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?

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.

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When to Choose?

When your project is short-term, or you are familiar with your product's needs, requirements, terms, and scope, a fixed price model is a perfect match for you.

Time & Material Model

Under this approach, the customer pays not for the final result but for the daily rate of each specialist working on the project. The payment scheme is "full-time equivalent of one employee", meaning the customer is charged an hourly rate. Project reports accompany all invoices for this type of contract.

This scheme is totally flexible, not requiring long and deep research at the initial stage. Thus, the client can adjust the software development process to the dynamic business needs.

When to Choose?

We recommend this model for use in developing medium- and large-sized projects; when the project is currently developing, the scope is not clearly defined, and the details are not described. This enables the client to manage the team working on the project. It is also a great model when you need to quickly start the technology development process or launch the discovery phase.

Possible problems in choosing a technical partner

The process of developing your product and the end result depends largely on your IT business partner. Choosing the wrong technical partner can lead to a number of problems:

Problems with project management

Let's say you've never had experience managing technical teams. You don't know how to set realistic deadlines, control the development process, and set goals.

Then, if you hire a team that needs a clear and detailed scope of work, your project may fail. This can lead to problems communicating with management, and product development is going nowhere.

Evaluate your experience managing technical teams before choosing a business partner and software engagement models, or you'll hate every second of the process.

Problems with budget planning

If you're on a tight budget, good planning of IT engagement models should be your best friend.

When you're building a house, you're always estimating how much money you'll need, right? You don't hire the most expensive design team and plan to buy designer furniture when you're on a tight budget.

Plus, you can always find a cheaper substitute for a quality one. It's the same with software development.

You don't want to find yourself in a situation where you can't pay the technical team because you didn't plan well and spent all your money.

The key in IT engagement models is to estimate all future development costs, including additional costs, and make sure that no matter what happens, you don't go bankrupt.

Problems with the final product

Imagine building a house, putting a lot of money and effort into it, only to realize that you hate it and can't live in it.

If you have communication or management problems during the development process, you may run into the same thing with your software.

You may get a product that you either don't like or don't need at all. It just becomes a waste of everyone's time.

That's why you need to take your choice of engagement model very seriously. It can help you get the best product for the money invested, enjoy the process, save you time and help you collaborate with talented software developers.

Questions to Ask Before Making a Choice

Each IT engagement model is notable. To be sure that you have chosen the most appropriate model, we recommend you answer the following questions:

Project type. Is your project simple or complex? Is it short-term or long-term?

Budget. Do you have a restricted budget, or can you allocate more funds in the development process?

Deadline. How soon should the software development project be completed? Can a deadline move based on progress?

Flexibility. Do you have a defined concept and requirements that will stay unaltered during the software development?

Involvement and project management. Would you participate in the decision-making at each stage of the project development, or would you like to delegate this work?

Expertise. Are you planning to augment your team with extra expertise or a dedicated team with the relevant background?

Our Approach to Engagement Process

Axon is a world-known software development company with expertise in developing customized software solutions for startups and global companies.

As an innovative and flexible company, Axon offers a choice of interaction models based on the customer's needs. We provide the following engagement models:

  • Dedicated Team
  • Outstaffing (Staff Augmentation) Model
  • Fixed Price Model
  • Time&Material

Due to our rich background, proper management, and high devotion to work, we have successfully executed more than 130 projects. We can select one of the most appropriate software engagement models for your project. Don’t hesitate to get in touch with us and learn how your organization can benefit from us!

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