Cutting the cost without having to sacrifice the quality, finding the partner that understands your needs and can actually contribute to the problem-solving process or how about trying to beat competition and come up with the best proposition for potential clients – as you can see a lot of effort goes into pairing the right client and project with the right vendor. Just like with any partnership, it’s a two-side job where it’s not enough for a customer to simply hand the vendor the list or requirements or for the outsourcing partner to have the same algorithm of cooperation for all clients. And what guarantees the beginning of this wonderful friendship is the right engagement model that works for both parties. Read on as we try to cover the most common project engagement models and help you choose the one that better suits your case.
What is a client engagement model?
Client engagement model serves as a basis for future client-vendor relationships. It’s a framework a company chooses to manage their customers that serves as a basis of their future collaboration between a client and a software vendor that ensures the level of control, responsibility or flexibility.
Just like there’s no such thing as a universal client, there’s no one way of collaborating. Choosing the appropriate client engagement model for software development is the primary task aimed to align goals around a common outcome and the best suitable pricing model. The decision to choose this or that engagement model can be based on various factors that might be objective like the maturity level of vendor and their track record of success, or subjective like customer’s previous experiences with other service providers.
Either way, the selected model with all its legal and technological aspects should be precisely specified and transparent for both parties. Here’s our brief overview and discussion of the most popular models of software engagement: Time and Material, Dedicated Team, and Fixed Price.
Time & Material
A cost-effective model where the amount of money you spend corresponds to the amount of work delivered. The client and the vendor usually agree upon an hourly, daily or weekly rate for the allocated project resources. This engagement model is often preferred because it offers flexibility to change requirements on the fly, ability to balance project resources, and spread the workload.
Provided that Time & Material project is accompanied by the experienced and skilled project managers, quality is properly supervised. Progress and the deadlines observance are not neglected. There are good chances of getting the work done in-time and within the budget.
Choosing Time and Material model usually minimizes the biggest risks of the outsourced projects: software you’ve been delivered fails to satisfy any of your needs because you lack control over the scope and the budget spending. With Time and Material, bugs are caught on the early stages of the project, the cost is thoroughly estimated with the sequence of iterations due to Agile methodology. Furthermore, the client can always make sure that the project meets market needs validating it before it’s too late to change anything.
Choose Time & Material Engagement Model when:
- You have constantly evolving or unclear requirements
- It’s a large project with numerous iterations planned
- Your developments needs will deviate over the time
- You appreciate transparency in customer-vendor relationships
A project engagement model with a dedicated team means an extension of the client’s team with the offshore, nearshore, or onshore vendors’ specialists, while the other project members are retained on the client’s side. The specialists your firm is supplemented with are supposed to entirely comply with the existing corporate culture, rules, and the best practices of your company. Moreover, this new team takes over your company’s technical resources, tools, and methodologies, and should be expected to recognize themselves as an important part of the organization.
This model may have productive variations when it is ‘injected’ with the Time and Material (T&M) elements. Let’s say you are sure that you will definitely need a software engineer of a precise qualification category somewhere down the project progress line, but you are not sure when exactly and for what period. In such a situation, the vendor will be able to provide you with the required resources at the right time and on favorable T&M terms.
Being the simplest approach to outsourcing engagement, it will work well for a long-standing relationship and long-term projects, although it requires vast managerial experience and extensive technology background, largely, on the part of the client’s team. The supplier normally takes a big deal of responsibility above the dedicated team performance with due consideration to motivation aspect. Working out reward programs, making a positive work environment, encouraging personal advancement and other similar initiatives will definitely increase the project performance rate.
Choose Dedicated Team Engagement Model when:
- When you need more manpower for the in-house development team
- When you are fond of cross-border knowledge sharing and bringing in outside minds
- When you have a fair vision of how your project should evolve and have enough time and resources to keep abreast of all the management aspects
Fixing the price is about fixing the scope, project requirements, as well as deadlines. This model will never work without thorough initial planning, estimation, and analysis sessions. The more planning you do, the better the outcome.
Why is the planning stage so important? The success of the fixed price project is directly proportional to the success of this initial phase. The slightest change in the scope can turn into endless negotiations between the parties with a negative impact on a product’s time-to-market. The main benefit of selecting this particular engagement model is predefined and fixed project’s budget, which means you know exactly how much you are going to spend on your product, but the cost may vary widely because of the smallest changes in the scope.
To have a better control over a bigger project, the engagement model might be slightly transformed with milestones & deliverables approach. A client is billed as the agreed milestones are reached and deliverables are in place. After that, another stage with its own milestones and deliverables will begin. With minimized risks, you’ll have a better vision of project needs and terms. On top of that, you’ll be able to more clearly define the next set of deliverables.
For the majority of successful fixed price projects, discovery phase serves as the starting point. Determining the desired outcome, understanding the requirements and the scope should ideally be further transformed into Minimum Viable Product (MVP). Under such a scenario, discovering the project needs is a great remedy for unrealistic expectations.
Choose Fixed Price Engagement Model when:
- Requirements are clear, well defined and unlikely to change
- You deal with small or medium project which won’t last for more than few months
- You used to outsource similar projects before
Whatever engagement model you are considering, look at the development project in a long perspective. Even if you are sure it will take no more than two weeks, the possible outcome might bring new opportunities. In fact, it is the reputable vendor and win-win attitude of both parties that are the biggest success factors under all the engagement conditions.
A guide to choosing the right engagement model
Product Development Engagements Models Cheat Sheet
|Fixed Price||Time & Material|
|Size of project||Small & Medium||Medium & Large||Large|
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