From Costs to Hiring: Everything You Need to Know About Fractional CTO

The term ‘fractional executive’ isn’t new. However, according to the New York Times, it became popular only after the pandemic. Both small and middle-sized companies started to actively hire workers for remote positions, including part-time C-level executives. Since then, the demand for fractional leadership keeps rising. In 2024, Forbes reports that 72% of CEOs intend to expand their utilization of fractional executives and "Micro-CXOs". Be it technology, marketing, or operations – fractional executives are currently required in all business domains. 

So who is a ‘fractional CTO’? It’s a chief technology officer who provides C-suite services to a company only for a fraction of the time. An FCTO usually works on a part-time contractual basis. Unlike a freelance worker, a fractional CTO’s work isn’t project-based. A fractional tech executive may be hired by several companies simultaneously and work for them at different hours of the day. Read further to find out if this person is what your company really needs and how to successfully integrate a fractional CTO into your business team. 

What does a fractional CTO do?

An FCTO is a person who is highly experienced in tech and provides the expertise in the domains needed. A fractional tech executive can be hired to deal with some specific issues with a focus on solving them or just take over all the CTO’s duties for a fraction of the time. 

An FCTO’s responsibilities usually include:

• Strategic planning. An FCTO develops and implements the enterprise’s tech strategy. They oversee product development and manage IT operations. Moreover, a fractional CTO provides strategic tech guidance and valuable insights into, the direction the company takes. 
• Industry expertise. Having years of experience and relevant tech background, a fractional CTO brings their IT expertise to the company. 
• Business systems audit. A fractional CTO evaluates the current enterprise’s systems and processes. The expert executive reviews architecture, compliance policies,, and other operations. They scale systems up and down if needed. In addition, they streamline and optimize current systems. Also, an FCTO drives innovation and implements new technologies if those prove to be a better fit. 
• Vendor management. An expert FCTO may guide a company through vendor selection, negotiating contracts, and reducing risks associated with tech vendors.
• Precision technology goals. A fractional CTO is usually the one who makes sure tech initiatives correspond to the company’s business goals. 
• Technical support. Ensuring technical support is also a task for a fractional CTO. The executive is responsible for quick reaction to any system failures. On top of that, an FCTO takes over the risk mitigation duties and implementation of security practices. 
• Team building. An FCTO provides mentorship, leadership, and support to the enterprise workers. In addition, the executive can be engaged in hiring and onboarding processes.
• Team and development optimization. A fractional CTO is sometimes responsible for building in-house teams as opposed to outsourcing workers. An FCTO can create and optimize in-house development teams. Also, a fractional CTO often establishes the development processes within them. Take CI/CD implementation and continuous testing practices, for instance. 

Fractional CTO vs interim CTO vs full-time CTO

It’s important to understand how a fractional CTO role differs from an Interim CTO and from a traditional full-time one. Let’s compare all of them.

Fractional CTO:

• Is a part-time employee.
• Usually works fully remotely or via a hybrid work model. 
• May be providing services to other companies and for your business simultaneously. 
• May take over all the duties of a full-time CTO or lead the company through specific challenges and focus on certain tech-related tasks. 
• Quickly gets to the job without a long onboarding process. 
• May have a high hourly rate, but is more cost-effective in the end. Hiring a fractional CTO is never as expensive as hiring a full-time CTO.

Interim CTO:

• Is a temporary chief technology officer, not a permanent employee.
• Works full-time for a company during a certain period of time, usually with a fixed end date. For example, while an enterprise is in search of a full-time permanent CTO, they can hire a temporary replacement. 
• Often does not have the benefits and privileges of an ordinary C-level executive. 
• Starts working immediately. Solves all the issues rapidly. 
• Is not committed to long-term cooperation. May lack strategic vision due to the length of involvement. 

Traditional full-time CTO:

• Is a permanent full-time C-level executive.
• Has a great commitment to the company. 
• Is able to create a long-term strategy for the enterprise and execute it. 
• Has a lengthy recruitment and onboarding process. 
• Is more expensive than an interim or a fractional CTO. This position comes with significant expenses for recruitment, a full-time salary, C-suite benefits, and bonuses.  

The key benefits of hiring a fractional CTO

No doubt, CTO as a service has many advantages both for small and middle-sized enterprises. Here are the main benefits. 

Great industry expertise and value

A fractional CTO is a person with years of experience in the industry. They previously worked in many roles and in many different companies. An FCTO has the knowledge and the expertise an enterprise will benefit from. They even may have a specific background for the role. Take experience with cloud migration, for instance. 

Cost-effectiveness

Hiring a fractional CTO is much more affordable than having a full-time one. The reason is a fractional CTO charge for fewer hours of work. At the same time, they deliver great value. 

Fast recruitment 

Finding a full-time CTO is hard. On top of that, the recruitment process takes ages. However, a fractional CTO gets to work sooner than a traditional one because of the fast recruitment and high adaptability of a fractional CTO. 

Flexibility

A fractional CTO can help you scale the enterprise up and down. They can also tailor their engagement according to the company’s needs. For instance, you can part ways with an FCTO much easier than with a full-time CTO. Or you can request that they focus more on certain tasks during the critical phases. 

Unbiased perspective

A fractional CTO is a person from outside the company. Which means that they have an external perspective on the direction the enterprise takes. An FCTO deals with problems and makes decisions without any bias. 

When is the right time to hire a fractional CTO? 

Yes, hiring a fractional CTO has many benefits. But when do you know that you really need a fractional executive? Let’s take a look at the cases when you’d better have an FCTO to help you out. 

Your company is in a technology migration phase
If you plan a significant technology investment and migration, you may need expert help with the whole process. A fractional CTO can guide the team through the transition and analyze beforehand whether you need it in the first place.  

Your team lacks in-house direction and expertise
In case you have a distributed development team, it’s good to have an expert CTO to manage it. Or if your company finally decides to switch from an outsourcing model to an in-house one, you may need a fractional CTO’s help during the transition. 

When preparing for the market release
A fractional CTO who has the correct background and experience can help you determine the product-market fit. This is a crucial process since 76% of pivots occur in the pursuit of it. Also, with a fractional executive at your side, you can avoid the pitfalls of going to new markets.  

Your budget is limited
Your company may not afford to hire a full-time CTO just yet. In this case, you can get a fractional CTO who will help you guide the enterprise and provide almost an equal impact.  

When raising new funding
An experienced FCTO can help startups prepare to raise funding. A fractional tech executive can optimize the company's processes, make the product more attractive for investors, and help improve the pitches. 

When your CTO left abruptly
What if you suddenly need to find a replacement for your CTO? You can hire a fractional one as a quick solution to the problem. If you don’t know how much hiring a full-time executive will take, there’s no need for getting an interim CTO with a short-term commitment. A fractional CTO can get to work fast and lead the company while you keep looking for the right full-time CTO at a slow pace. 

If you don’t need a full-time CTO
Maybe your enterprise doesn’t need a full-time traditional CTO since you don’t have much for them to do. For instance, other executives took over some CTO responsibilities. In this case, you can benefit from a fractional CTO who will guide the company only on a part-time basis. 

If your non-tech company plans significant digital transformation
An expert fractional CTO can provide your enterprise with innovative tech solutions. An FCTO can ensure successful digital transformation and guide your team every step of the way. 

How to hire a fractional CTO: The complete guide

Having learned more about an FCTO role, let’s get a bit deeper into what it takes to hire one. How do I get the right fractional CTO? Follow our complete guide step-by-step. 

Understand why you need an FCTO

Before starting a search for a fractional CTO, determine why you need one. Review your business goals and conduct a deep assessment of your company's current problems.  Define the reasons for bringing an FCTO to your enterprise. 

Define the qualities to look for in an FCTO

Next, proceed by making a list of qualities to look for in a fractional CTO. Those should correspond to the problems an FCTO is going to assist you with. But no matter the task, a fractional CTO should always have the following virtues:  

• Strategic vision. A fractional CTO must have a complete picture of a company's long-term goals and the ways of how to achieve them. Since an FCTO is the one responsible for creating an organization's tech strategy. In essence, building an enterprise’s technology strategy is a complex and demanding process. 
• Years of industry experience. Just like a full-time CTO, a factional CTO must have 15+ years of experience in the technology field. And if you are looking for an FCTO to complete a specific task, hire a person with a particular background. For instance, familiar with specific technologies or compliances. 
• Business mindset. An FCTO must be able to align tech strategy with business objectives. So that when they adopt technology trends and foster innovation, they have the business impact in mind. 
• Leadership and communication skills. Of course, any tech executive must have great communication and leadership skills. Vendor management, development team guidance, C-suite meetings - a fractional CTO has to be able to interact freely with all the stakeholders. As a technology leader, an FCTO must have impeccable soft skills to engage, mentor, and collaborate with other team members. 
• Agility and problem-solving skills. A fractional CTO is a person responsible for technical risk determination and mitigation. An FCTO is also the one who must quickly address any tech issues and challenges when those come forward. All this requires excellent agility and problem-solving skills - the must-have qualities for a fractional CTO. An FCTO has to adapt quickly to any situation, plan the risks beforehand, and respond to unexpected challenges wisely.

Where to find the right candidate?

Now, with the list of qualities and skills of a perfect candidate at your desk, you can start searching for one. But where to find a fractional CTO? There are several options here. 

Networking

First, you can try finding a CTO through networking and referrals. Use your industry connections, participate in tech events, and ask other market players for recommendations.  

Using job aggregator websites

If networking doesn’t work or you don’t have time for it, try using job aggregator websites, such as Indeed, LinkedIn, or Glassdoor. Post information about a fractional CTO position open at your company. Be aware that working with job aggregator websites is time-consuming. Screening the numerous applicants is a tedious task. 

Hiring an agency

Alternatively, you can hire an agency to find you skilled tech candidates. This approach, however, is the most expensive one since agencies usually charge significant fees. 

CTO as a service

You can hire a fractional CTO within an outsourcing development company. ‘CTO as a service’ is an option for startups and small businesses to get strategic advice and guidance from a dedicated tech executive. 

Understanding the costs involved

Fractional CTO hourly rates usually range from $150 to over $500. The rate depends on the person’s years of experience and qualifications. In addition, for hiring a fractional CTO, monthly retainer fees are common. They range between $2,000 and $10,000. 

The total CTO compensation also differs worldwide. For instance, candidates from Europe charge less than CTOs from the US. 

Takeaways

All in all, the demand for fractional CTOs is growing steadily within the IT industry. For startups and small enterprises, hiring an FCTO is a way to save resources while getting expert help. For medium-sized companies, working with a fractional CTO is a way to close the talent gap quickly, since finding a full-time CTO is always time-consuming. 

A fractional CTO is an experienced executive who assists enterprises in aligning tech initiatives with business goals. An FCTO helps companies make strategic decisions, scale their systems, streamline operations, optimize processes, and foster innovation. On top of that, a fractional CTO guides the teams, represents technologies to investors, and navigates through the competitive market. 

Hiring an FCTO is quick and cost-effective. A fractional CTO is agile and flexible. They have a business mindset and years of experience in the IT industry. Which means that working with a fractional CTO is a bargain. 

In case you are looking for a fractional CTO, contact ElifTech. We provide expert CTO services to companies of all sizes.