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

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Product Development
Dmytro Nalyvaiko
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Table of Contents:

1. Business Engagement Model in IT Industry

2. What is an Engagement Model?

3. Types of Engagement Models

Outstaffing Model

Dedicated Team Model

Fixed Price Model

Time & Material Model

4. Questions to Ask Before Making a Choice

5. Our Approach to Engagement Process

Business Engagement Model in IT Industry

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?

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.

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.

There are two underlying criteria of engagement model groups: 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.

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.

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!

Axon Development Group
August 3, 2022
Product Development

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