What Outsourcing Engagement Model is Right For You?

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Economic arbitrage and information technology outsourcing have characterized how businesses approach software development. Companies have tapped into a worldwide pool of development resources rather than relying only on in-house expertise and skills. On the other hand, outsourced software development firms face the challenge of determining the best cost-effective and cooperative model. Smart IT has put together a definitive guide to IT services pricing and outsourcing engagement models for these intents and purposes. The importance of business process outsourcing has been realized in the last two decades. The BPO industry has registered tremendous growth in the last ten years. Invensis’ deep industry-specific expertise helps us to tailor customized back office BPO services that match your business needs. So, this blog will discuss the BPO services and their engagement models, which create a collaborative value chain and offer true benefits of outsourcing.

Outsourcing Engagement Model

Outsourcing Engagement Models

An outsourcing engagement model is the fundamental-defining form of the client vs. outsourcing vendor relation. Each of the two parties, i.e., the client and the outsourced vendor, must communicate clearly under the software development model of engagement. The outsourcing engagement models are classified into the three types depending on the financial aspects and other conditions:

Fixed Price Model

The fixed-price engagement model establishes a professional partnership with a pre-determined budget. Despite the time and money spent, the model indicates a single-rated bill. To set the budget at the start of a collaboration, the team must be fully aware of your requirements, business demands, and budgetary constraints. 

Pros of using a Fixed Price Model

  • Overall Transparency

This strategy is based on plans, timelines, and regularly updated milestones reached during the software development process

  • Quicker Business Results

The FP model pre-plans each stage, and enterprises adhere to the schedule. As a result, each phase aligns, and every business outcome is more predictable.

  • Easily Manageable Business Processes

With minimum supervision needed by clients on their ongoing software product. The management of the client’s company has finished liberty to focus on other important activities rather than monitoring and giving feedback on developed software.

Cons of using a Fixed Price Model

  • Does not Allow Adjustments

The FP model ensures everything is set initially and works as per the plan. However, if anything goes wrong with the plan, this model has to quit the current plan and focus on the emergency demands, spoiling upcoming deadlines and deliveries.

  • Extra Work Costs an Extra Penny

With the entrance of newer technologies, if the businesses have some additional demands to be added to the list, they have to pay extra for all the extra work not included in the model.

  • Delayed Launch time 

If something goes wrong, firms must change their schedules for other jobs, which may cause most of their normal plans to be late, ultimately delaying the entire launch time.

Dedicated Team Model

The dedicated team engagement model focuses on long-term collaborations in product development from scratch. First, you recruit an outsourcing vendor’s team (developers, QA engineers, Project Managers, and others) for a monthly salary specified by a contract. In addition, the monthly fee depends on the staff’s qualifications, the team’s size, and the hourly rate set by the software development company.

Pros of using a Dedicated Team Model

  • Employed to Align with Business Objectives

This form of cooperation is typically utilized to get work done quickly by screening the correct group of resources for the job. 

  • Relevant Expertise and Experience

The recruiting of these expert development teams usually done with great scrutiny. Hence the experience and expertise of team members are never queried. 

  • Result-driven Approach

The only aim of hiring a dedicated team for software outsourcing projects and services is to achieve targeted goals. This result-driven approach provides complete visibility of regular task updates, which permit a business to make the right decision and avoid conflicts.

Cons of using a Dedicated Team Model

  • High Cost

If you have recruited a dedicated development team for smaller projects, it can be a costly expense as the efforts will be higher. However, this engagement model suits larger projects and enterprise businesses more.

  • Barriers to Communication

Communication might be a major issue if the organization does not work with the correct developers from a software outsourcing company. 

Time & Material Model

The T&M models of engagement are based on an agreed-upon billing rate and consider actual project time and materials consumed. As a result, you can completely engage in the process and adjust the necessary criteria. Moreover, the price approach is solely based on the development team’s real-time spent executing your product. 

Pros of using a T&M Model 

  • Rapid Adaptability 

Because of the rapid-paced nature of business, every company must be adaptable and adopt changes quickly. This “Time and Material approach” enables firms to adopt changes fast with the next project cycle’s closest iteration. 

  • Staying up-to-date with Technology 

When you execute the T&M model, all the alterations are periodically addressed, which means there is a higher possibility of withstanding technology changes easily and effectively. 

  • Improved time-to-market

The “T&M” model employs a continuous change approach in which defects are identified early on, and costs are meticulously calculated to meet the end goal. In addition, because the T&M technique reduced time-to-market, numerous goods are halfway ready for launch.

Cons of using a T&M Model 

  • Time and budget restrictions are both uncertain

The Time & Material model focuses more on time, so your development needs get deviated. The overall cost might not fit in your budget. So businesses choose this model so that they can halt the services whenever they feel content with the achievement. 

  • Contract Extensions are less likely

This strategy is typically adopted on an hourly, weekly, or monthly basis, and no firm will adhere to the same method for an extended period once the goal has been attained.

Also read: 6 Factors that Influence F&A Outsourcing Success

Conclusion

We believe that this review will assist you in making the best decision for your development. The major goal of this blog was to shed light on the various ways in which firms might engage or collaborate in terms of financial models. We also intend to cover all facets of the types, including a thorough analysis of how each contributes to specific businesses. 

Word of advice: Talk to your outsourcing company about your project requirements to determine which model is ideal for your product development. Invensis delivers high-quality project management and development services, so contact us if you need business process outsourcing services.

About Invensis

Invensis Technologies is a leading global provider of IT-BPO services with a reputation for excellence. Our carrier-grade infrastructure and commitment to empowering clients around the world to achieve business transformation and growth. With over 5,000 staff and more than 22 years of experience, our company has been providing quality services since 2000.

Invensis delivers intelligent contact center and back-office functions for businesses. Invensis is an ISO 9001 and 27001 certified organization and has achieved HIPAA compliance to provide high quality and secured end-to-end outsourcing services. We have a strong base in the USA, Canada, Australia, UK, Ireland, Germany, and other countries serving over 200 clients. Creative methods and technological solutions drive Invensis, offering end-to-end automation from design to implementation, as well as ongoing development and data security. Our solutions tailors to help businesses achieve their strategic goals and help them become industry leaders.

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