Team Extension, Managed Services And Fixed Price Projects. For Whom, How Much, When And Why?

Nothing generates as much debate and apprehension as price negotiation. Development begins with the choice of software development contracting and pricing model that the supplier provides. So let’s take a closer look at 3 types of contract in the software outsourcing world.

Team extension

Personnel outsourcing, or ‘team extension’, is used when your organization needs to acquire an employee or a team of employees with specific IT skills for a limited time or for a specific project.

Candidates with suitable profiles can provide a fresh view on the project, system or workflow. It is priceless since it often happens that, because your employees know the company's processes very well, they are not able to suggest innovative changes. Of course, it is worth remembering that you will need someone in your company who can assess the work of the external consultants.

Usually, the price for such a specialist, or team of specialists, comprises the monthly salary of all hired employees plus additional costs for administrative needs. What are the advantages of such a solution? Control, professionalism, predictability and reduction of costs. It is you who manages the team or specialist and determines the workload. However, it is not you who spends much time on finding and recruiting experts. But it is you who lists requirements. Administration of the team is managed by the provider. And last but not the least, you always know the next month’s payments and taxes.

It is an excellent solution for long-term or large in-house projects when you do not have enough staff or your staff lacks some skills.

Managed services

Similar benefits come from managed services. In this case, however, the supplier will provide comprehensive support for the new process and have more opportunities to get to know your business in more depth. In this model full responsibility for part of the IT area in your company, or perhaps the entire area, is transferred to the external company, supporting the construction of the most effective IT strategy and in conducting IT projects. It can involve not only the use of the resources and knowledge of the experienced technology partner but also responsibilities related to the administration of hardware and software resources of your company. You benefit from the specialist knowledge and experience of engineers and IT architects, without restriction, based on the best technological solutions on the market.

Fixed price projects

This IT outsourcing model works best when used for projects with a predefined scope of tasks, rigid requirements and predictable time frames. This model requires you to provide a detailed list of project requirements and all required developer documentation, so the contractors can design a scope of work and work according to a strict roadmap with unchangeable deadlines. Put simply, this model works best on short-term projects (1-4 months), with well-formed specifications and time frames. Usually, the budget is not big here, so it becomes critical to keep within its scope. Our advice to make it work properly – choose a reliable outsourcing partner. The undoubted advantages of this approach are clarity and precision. Everybody knows what to do, when and how. The project scope and time frames are known in advance, so the team can set the deadlines and monitor the project progress with ease.

Which is best?

Will outsourcing provide your company with cost savings? Proponents of this solution suggest that you minimize part of the costs associated with the worker's employment process, training and leave. It's hard to deny. The fixed price model is great for short‐term projects when you need quick results on a tight budget. However, this is not a suitable long‐term strategy, and you will still not save as much as you could by deciding on comprehensive managed services. In this case, you save not only on personnel costs but also in connection with the operation and management of IT infrastructure.

Who takes responsibility for delivery?

Who takes responsibility for costs?

Advantages / Disadvantages

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