2021-07-02 / Modified on 2022-06-20
An increasing number of organizations are now outsourcing their business activities to external partners, with IT services dominant among outsourced projects. GlobalViewResearch reported that the global IT outsourcing market shows a 7.7% CAGR and is forecasted to reach USD 806.63 billion by 2025.
Several cooperation models for software development outsourcing have evolved in recent years to facilitate such partnerships. However, choosing the right partnership model is important for the success of your project implementation and better ROI.
So, how can you choose the ideal software development cooperation model for your company? This article will introduce you to several cooperation models, including their pros and cons, to help you decide. Let's take a closer look!
The specific nature of your project is one of the key elements you should consider when choosing your optimal partnership model. What works great for short-term projects with a well-defined output may not be suitable for long-term projects with varying outputs. Thus, you will need to carefully consider the degree of certainty of the output.
Additionally, the client's involvement with the development team is another key determinant. When you want your involvement to be minimal, then certain collaboration models, such as a fixed-price arrangement, would be a perfect fit. On the other hand, if you prefer active involvement, collaboration models with dedicated teams would work best.
Let’s consider what model you should choose for which project.
A fixed price cooperative model is most suitable for short-term projects with well-defined requirements. For example, you can easily opt for a fixed price model if you need to develop a prototype for internal use or a minimum viable product (MVP) for research.
To help you decide, we have prepared a list of questions.
A fixed-price model is the right one for you if the answer is “yes” for most of them. However, if you’ve answered “no” to several questions, there are two more models to contemplate.
The dedicated team model is a better fit for projects where requirements are not well defined. You may need to adjust the project goals over time based on customer feedback or application performance in certain projects.
If you have a dedicated team, they will easily understand the complicated scope and task requirements. You can also ask your tech partner to do outstaffing, where they take full responsibility for assembling and managing a dedicated project team. For example, Geniusee has formed and enhanced over 100 project teams globally.
So how do you know if you should form a dedicated team? If the project has many of the characteristics listed below, then a dedicated team model would serve you best.
There are certain situations when neither a dedicated team nor a fixed price model will “fully” meet your project needs. If that’s the case, you should go with a time and material model.
If your project has the following characteristics, you may find the time and material model well suited.
Now that we know the suitability of each cooperation model for different project types let’s explore the pros and cons further.
A fixed-price project always sets a clear project goal and the amount of money to be paid. Once you tell your service provider the desired outcome of the project, the provider can prepare a timeline with clear project goals.
Let’s look at the pros and cons.
It is essential that you get familiar with the job that will be done to make a fixed-price project successful. Familiarity with the job will help you negotiate a good price with your tech partner.
In a dedicated-team model, the client and tech support provider agree on the workload, time, and staffing requirements. That said, the project goals and requirements may evolve. In addition, it is expected that the cooperative members of the IT service provider dedicate themselves fully to the client’s task.
The model has its pros and cons.
This model is highly suitable for long-term projects. For instance, Geniusee formed a 12-member dedicated team for Drum, a bio linking mobile app, and the partnership has been working for two years.
The T&M cooperation model is comparatively simpler than the dedicated-team model. Here the customer pays for all working hours and provides all the cost of materials regardless of the project requirement or duration.
There are certain pros and cons for this model as well.
The T&M model is also suitable for longer-term projects.
The hybrid pricing model lets you combine the T&M and fixed-price model. Here’s an example. You will form two teams. One will take care of administration, business analytics, and customer relationship management. As the tasks vary, you may go with T&M for this team. Another team will take care of product development, a clearly-defined task. So you can opt for a fixed-price model for the second team.
The table below summarizes the pros and cons of each model.
By now you can see that each model has its individual pros and cons. However, the applicability fully depends on your business, project, and requirement type. Thus, always carefully analyze the nature of the project before choosing one of the collaboration models.
Geniusee supports cooperation with businesses from different industries and has completed over 100 IT projects for clients located in different parts of the world. Depending on the size of your organization and your business needs, the Geniusee team can assist you with project estimation, propose the optimal cooperation model, and form your remote team.
The vetted IT experts can perform every task, from conceptual modeling to providing technical support to your end-users. The cooperative members of the dedicated team will work consistently for your custom software development and product improvement while preparing updates for the next release. Silibrain, a digital healthcare app that partnered with Geniusee, was selected as the Best Patient Engagement Solutions Software Provider for 2021 by New World Report.
Let’s take a quick look at what Geniusee offers:
Check out Geniusee’s portfolio for further details on successful projects.
Choosing the right IT partnership model will help you achieve your IT product development and business goals. Your choice will depend on the project type and predictability of time and resources.
A pricing system that has worked well for a particular business and a tech support provider may not always suit your project. Thus, always consider the specific nature of your project and business. Reach out to Geniusee if you need professional assistance.
2021-07-02 / mod. 2022-06-20
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