performer is performing at their top level, and when it's your turn, you feel the heat."

Anne Adams, 30, left a programming job at Bank of America Merrill Lynch in 2013 and began freelancing through Toptal. She's now writing car insurance software for a large U.S. insurer.

"At a company like Merrill Lynch you have to be seen by the right people doing the right thing, rather than just getting on with the job you've been given," she said. "You have some people contributing more than others and people are operating at different levels, while at Toptal everyone is kind of up there. So that way, you get a lot more productive."

Knight, who left Google to work with 10x, agreed. "At Google you could probably get away with not working for six to nine months-just showing up and making it look like you're working," he says. "There's definitely a level of stress that comes with being independent that's absent at Google, but I like that. I have motivation issues if I don't think my paycheck is on the line."

© 2016 Bloomberg L.P.