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 the interest any time soon.
Along with fixed price and time and material (T&M), the dedicated software development 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 a dedicated software development team model is a game-changer in IT outsourcing
Let’s say you’re a startup that needs to build an MVP to validate the feasibility of your business idea and attract external funding. You have a very limited budget and little time to create and market your product as competitors are on the watch out and busy building their own products. As a matter of fact, you have 2 options to choose from:
- Launch a full-fledged software development team internally for PoC, or
- Outsource your product development to a specialist provider onshore, 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 an internal recruitment team/bandwidth 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 in, 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 software engineer you’ve 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 to replace him/her, 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.
And you aren’t even sure you’ll be converting your MVP into a full-fledged product so why make all these investments now?
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 without losing product quality.
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.
Key features of a dedicated development team model
Dedicated team members work exclusively on your project development
When you outsource your custom software development as a managed project (fixed price, T&M), you normally get software engineers and other tech specialists from the bench, which means they aren’t reserved to work exclusively on your project development. Outsourcing providers shuffle developers from project to project and keep the bench, i.e. developers with no current projects and assignments who just sit and wait for an appropriate project to get onboard. While on the bench, developers are less committed and dedicated to a certain client. In fact, they don’t know how long they’ll be working on a project before being moved to a different one, so they may simply have no time to get used to a project team, absorb client’s values, understand its mission and business goals, and dive deep in the project itself.
Using bench resources can result in hidden agenda and additional overheads for the client as well as low productivity and efficiency of software development.
Compared to other outsourcing models, the dedicated team model is the most personalized one. By hiring a dedicated team onshore or offshore, most customers do not just look for additional resources, but they seek to get IT professionals motivated and interested in the project, committed and proactive and 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.
Maximum transparency of payments and processes
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.
Maximum project management control and the final decision making
Dedicated software team proves to be more productive and effective if you, as a client, manage it on your own. However, if you have no internal resource to manage your offshore team, you can find an outsourcing partner like 8allocate 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/augmented 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.