Hiring permanent employees and hiring contractors has their own advantages and disadvantages. If a company is a IT Company, it makes sense for them to hire permanent IT Developers or if a company is into other business and they have an intention to start an IT division, then it still makes sense to hire permanent IT Developers. However, some companies, do prefer hiring contractors for the following reasons.
They might be cost cutting and hiring a permanent employee for a temporary project need may not be a feasible option.Also, finding permanent employees specializing in niche technologies might be difficult.
If the project demands urgent hiring, hiring permanent employee might take time for the employees to come on-board, typically two to three months. Also, contract hiring is a flexible option as they can either hire them to work full-time or part-time, depending on their project need and their budget.
Sometimes, for a Non-IT start up or a non-IT business, it might be unnecessary to hire permanent IT Developers as their primary focus is their business and it is definitely not to set up an IT division.
Also, hiring contractors from a known IT Vendor, will guarantee quality, on-time delivery and little or no supervision as the IT Vendor will take care end to end.
With permanent hiring, companies will be recurring termination costs. In Contract hiring, they might anytime extend or terminate the contract without an obligation and depending on their project needs.
Failure rate is very high in permanent hiring as compared to contract hiring. Hiring contractors from IT Vendors guarantees immediate replacement of contractors in case of non-performance or the contractor leaving the company.