Engagement Models: Choose The Fit That’s Right For You

According to statistics, 90% of The Global 2000 companies use IT and software development outsourcing services. The basis of software outsourcing is a clear business engagement model.

What is engagement model? This framework of software development engagement model defines the relationship between parties: communication, participation, management, pricing, work schedule, etc.

Choosing the most suitable engagement model in software development is often challenging. All of them have benefits and cornerstones.

This blog post discusses the main types of engagement models in software development and tells you how not to make a mistake with the choice!

What is an Engagement Model?

The success of the development process depends on the choice of the team. Especially if working with an internal team is impossible for a number of reasons: lack of consistent tasks, budgeting, incompetence, lack of time, and so on. If you have been thinking about finding a development team to build your software, but are afraid that your project will fail, pay special attention to how you will collaborate with the team.
In other words, be sure to choose an engagement model that works for your particular project.

An engagement model is a framework of relationships between a customer (project owner) and a vendor (IT company), which determines how a vendor provides software services.

The software development engagement model forms the basis of the parties' duties, responsibilities, and commitments.

The main principles of the project engagement model include transparency, justice, respect for the parties, and clarity. In addition, it must cover all the interaction fields and the incentives of the parties involved.

How to Choose an Engagement Model?

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First, you must determine your level of internal technical expertise and what your business goals are. Do you need a team to work on your project from A to Z? Or do you have your own team and your only request is to help with an ongoing project? Budget structure is also important.
Are you ready for additional costs and an uncertain final cost for the project? Or do you want to pay a fixed amount of money, but have little or no flexibility for changes?
Here, we'll go into detail about each type of collaboration and budgeting so you can choose the one that will save you money, time, and guarantee the success of your next project.
If you want to know which collaboration model is less risky and you want to ensure a smooth and efficient collaboration with outsourced developers, keep reading.

Types of Engagement Models

There is no magic pill, i.e., universal engagement models in IT industry that will meet the demands of any project. Instead, you must select the most suitable model according to the project’s size, duration, goals, and concept.

Choosing the right customer engagement model for software development is a major task, aimed at aligning goals around the overall result and the best suitable pricing model. The decision to choose one or another engagement model can be based on various factors, which can be objective, like the vendor's maturity level and track record of success, or subjective, like the client's previous experience with other service providers.
In any case, the chosen model with all of its legal and technological aspects must be accurately defined and transparent to both parties.

In short, the engagement model is a detailed plan. It covers all the features of your collaboration with the development team: responsibilities, budgeting terms, management issues, rules, obligations, and the duration of the business relationship. It is usually a legally binding contract signed by the client and the developers.
When you hire a team of builders to build your house, you also use a certain interaction model. You determine their work hours, wages, responsibilities, and the approximate length of the construction process, right?
For example, if you're out of town a lot, you'll discuss it with the builders and hire someone to oversee the process because you can't do it yourself. Or, let's say you've always wanted to build a house yourself, but you still need help on the site. In that case, you would be looking for a completely different type of collaboration.
Engagement models in software development are the same as everywhere, not just in IT. If you need to work with any outside team, the rules are the same.

There are two underlying criteria of engagement models: relationships between the parties and type of contract. Let’s consider them in detail!

Relationships-Based Business Engagement Models

Outstaffing (Staff Augmentation) Model

In this approach, employees are on the staff of one company while working for another. Outstaffing is a kind of rent: the customer company pays the outstaffer (the company that provides the customer with human resources) a fee for each employee. The vendor is responsible for employees’ payments, taxes, and benefits.

In outstaffing, business processes, competencies, and results are transferred. An employee comes to the working conditions of the client company and can even work in the company's office like staff members.

When to Choose? ‍

When you need a technical specialist for a specific task (for example, JavaScript engineer or UI designer), but are not ready to look for and hire staff, pay taxes, and cover other expenses.

Dedicated Team Model

Dedicated Team is one of the most popular and flexible interaction approaches. The vendor acts as a partner and is responsible for creating a dedicated engineering team working entirely with a client’s project on a long-term basis.

The vendor undertakes a search for team members based on the client’s requirements, as well as organizational details such as team workspace and daily workload management. The pricing system provides monthly payments covering salaries for members, the fee of the vendor as well as administrative costs.

Through effective collaboration, a dedicated software development team can have a clear understanding of the purpose of the project. The business vision and goals for what your end users expect are explained in advance along with a project management roadmap - from inception to implementation.

When to Choose?

‍The Dedicated Team approach best fits dynamic long-term projects with changing requirements. Also, if you want to have a team involved in only one project, this model is precisely for you. On the other hand, we recommend considering another model if you have a strictly limited budget and a tight deadline or if your project is very small or short-term.

Check out our blog post about the benefits and challenges of Dedicated Team!

Project-Based Business Engagement Models

Fixed Price Model

This model determines the project's requirements before actual development begins.

The vendor provides customers with a fixed price offer, which describes the project's scope, the work schedule, and cost. The payment schedule for the fixed price interaction model depends on the stages of the project and its duration.