Which is The Right Engagement Model for Offshore Software Development?

Going offshore for software development is a popular option for most companies. And why not? As per grand view research, the global business software and services market size is expected to grow at a compound annual growth rate (CAGR) of 11.9% from 2023 to 2030. With the irrepressible demand for innovative software and mobile applications, most companies will have to rely on dedicated development teams to off-shoulder extra work and achieve their development goals.

It could be as simple as building a prototype or as comprehensive as an enterprise-level online store. But at the core lies, how it all works with developers sitting miles away from your host location. That brings us to software development engagement models. They define the working relationship between the hired software developers and the business client.

Before we dig into it further, let’s understand more about software development engagement models and how they work in favor of software companies.

Without much ado, let’s start.

What is Software Development Engagement Model?

A business engagement model defines how the software development company and the client interact throughout the project lifecycle, from initial planning and defining project scope to delivery and ongoing support.

It is a contractual partnership that defines responsibilities, terms of payment, management issues, timelines, etc. It ensures that the service provider is accountable for delivering the agreed-upon level of service.

There are different business engagement models, each with its own set of pros and cons. Let’s find out more and decide what works best for your business.

Types of Engagement Models for Offshore Software Development

There are generally three types of software development engagement models. And your choice of the same will determine half the success of your development project.

Let’s understand each engagement model and determine if it works for you or not.

Fixed Price Model (FPM)

It is the most commonly used team engagement model. Also known as a fixed time, fixed scope, fixed cost, and fixed bid.

This model, as the name suggests, emphasizes certainty between the client and the hired developers. It enables the client to fix the project budget regardless of the project scope and timeline.

Everything about the project is pre-planned and detailed. This eliminates the need for strict client supervision.

There’s no uncertainty. Everything is crystal clear and FIXED before the work begins.

Pros

• The financial risk is low as the project budget is fixed.
• The project is executed and delivered within a calculated timeframe.
• The project does not require constant supervision from the client.

Cons

• The model does not leave any room for last-minute changes in the project.
• The model is inflexible and does not consider uncontrollable factors that affect the outcomes.
• The model does not fit right for large-scale and complex projects with varying requirements.
• The model requires comprehensive planning and discussions.

When To Use Fixed Price Model

When working under the fixed price model, the developers feel the pressure to follow a plan. However, if things go south, the developers may have to work, even for what they are not being paid for.

And worse, the developers may simply brush off the quality expectations and deliver subpar results as per the committed project timeline.

Most companies select the fixed price model in the following conditions.

• If you’re crystal clear about what’s to be built
• If your project is small like a trial project that runs for upto 3-4 months
• If you are building an MVP
• If you have a fixed development delivery time

Do not risk big projects. Filter your development needs before signing the contract.

Time & Material (T&M) Model

The time and material (T&M) model enables the client to pay for the actual time and materials for the successful completion of the project. It could be a mobile app, a product, or anything else.

The time  material model works as per the plan chalked out, which may or may not be clearly defined. The execution is flexible as developers are paid for the work completed during the billing cycle.

The client monitors the progress including detailed invoices for the project. The client only pays for the development hours and materials (frameworks, etc.) used for the project.

There is more transparency in the project status and the costs involved.

Pros

• The model is flexible to varying project requirements.
• The model doesn’t necessarily require a detailed plan to start.
• The model facilitates continuous iteration and testing that improves the quality of the end products
• The model ensures better control over the project execution.
• The model prioritizes modular tasks throughout the project.

Cons

• The total cost may exceed the project budget.
• The model does not define an exact timeline.
• The model demands active participation or involvement of the client.

When to Use Time & Materials Model

While working according to the T&M Model,  developers enjoy the freedom to work at their convenience. There is no detailed plan for developers to incrementally deliver the work and get paid for the same.

It however can get exhausting since there is no fixed project scope and deadline. So, the client may have to wait longer than usual.

Have a look at the situations that may compel you to sign the T&M contract.

• If it’s a scalable project that may run for months or up to one year or more
• If the project scope is not clearly defined
• If the project requirements are likely to change with time
• If you want to own complete control over the project execution
• If you want to work on flexible terms and conditions
• If you want to regular the project costs with no compromising on the quality

If you are still figuring out what to build and  how much you can invest, signing the T&M pricing contract makes complete sense.

Dedicated Team Model (DTM)

A dedicated team model enables outsourcing software projects to a remote team of developers.

It is not an extension of your existing or in-house development team. Instead, it is a dedicated team you hire to work on your development project.

Working in close collaboration with the developers. Expedite software development without affecting the quality and budget of the project.

Build a good repo and set clear communication with the developers. It ensures the project is delivered to your satisfaction.

Pros

• The model enables you to save extra on development as the client pays hourly or for the entire project.
• The model ensures seamless execution of large-scale and complex projects.
• The model offers instant access to specialized IT resources ( talent and tools).
• The model supports result-oriented development work.
• The model provides flexibility to scale your remote team up or down.
• The model adapts to changing project requirements.
• The model facilitates honest and transparent communication practices.
• The model supports professional project control and management.
• The model ensures transparent pricing so that the budget can be regulated.

Cons

• The model may not be effective for short-term projects.
• The model’s success highly depends on communication.
• The project’s total cost can be hard to control.

When to Use Dedicated Team Model

The dedicated team model works amazingly for businesses of all sizes and industries. Luckily, you can save big bucks and valuable time on recruitment and development.

Things only get tricky if the coordination between the client and the remote team gets affected.

Discover the situations in which signing for the DTM looks apt:

• If the project is likely to run for at least one year
• If the project needs vary over the course
• If the project requires specialized IT talent and resources
• If the project requires flexibility and scalability
• If the project demands greater control over its execution and completion

Stay at the top of your development needs while moving forward with your ambitious business expansions plans.

What To Consider Before Choosing The Engagement Model?

The IT outsourcing industry is dynamic and evolving as the ecosystem changes. Contemplate different factors before you say ‘Yes’ to the engagement model for your software development project.

• Type of Project: Study the project, its size, and scope. Figure out if it’s a simple MVP, an enterprise-grade solution, or something different.
• Budget:  Determine the budget allocated for the project as it defines how much you would have to pay to the service provider.
• Flexibility: How defined are your product details? Is there any possibility of changes in the future? E.g. extra features or 3rd party integrations.
• Time:  Get an estimated timeline for the project. A few weeks to months or beyond. Ensure your available IT talent and resources are optimally utilized.
• Project Management: Would you like to use a tool or manage via a dedicated project manager? Think over many other possibilities.

Failing to choose the right software engineering engagement model can cost you big. From unhappy customers to poor market reputation, and worse — loss of business revenue. The consequences can be more far-reaching than you can fathom.

Making an informed decision could win you big clients and ensure a steady stream of business revenue. Squeeze in some time and think over all the possible questions before you sign on the dotted lines.

Selecting the Right Engagement Model for Your Business

Many engagement models can pull your small to large-scale development needs. Look at the snapshot comparing the three different business engagement models.

Service level agreements can get complicated, especially if you are new to the industry. It is advised to shun all assumptions and focus on the practical facets of your development project.

Conclusion: What To Do Next?

Going offshore for your next software development project? We aren’t surprised as hundreds or hundreds of companies are outsourcing development work they can’t handle themselves.

From entrepreneurs, and small companies to brands or global enterprises, every business needs a technology partner for satisfying evolving development needs. Some only need basic web services, like a website. Others need complex business applications. Regardless, most companies do not have the necessary resources ( labor, time, money, etc.) to satisfy the evolving development industry demands.

This is where they have to step outside their comfort zone and partner with the best offshore development team. Selecting the engagement model is the first step to guarantee the success of the development project.

At Build Offshore Team, our software developers work per different IT engagement models that work for businesses and brands alike.  We can help you determine the best engagement model that drives you toward successful software development.

Unsure What to Do Next?

Build Offshore Team is happy to answer all your questions or clear doubts if any. Honest and unbiased, we help IT firms and software businesses achieve their development goals.