Outsourcing Engagement Models: Overview And Choice Tips

What’s Outsourcing?

Outsourcing is a practice in software development businesses that aims at hiring a software development team outside of the company to provide development services to a client, e.g. carry out the project management from A to Z. Though recognized in the 1990s as a work strategy, it became popular only within the last decade.

When international companies could not cover their needs with in-house candidates on the job market, they found a solution to search for the development team abroad. Top talents could be found internationally, their cost per hour was lower compared to the internal workers, they could work for the company’s specific project or supplement the existing team to enhance the workflow. Besides, clients could outsource any positions that met their requirements. So, the work strategy stayed, rooted, and advanced into the one we have today.

What’s the Engagement Model and Why Do We Need It?

An engagement model is the key-defining form of the client vs. outsourcing vendor relationship. The software development model of engagement is sort of a contract, each of the two parties, i.e. the client and the outsourcing vendor, should communicate clearly to each other. For example, after agreeing to the terms of the contract, the governance of the processes will be based on the chosen model of work.

Thus, the model of engagement should:

• ground on the client’s requirements (whether they are known or being set negotiated)
• define the level of client’s control over the processes (whether the client wants to participate in the dedicated development or lacks time to do that)
• set the suitable deadline (the time spent on the project depends on the client’s business idea and the engagement of the team)
• discuss the pricing model and communicate the fixed-price or the flexible budget (pricing should be negotiated and adjusted taking into account all the previous factors)

Surely, there is no “universal” model to meet all the requirements and needs of every company and the development process, but such models are designed to be the foundation for client-vendor relationships in the future.

Types of Outsourcing Engagement Models

As it was impossible to apply one standard model to each and every project, software companies worked out the three most-used core engagement models:

• Fixed-price
• Time and Material
• Dedicated team

The Fixed-Price Model

The fixed-price engagement model defines a working relationship based on a set budget. The model suggests a single-rated bill despite the time and resources used. To set the budget at the beginning of cooperation, the team has to be fully aware of your requirements, business needs, and costs you are ready to spend. Besides, you have to communicate all the requirements to the outsourcing vendor clearly and in detail. After the start of the implementation phase, the scope of work cannot be changed, because the pricing model proposes a permanent co-working project-based method.

The biggest advantage of the project team model is the ability to hire the right talents and plan your project before putting it into work. If the planning seems complex, the outsourcing vendor might give you insights on the fixed-price of specific services. What is more, you can always request a Discovery Phase to know all the project-based details. Hence, if you have a set list of requirements, a fixed-price to pay, and a deadline, but have no team, we are ready to offer you one!

The Time and Materials Model

The Time and Material Model of engagement has an agreed-upon billing rate at its core and takes into account the real-time spend on the project as well as the resources used. Hence, you are fully engaged in the process and can change the requirements whenever there are some. The pricing model is based only on the actual time the development team spends on your product execution. The only drawback is that you cannot predict the final cost of project management due to the option of flexibility. But as the software development process is iterative, each iteration in the development process ends up with a functioning product.

At Inoxoft we understand that budget optimization is a priority and provide a flexible T&M pricing model, which allows clients to control and save costs at every stage of product development. This model may be a great choice for the rapidly changing environment, giving you the possibilities to alter requirements at any time and still be the first to market your freshly-developed product.

The Dedicated Team Model

The dedicated team model of engagement focuses on long-term collaborations in product development from scratch. Here, you hire an outsourcing vendor’s team (developers, designers, QA engineers, PMs, and others) for a monthly salary defined by contract. The monthly fee is defined by the staff’s qualifications (Senior, Middle or Junior), size of the team, and takes into account an hourly rate offered by the software development company.

This model allows you to have the biggest impact on the project outcomes and full-control over the software development process. Also, the client should not worry about staff recruitment, administration, and other employee-related issues as staff augmentation and other functions are carried out on the vendor’s part. However, having full control of the project development process makes you responsible for the project and requires full-time engagement. Sometimes, this may even include project management of occurring issues.

At Inoxoft we have the same Dedicated Team model of engagement, where we offer scalability and advancement you can achieve with the help of our professional staff. Moreover, you will be able to create, view, and manage product development and delivery together with our expert team.

Why Should You Choose Outsourcing?

First, the most important trigger to engage in outsourcing is the cost reduction pricing model in comparison to in-house delivery, which might be more expensive. Second, if you have an idea you want to realize, all you need is an outsourcing development team of dedicated experts. And third, the delivery of the project will be top-notch and significantly faster.

Also, there are definite pros of outsourcing that should be taken into account.

Outsourcing Benefits

• Quality of coding and timely delivery are the vendor’s responsibility
• Project Management is done by a vendor’s PM
• Hiring processes are carried out by the vendor’s Recruitment Team
• Contribution to the client’s business needs is the top priority
• Hardware and software supplies are provided by the vendor

Thanks to these benefits, outsourcing is one of the most used practices of dedicated development and product delivery. If you want to know more, read 5 Reasons to Invest in Ukrainian IT Outsourcing here.

How You Should Choose The Model Of Engagement For Your Project?

To make the right decision, which outsourcing model of engagement will suit your project 100%, you should answer the following project-based choice tips:

• What is the type of project? Is it simple or complex?
• Is your budget predictable? Do you have a budget that needs to be fit-in?
• Do you want to make flexible decisions on the project scope? Do you want to be able to change requirements in the process of product development?
• What time frame do you expect? Should the project be carried out as soon as possible or there is extra time for execution?
• Is there a set deadline for your project? Have you any specific release date in your mind?
• What project management models do you prefer? Are you feeling competent to control the software development process yourself or rather somebody else does it?
• Is there a need for staff augmentation? Do you need dedicated development and specific experts on your team?

And, the most important one:

• Are you in search of a vendor to implement your business idea with a dedicated development strategy? Or are you in search of staff augmentation to complement your existing team?

Answering these questions will make it easier for you to understand your needs and eliminate all the unwanted outcomes together with the unexpected profit loss. Find out more information and Learn 10 Tips On How To Outsource Software Development here.

The last question may even lead you towards choosing Outstaffing over Outsourcing. Let’s find out why!

What’s Outstaffing?

Of course, you shouldn’t mix outsourcing with outstaffing as the latter has a completely different meaning. Outstaffing is a work strategy, when a third-party worker or a team, who are officially employed within a company, perform software development for the company’s client remotely. Here, the development process and the scope of it is managed on the client’s side. Clients tend to choose outstaffing when the team has been already created but it lacks key-experts. So, there is a need for staff augmentation! Also, outstaffing suits best when the scope of work is undefined. The vendor company is obliged to provide such development services as salary, bonuses, equipment, and technical support. The only things a client controls are the tasks and assignments for an outstaffed employee. So, if everything isn’t much understood and defined – choose the practice of outstaffing! However, if you know all the aspects that should be carried out in the project and need to delegate project management but be able to participate yourself – outsourcing is the best choice!