Each project is different and difficult in its own way. Software development is a highly competitive profession, and companies pay close attention to even the smallest aspects in order to fine-tune their concepts. Choosing an engagement model for their applications is one of the parts where they should be cautious. Since each app follows its own path and is unique. There is no one-size-fits-all paradigm that can be applied to all of them.
When it comes to choosing a development partner for an app, one of the most important factors to consider is the engagement model. It also defines each side’s degree of control and accountability. Another consideration is the desired engagement model, which has an impact on the overall cost of app development. When it comes to development organizations, the quality and accessibility of the product should be consistent regardless of the engagement model chosen.
According to a recent survey, the worldwide IT outsourcing market will expand by USD 98 billion between 2020 and 2024. After 2020, outsourced development will be the best option laying the groundwork for new software outsourcing business models at an astonishing rate. The numerous advantages vary from easier access to a diverse pool of talent to greater cost control and reduced marketing time.
As software development is distinctive to each project, there is no one-size-fits-all engagement model for software development. Every software development engagement model has its own set of advantages and disadvantages allowing it to be tailored to unique development projects.
1. What is the Software Development Engagement Model?
An engagement model is nothing more than a plan or strategy for describing a customer-vendor partnership during project development. Software businesses engagement models define how specialists and professionals are involved in software development, as well as their roles, payment terms, management concerns and timetables.
Although no single software development engagement model is suitable for all sorts of projects or meets the needs of all customers.
2. Types of Engagement Model
It’s easier than it sounds to find the ideal engagement models for a software company. Though there are a few industry-wide standard engagement approaches. All the different models are classified as either Fixed Price or Non-Fixed Price types. Fixed-price contracts have specific conditions as well as a set price that is not subject to change. Non-fixed-price models provide a level of flexibility that is perfect for today’s continuously changing circumstances.
Let’s take a closer look at what they symbolize and layout all the benefits and drawbacks for you.
2.1 Fixed Price Engagement Model
This model is often known as a fixed price or lump sum agreement is the most evident. This methodology is all about locking in the costs of your project long before construction begins. A predetermined project cost is related to the Fixed Price Model. When you have well-defined project requirements for the product or application you want to develop it’s perfect to use.
At the time of the contract agreement, the scope of work and costs are agreed upon and the project is carried out in compliance with this agreement. In this situation, project expenditures are firmly related to well-defined project deliverables which are often tied to specific payment milestones during the project’s life cycle. This setup also allows you to keep track of progress and reduce project risk.
Before beginning development, the TechDel business analysis team conducts a series of in-depth interviews with the customer to learn every aspect of the upcoming project. We work together to define use cases, create user stories and build wireframes to aid in the depiction of the user experience and layout. A precise technical specification, estimation, development timetable and prototype are the outcomes of this stage.
All of these are predetermined from this point forward and are not liable to change during the development process.
2.1.1 Benefits of Fixed Price Engagement Model
There are the following benefits of the fixed price engagement model.
- Predictability and accountability: Before the development begins, you’ll be given a detailed budget and timeline.
- Lower monitoring and involvement of clients: In comparison to other models fixed pricing involves less client management and monitoring because the development team has a specification and is aware of the scope of work and budget ahead of time.
- End-goal specificity: You’ll have a decent concept of what the finished result will look like from the start and you can expect it to be delivered exactly that way. This is an excellent way to build trust with a new partner.
2.1.2 Drawbacks of Fixed Price Engagement Model
Costly: Since the development company is usually in charge of risk management all risks are determined accordingly and included in the proposal. As a result, fixed-price engagements are considered the most expensive of the engagement models.
Unexpected Results: You can’t track the project because you don’t have a part to play. There’s a chance you’ll get bad results.
No Feedback: Since there is no way to communicate, you may not receive any feedback on your progress.
Long Preparation: Everything, including the agenda and pricing, must be finalized. All of this must also be documented.
2.2 Time and Material Model
The majority of the applications are ongoing and will continue to grow over time. Continuous development and layered integration are the foundations of this architecture. This methodology enables you to set more short-term objectives and work with a lot of freedom. Because this strategy is based on pay-as-you-go, it allows developers to organize their work more efficiently. With regular updates and more thinking put into it as the process progresses, the product has the best chance of meeting the initial business plan.
The payment is made for the actual work done in this model. Every month, you determine the actual labor time and pay yourself. This model is appropriate for long-term projects with the potential for change during the process – the project’s aims may shift as the market shifts. In comparison to the set price approach, there is more flexibility.
2.2.1 Benefits
- Flexibility: It is adaptable in terms of the project’s scope.
- Easy adaptability: You can adjust the project’s goals in response to market changes.
- Specify Objectives: You can specify project objectives explicitly. This benefits small businesses and startups.
- Manage Your Time: Because you are paid by the hour, you could stick to a strict schedule.
- Budget Monitoring: You can keep costs under control while maintaining flexibility.
- Track Progress: You can keep track of your progress according to set deadlines. It will aid in performance testing.
- No accurate estimates: You can’t estimate the exact total value because you can’t control costs. Because of modifications in the project as a result of market developments, this is the case.
- Continuous Follow-Up: To get the greatest outcomes, you should communicate with the outsourcing firm on a frequent basis.
- No set time limit: The project’s aims are ambiguous, making setting a time frame impossible.
This means that the T&M model necessitates more involvement from the client while also giving them more control over the project. The size and composition of the team can also be changed on the fly based on new requirements and demands.
2.3 Dedicated Team/Dedicated Development Center
The DDC model is offered by development firms to clients who need to supplement their existing team with a few remote specialists or establish a full-fledged offshore development Center. In this case, the contractor serves as both an outsourcing provider and a sort of HR organization.
The development firm provides the experts with the necessary expertise, and the client selects them for the team. The contractor assures each team member’s high professionalism and commitment to excellence.
For long-term projects, this type of relationship with an outsourcing company is ideal. The projects’ objectives may shift over time. It’s possible that the outsourced team’s requirements will alter frequently. This form of engagement is appropriate when your team lacks the necessary capabilities for the project. You can assemble a team of professionals to execute tasks that necessitate these abilities. They will collaborate with your staff. It eliminates the need for you to grow the size of your workforce.
You have total control over the team as the client. You have control over the project’s progress. Your authority helps you in maintaining a positive relationship between your team and the outsourcing team. Both teams work together to get excellent results.
2.3.1 Benefits
- Cost-effective: Hiring a team is less expensive than hiring a team yourself.
- More Focus: A committed team will devote more time and effort to the project. It provides you with superior outcomes. You have complete control over the project and can make modifications as needed.
- Improved Assessment: Communication between the staff and you should be excellent. It will aid in a more accurate assessment of progress. To improve the sharing of ideas and perspectives, you can employ a variety of communication tools.
- Flexible: Allowing you to improve or add new features.
2.3.2 Drawbacks
- Applicable to the project: This model is only appropriate for long-term projects with shifting objectives. Short-term ventures are not profitable.
- Choosing the Right Team: You must have the best team possible. It’s possible that hiring will take a long period. It necessitates your full participation and takes up a significant amount of your time.
- Team Preferences: If the specifications aren’t exact, the team can work according to their own preferences.
2.4 Cost-Plus Model
The Cost-Plus model is most commonly used for outstaffing or staff leasing, which is when one company hires part of its experts to another for a certain length of time. In fact, this implies that as a client, you can “borrow” a handful of developers/QA engineers, etc., who will work for you until the project is completed or their services are no longer required. The client is responsible for the developers’ compensation, as well as all associated costs and a contractor’s fee. At the conclusion of each month, the contractor submits a detailed analysis of all project-related expenses that are supported by documentation.
They include everything from the developers’ salaries to utility bills and management costs. The model’s defining feature is its great price transparency, which has given it the term Open-Book Model.
The model is separated into three subcategories depending on how the profitability is calculated:
- Cost Plus Fixed Fee: As with a Fixed Price Contract, the contractor’s fee is predetermined.
- Cost Plus % Fee: The contractor’s fee is calculated as a percentage of the project’s total expenses. My recommendation is to stay away from this strategy because it may encourage the contractor to spend as much as possible in order to maximize earnings.
- Cost Plus Incentive Fee: The contractor’s profit is determined by the target cost to actual cost ratio; in other words, the developer earns more for spending less and working quicker.
The advantages and disadvantages of the Cost-Plus approach are quite similar to those of the Time & Material model. It’s usually less expensive, faster, and less hazardous than a Fixed Price bid, but it requires more client control. It also has the advantage of excellent cost transparency.
It’s one distinct drawback is that developers frequently stipulate in their Cost-Plus contracts that clients must notify them of service termination 2-3 months in advance.
3. Conclusion
Engagement models are multiple techniques of cooperation from which you must select before committing to a healthy working relationship. At Techdel, we advise our clients to begin working with us on a fixed-price basis. It provides complete budget management and unrivalled dependability. It allows you to get a feel for your partner and come up with a working solution that fits all of your needs on schedule.
We emphasize the need for accountability and integrity in software development on a regular basis as a web and mobile app development firm. Over the years, we’ve refined our work standards including interaction methods to ensure that we and our clients are always working together.
TechDel is a dedicated development company known for flexible and customer-friendly engagement models. Please Contact TechDel for further assistance.
