What engagement model is a proper option for your business case?

Which Engagement Model to Choose? A Hands-On Guide to Starting Your Project

Choosing an appropriate engagement model has always been painful labor for business owners. Modern IT-market bustles with offshore development company collaboration offers. Finding a perfect pricing approach becomes a real challenge for entrepreneurs.

If you still have no idea of what engagement model fits your business case, do not feel insecure about proceeding. Win the race and find the best possible collaboration variant with OpenGeeksLab’s guide to engagement model choice.

What Is an Engagement Model and How Does It Affect Your Business?

Which Engagement Model to Choose?

An engagement model is a structured plan defining collaboration terms between client and development company. An engagement model takes into consideration the customer’s requirements and peculiarities of a particular business case.

The proper engagement model choice makes a partnership with offshore dedicated software developers a win-win option. On the other hand, an inappropriate engagement model may ruin your project or result in significant losses.

Now, let’s go into more detail about the current global offshore market size. Researchers claim that in 2020 it reached $132.9 billion. What’s more, the forecasts uncover the industry is expected to witness significant growth on account of over $400 billion by 2027. As of 2019, market analysts expected a compound annual growth rate (CAGR) of 8.0%. However, we may presume that the COVID-19 pandemic has dramatically influenced the market, and the number will grow even more.

To stay in trend and establish promising partnership practices with an offshore dedicated development team, you should consider your project’s core pillars.

6 Questions You Should Ask Yourself Before Deciding on an Engagement Model

Let’s uncover some basic issues to mind while choosing a particular customer engagement model.

Before choosing an engagement model, a business runner must take into consideration several impact factors. They include:

1. Project Type

Define the project type you aim for. For example, the engagement model applied to build a minimum vital product (MVP) will considerably differ from the one implemented for full-scope complex solution implementation.

2. Budget Plan

Budget predictability plays a significant role in choosing an appropriate engagement model for your specific business case. Mind your expenses and financial sources and decide whether you will make a precise estimate before starting software implementation or paying for the final product.

3. Project Flexibility

Think over project flexibility perspectives. Do you have a detailed vision of the final product, or will you leave this task to offshore experts? Consider your requirement’s preciseness: either you will stick to them till the end or prefer agile methodologies.

4. Product Release Date

Consider the final product release date and your priorities in the development process. Find out if you require the final product to be rolled out as soon as possible, or you can prolong the initial deadlines.

5. Deadlines

Setting deadlines is a vital part of any project plan. Decide whether you will set only the date of rolling out the final product or add some milestones. Think over the possible fluctuations and either include them into strict development terms or make your deadlines more flexible.

6. Management Level

Consider your management level, mind your previous experiences or their absence to spot your strengths and weaknesses. Define your role in the project: will you take an active management role or supervise the development process avoiding direct interaction.

Diverse client engagement models cover these factors differently, making emphasis on one or two of them. The perfect solution often depends on your business objectives and the factors you prioritize.

Which Customer Engagement Model to Apply?

Proper engagement model choice lays the firm ground for the effective partnership between a business runner and a development company. Each pricing variant differs from the others according to top priorities and has its advantages and disadvantages. Every other business case requires an individual approach while defining a fitting engagement model. There are five basic customer engagement models:

1. Fixed Price

Check out significant benefits of adopting a fixed-price model.

Check out significant benefits of adopting a Fixed Price model

According to a fixed-price contract, an offshore company develops a client’s software with fixed service costs, deadlines, and requirements.

Advantages of the fixed-price contract:

  • The exact project budget is planned in advance
  • Customers have no money risks as the development company reimburses any estimated violations
  • The final product is released as planned due to the strict deadline system
  • Detailed requirements guarantee results meeting customer expectations
  • Little customer participation is needed during the software implementation process

Disadvantages of the fixed-price contract:

  • Long preparation period that includes negotiations, requirement clarification, budget planning, and other pre-development steps
  • Profound risk management is vital as after signing a fixed-price contract, customers have little influence on software implementation
  • Flexibility is low or unavailable. This way, customers should clarify their needs before jumping into the very development process
  • If not expressed correctly, outcomes may not meet customer expectations
  • Lack of accountability, transparency, and control
  • Strict deadlines can affect the final product’s quality (in case of unpredicted issues) or its cost (customer pays a fixed price even if a company spent fewer working hours than planned)
  • The fixed-price model doesn’t fit most projects
  • Long-lasting negotiations often took much time, so customer’s ideas may turn out-of-trend when it is high time for their product launch

A fixed-price contract is a perfect option for short-termed small or mid-sized projects. The model seems highly advantageous to customers as service providers repay any troubles. However, one should be careful with a fixed budget model. Make 100% sure about requirements and clarify every detail to avoid possible disappointment.

2. Time and Material

Time and Material

Now, let’s single out several principles of time and material model implementation.

The time and material pricing approach presupposes a post-factum service payment based on the working hours spent on project implementation and hourly rates.

Advantages of the time and material model:

  • Time and materials contract software development is highly flexible, so you can make corrections and adjust the plan at any development stage
  • Workflow adjustments do not require changing the contract itself
  • Time and material pricing approach does not require lengthy preparatory negotiations. Accordingly, clients quickly get started and release their products on-trend
  • Final product quality comes as a major priority
  • A flexible budget is a win-win option for both customers and a development company
  • The time and material pricing approach is easily compatible with Agile methodology
  • Profound accountability and direct interaction make collaboration transparent and visible
  • Minimized typical offshore software implementation risks
  • Product iterations accelerate return on investment (ROI). What’s more, customers can roll out a demo-version and update it later

Disadvantages of the time and material model:

  • Lack of long-term budget planning may turn a project unprofitable when the software development process comes to an end
  • Vague deadlines
  • The time and material engagement model requires collaboration, direct customer participation, and reasonable control
  • Significant changes take more time for implementation, resulting in higher risks of possible release delays

Time and material pricing is highly flexible (no fixed deadlines, flexible budget) and fits long-lasting projects with changing requirements. The model is based on Agile methodology and works well if one looks for a shorter time-to-market period. However, the risk of delays increases in case of multiple changes or adjustments.

3. Dedicated Team

How does the dedicated team model work?

How does a dedicated team model work?

A dedicated team pricing approach allows expanding the client’s team by attracting offshore experts. The pricing plan includes fixed service prices and monthly payments that depend on team size.

Advantages of the dedicated team model:

  • Changes are possible at any workflow stage due to flexibility
  • A dedicated team is a perfect match for long-lasting projects and continuous partnership
  • Hiring a dedicated software development team is more time-effective than assembling experts by oneself
  • Rolling out high-quality products is a priority
  • Collaborating with offshore development teams, customers broaden their niche knowledge and acquire new expertise
  • Customers possess overall control over resources
  • A software service provider ensures team recruitment, management support, suitable infrastructure, resulting in reduced costs
  • Annual accountability provides development process transparency and visibility
  • A dedicated team is the easiest way to offshore employee engagement
  • Overall performance accelerates because of a positive working environment, reward programs, and motivated workers

Disadvantages of the dedicated team model:

  • A dedicated team model usually doesn’t fit short-term projects
  • Cultural gaps may prolongate an adaptation period
  • Regular effective meetings turn challenging if customers and workers operate in different time zones
  • The cost appears substantial as a client should pay a complete salary once per month
  • Customers share basic responsibility for project success (communication, management, control) with a service provider
  • Team compilation period varies from project to project, which may trigger delays

A dedicated team stands as a perfect option for large projects requiring well-developed infrastructure and streamlined workflow. A high level of flexibility and customer’s direct participation allow changing requirements on the go across each development process stage. Hence, this model comes in handy in the unclear final product vision. A dedicated team also represents a powerful means of sharing international expertise.

4. Staff Augmentation

Staff Augmentation

Let’s take a quick look at the team augmentation engagement model.

The staff augmentation model enables stakeholders to complete or expand their team by recruiting an offshore developer at a fixed fee.

Advantages of the staff augmentation engagement model;

  • A flexible recruitment system allows choosing an IT-expert (from interface designer to back-end developer) who will perfectly fit your business case
  • The overall productivity level increases as hired offshore developers focus on current workflow tasks
  • Easy team member replacement in case of emergency
  • Staff augmentation is a cost-effective option to increase your company’s workforce for a short period
  • Operational costs reduce as customers pay only fixed fees, while service providers ensure a working environment for offshore team members
  • All intellectual property rights belong to the client
  • Staff augmentation pricing approach may be used as probation for potential full-time developers

Disadvantages of the staff augmentation engagement model:

  • Staff augmentation may turn inappropriate for projects requiring a high level of contextual knowledge, peculiar to the customer company, niche, or country
  • The staff augmentation pricing approach doesn’t fit long-lasting projects
  • Engaging offshore team members negatively influences general sustainability plans
  • A service provider is not responsible for project management or its quality level

Staff augmentation fits short-term projects that lack a specific skill developer. It is a quick and easy way to make your team stronger on demand. Besides, service providers care for all payroll aspects (salary, rewards, operational costs).

5. Outstaffing

What advantages does your business get with an outstaffing model?

What advantages does your business get with an outstaffing model?

Outstaffing is very close to staff augmentation, though it presupposes hiring an offshore team member (of any position) for a fixed fee paid to service providers.

Advantages of the outstaffing engagement model:

  • The outstaffing engagement model ensures flexible recruitment on time
  • A client gets a significant practical influence on results
  • Broad cooperation and collaboration opportunities (customers can complete their teams with offshore members)
  • A customer has full control over the development process and regulates it himself/herself
  • As an outstaff member is incorporated in the client’s company, accountability is advanced and transparent
  • Customer’s IP rights are protected
  • The service provider takes care of payroll, rewards, equipment costs, and many more
  • Lower hourly rates for outstaff members reduce operational costs during software development implementation

Disadvantages of the outstaffing engagement model:

  • Lack of reliable employer – outstaff employee communication channels.
  • Quality control depends on the client himself/herself.
  • Accountability synchronization may turn challenging, as customers should make it completely transparent for a service providing company
  • Requirements must be clarified and updated regularly to keep outstaff employees informed about current workflow tasks

Outstaffing comes to the rescue for small- or medium-scale short-term projects. An outstaff member incorporates into the customer’s team and works exclusively on one project. Service providers cover all employee expenses, so clients avoid routine management tasks focusing on software implementation.

Engagement model choice is time-consuming and a challenging process. There is no general solution fitting every business case, though all variants look pretty attractive. Don’t hesitate to make your decision, but first, analyze your business needs, clarify your goals, and consult experts to choose a win-win option for your business.

Engagement Models in a Nutshell

A concise comparison of the most popular engagement models.

As we’ve stated above, there is no unified engagement solution applicable to any case, as your business needs are unique. Deciding on a suitable engagement model always requires an individual approach.

To ease your choice, we composed a comparison chart of the most popular customer engagement models.

Fixed-Price Time and Material Dedicated Team Staff Augmentation Outstaffing
Project Size Small or mid-sized Mid-sized or large Large Small or mid-sized Small or mid-sized
Project Duration Short-term Average or long-lasting Long-lasting Short-term Short-term
Customer Control Low Medium High High High
Pricing Fixed for a project Depends on hourly/daily/weekly rates Fixed as a regular salary for a team member Fee for all developer recruitment period Fee for all team member recruitment period
Project Budget Fixed budget Flexible budget Flexible budget Budget is not discussed with a service provider Budget is not discussed with a service provider
Project Changes Possible before or after complete project implementation Possible during project implementation Possible during project implementation Possible during project implementation Possible during project implementation
Time frames Strict time frames Highly flexible time frames Flexible time frames Time frames depend on context Time frames depend on context
Team Scalability Low High Average High High
Requirements Fixed Flexible Flexible Flexible Flexible
Accountability Low or absent Advanced Advanced Optional Optional
Project Transparency Low High High Optional Optional
Tech Stack Fixed Flexible Flexible Flexible Flexible

What We Offer

OpenGeeksLab is more about a dedicated team model, as we are used to leading your project from a vague concept to commercial success. If all our experts, from business analysts to software developers, work together, the result will exceed your bravest expectations.

However, we are not limited by the dedicated team scenario. OpenGeeksLab leads projects to success regardless of the engagement model chosen by our clients. We are always ready to help: either you need an entire team contribution or one-time expert assistance.

Have any questions? Get all answers without delay. Diverse niche experiences made our team proficient in applying suitable toolkits and software development technologies to cover your specific objectives. We offer efficient partnership terms for any project irrespective of the contribution needed. We take on the cases at any stage and support them until successfully launched. Our team provides top-notch assistance at any scope of work, as OpenGeeksLab is experienced in collaborating with both enterprises and startups.

So, don’t be afraid of starting customer-oriented software development with OpenGeeksLab. By the way, you can book a free consultation with our lead experts to discuss all the details right now.

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