Let’s assume you need development and decided to contact a service company. The reasons may be different: you do not have your own IT department, your team is slow to deliver functionality, or you are dissatisfied with the quality. The final decision on selecting a contractor is postponed due to uncertainty about which interaction model to choose and concerns about the loss of control over the development process. It is right to ask such questions if financial indicators and the overall well-being of the business are at stake.
In this article, we will share recommendations on reducing the possible risks of IT outsourcing and outstaffing based on our experience. To help you develop a strategy for working with an external contractor to weigh all the options, we have prepared an overview of popular cooperation models and reward formats:
The supplier takes over the entire development process with full responsibility for the organization and management of the team, the quality of results, and associated risks from business analysis to support decisions.
if you have no experience in development, and at the same time, there is no goal to accumulate technical competencies inside.
turnkey outsourcing will not protect you from all risks, so you should choose this model cautiously.
What to pay attention to: firstly, this is the most expensive model of interaction for the service's customer, which is easily explained - the contractor puts all potential risks in the estimate. The triggered risks affect the internal quality of the product, which you will learn about only after the launch. This model seems attractive when the development budget is limited, and the whole strategy of outsourcing the service is to save costs. Still, in reality, such projects are more expensive. Paradoxically, such a strategy of eliminating financial risks leads to even more significant risks, since you can get an unnecessary product at the exit or overpay with the support of the system due to poor quality. Therefore, this format works only for small projects.
What formats of interaction are possible here?
you understand the development lifecycle and know how to build processes for practical work, but at the same time, you do not have your own resources to implement the project. For example, if a full-time team is busy with the server part and you need a redesign - then you attract a dedicated team of frontenders. At the same time, the internal team can not be distracted from strategic priorities.
you will be required to monitor the team actively, so ask for transparent reporting, agreeing on the format in advance. These can be daily and weekly reports on the status of works of varying degrees of detail. Remember, as a buyer you want programmers to work only on your project. Ideally, a dedicated team should be located in one office.
The supplier provides you with individual specialists so that you complete the team yourself. The equipped people integrate with your employees or specialists from another supplier.
in the case of an established but slow development process, or a shortage of rare competencies, when the bandwidth of the in-house team does not allow to achieve the required pace, and several people are needed, not the whole team.
look for a direct supplier who cares about the quality of the services provided. The white-label model is often practiced on the market when developers are resold under the guise of their employees. As a result, when several intermediaries have put their marginal profit into the developer's bid, you not only overpay but also do not get the desired results.
At first glance, attracting dedicated teams or expanding staff seem to be similar models. Different suppliers may even present these concepts as identical and interchangeable, calling everything simply outstaffing. In fact, this is not the case. In the case of a dedicated team, the supplier bears more responsibility, and in the case of expansion, the customer. Also, outsourcing and outstaffing are primarily about profitability, and there may be different options for pricing, so next, we will look at the formats of rewards.
At the same time, everything remains conservative among B2B service companies, and it is not surprising that digital service providers are actively trying to change this. The point here is not in fashion but in the features of digital development. Let's highlight four common ways of invoicing:
You pay a pre-determined price based on the estimate of labor costs that the contractor provided before entering into the contract. If the project is simple, small, and there is a clear vision of the result, then the model will do. Do not forget that the main risk is getting low internal quality since this is the only non-fixed parameter.
Often a business needs to specify a deadline and budget in the contract, but there are no strict volume requirements. In this case, for the sake of the overall quality of the product, you can change the volume — that is, excluding the least priority parts of the functionality from the release to meet the deadlines and budget without compromising the project. In practice, this format is scarce.
You pay for the hours worked. The format is suitable for working in conditions of high uncertainty, where the amount of labor is often determined on the go, and the team size can change throughout the project.
The supplier sets a budget and reserves a certain number of hours for work performed regularly. A tariff is formed, according to which you pay a monthly subscription fee. If it took less time in one month, the unworked hours are burned out, and everything spent over the tariff is additionally billed. The retainer is suitable for dedicated teams that support a project where there is always a task flow, but it is not stable.
Anyway, the cooperation model assumes that the client must provide the necessary amount of work. Otherwise, the customer will have to pay for days or weeks of downtime. And even if, for some reason, the customer can afford to pay for downtime, the supplier will not be happy about it, as he will receive a highly demoralized team with low labor discipline. Unfortunately, there is no proven approach to attract qualified developers for ultra-short work periods. At the same time, there are periodic mentions of such a model as SEaaS (Software Engineers as a Service) on the network, but it should not be taken seriously. "Cloud Programmer" is fantastic so far.
In theory, you can get a programmer for a couple of hours in countries with a highly competitive environment. For example, some Indian companies are engaged in body shopping. This is when a client can come and take a developer "off the bench" for a couple of hours at any time. Of course, there is no need to talk about any quality in this case.
Before applying for the service, calculate the budget based on the full employment of programmers — the number of people X the rate per hour X the number of working hours per month. When companies first started developing digital products a couple of decades ago, outsourcing the entire project to an external contractor was the main alternative to hiring their own developers.
In this article, we have analyzed new partnership models that, with a competent approach, allow you to build win-win relationships. Regardless of the format of cooperation, attracting an external supplier is beneficial because you get access to experience and advanced development methods without spending resources on finding and attracting full-time employees. How much will you save? On average, hiring a specialist will take two months, which will delay the launch of your project and deprive part of the projected profit. And after commissioning, you will not have to fire programmers, which will avoid the legal hassle associated with official full-time employment.
Therefore, we recommend reducing the number of potential suppliers to 3-5, paying attention to how long the company has existed, whether it actively demonstrates its expertise in the external info field with the help of cases and articles, and whether it is possible to request feedback from previous customers, etc. If you still have doubts, start cooperation with a small one, honestly reporting your suspicions. Having received the first results on the classical model and a fixed price, it will be easier for you to transfer to the next stage of the development of an already dedicated team.