Dedicated Software Team As a Value-Based and Personalized Outsourcing Engagement
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If we go to Google Trends and type in “dedicated team”, we’ll see that over the past 5 years this search term has remained pretty steady in volume with high peaks in 2017 and 2018.
If we then go to Semrush, we’ll see that CPC for “dedicated team” is as high as almost $10. Both observations suggest that the topic of dedicated teams has been pretty hot over the past years and will not likely diminish in interest any time soon.
Along with fixed price and time and material (T&M), dedicated team is the third most popular engagement and pricing model in software development outsourcing that proves to be one of the most beneficial ones for both service buyers and providers.
Of all outsourcing projects today, up to 60% are executed by extended dedicated software development teams with clients retaining 100% project management and delivery control.
Let’s explore the ins and outs of this business model to understand why it is preferable for most of the outsourcing ventures today.
Why dedicated team model is a game-changer in outsourcing
Let’s say you’re the owner of a startup that built an MVP to validate the feasibility of your business idea and to attract external funding. You were able to create an MVP with very limited resources in-house, but now when you have enough money you need to make a choice of whether to launch a full-fledged software development team internally or outsource your product development to a specialist provider offshore (2+ time zones away) or nearshore (the same time zone). Let’s assume you choose to set up a team in-house: you define team composition, create skills profiles and job descriptions, and submit this information to your IT staffing agency (as a startup you won’t likely have any internal recruitment team to rely on). The agency starts the search for talent to hire for your software team, but it has other higher priority clients to focus on (e.g., better established brands with 3x more job openings than you and, thus, heftier business opportunities) so they supply interview candidates slowly and you need to partner up with more agencies to speed up the process. You pay a retainer fee to each agency to keep them work on your vacancies so start spending your budget without even getting any qualified candidates for your project team. The average time to hire a good software developer resource in North America is 60 days; the more complex and rare the skills (e.g., data science, AI, ML), the longer the hiring. So you’re still waiting for good candidates to come in while your competitor is already working on similar product development.
Two months later you finally get the appropriate candidates, make them a job offer and start building an in-house team. Now you need to invest in the infrastructure development, workstations, create social benefits packages and hire a PM or an external consultant to help you ramp up the project kickoff, onboard and train developers, implement Scrum or a different methodology, do project planning, etc. Each of these steps adds up to your total cost of the in-house team, which will eventually blow up your entire software dev budget.
Fast forward to the middle of the project, you realize that the developer you hired is a mistake. You want him off your team right away, but you can’t do it fast due to the contractual obligations, so you end up having the wrong guy keep screwing up your project and in order to replace him, you need to repeat all of the above steps once again and pay for the idle time, too.
The chance you’ll build and launch your solution is still high, but you’ll significantly delay your product release, pay overheads as a result of staff attrition and replacement, and will release your product with limited functional features as most of your budget will be spent on team staffing and retention, not on product development.
Now you wish you’d taken a different path and opted to outsource your software development, but you still have concerns that if you choose a wrong provider it’ll be more detrimental to your project development than building an in-house team.
Clients that choose to build their dedicated teams with 8allocate report 80% team hiring success rate and less than 10% attrition rate. Check out their case stories!
The extended dedicated software team is a golden middle between in-house development and outsourcing, as it allows you to retain maximum managerial control of your project and milestone deliveries.
When is it best to build an extended/augmented dedicated team?
- You are focused on establishing long-term cooperation with a service provider, i.e. you have software development needs for 5+ months going forward;
- Your project requirements will change frequently;
- You assume that in the process of work you may need to increase or decrease your team size;
- You do not have the time / desire / resources to hire / train your own team in-house;
- You want to reduce the cost of your software development by leveraging lower-cost resources;
- You want to be completely responsible for the outcome of your project development.
Main features of a dedicated team model
Compared to other outsourcing models, the dedicated team model is the most personalized one. By hiring a dedicated team, most customers do not just look for additional resources, but they seek to get IT professionals motivated and interested in the project, to be committed and proactive and to be able to do everything possible to make the final product perfect. The client uses the team as an extended software development department that can be easily scaled up and down depending on the current project needs and budget.
Besides the team’s dedication and commitment to the client’s success, this model envisions high transparency of processes, project management retention, and clear pricing. The client normally gets a monthly invoice comprised of each team member’s salary, taxes and the provider’s service fee. Alternatively, the management fee and taxes are included in the total cost of the developer on the outsourced team.
Compare the total monthly cost of tech resource in Ukraine, Israel, USA and the United Kingdom here.
As mentioned above, it proves to be more effective if you, as a client, manage your dedicated offshore team on your own. However, if you have no internal resource to manage your offshore team, you can find an outsourcing partner that can assign a proxy PM or a tech lead to report to you and oversee your project. Still, we recommend that you allocate your own manager to take care of your dedicated team, while the provider helps you with team performance monitoring metrics and tools, team size planning and resource swapping, etc.
Another important feature of the Dedicated Team model is that as a client, you are fully involved in the interview process and you make the final hiring decisions. It allows you to keep control of your project development from day zero and build a close relationship with each team member before even starting the project, which will enable you to better motivate and retain those people down the road.
To conclude, it makes sense to build a dedicated software dev team offshore when you want to keep maximum control of your project development, to have transparent pricing and the flexibility to scale your team depending on current needs.
The rule of thumb is to use an extended team for long-term project development with unclear and rapidly changing requirements or as a way to boost the existing in-house team with auxiliary long-term talent and resources.