Outsourcing models – how to engage with app development teams

negotiations-in-project-management

First-time outsourcers may have heard terms like fixed cost project and time and material engagement. These are some of the outsourcing models app development teams follow today. There are a couple more and the models decide how the project would be done in terms of releases and payments.

Fixed cost project

 True fixed cost projects require teams and their clients to have total clarity on what features would be built and the way they would be built. It always helps if a team has built a similar product before or the work to be outsourced is similar to another module of an existing product. All this leaves little room for misunderstanding of product scope and scope creep that happens so often in the outsourcing market. This is the most standard of outsourcing models.

 A considerable amount of time needs to be spent in documenting the features and laying out the timelines and deliverables. The contract would state the deliverables and their corresponding timelines and the exact project cost. This is signed prior to the first invoice for advance and project kickoff.

 This model is a bad idea in cases where the product is constantly evolving, bringing changes to the scope. Care has to be taken to ensure that change orders are carried out properly in case new features need to be added. Minimizing project risk and cost escalation are primary goals of this model.

Time & Material

 As the name suggests, this model involves paying a team on a periodic basis. The project and its scope are not fixed and as a result, continuous discovery takes place. Initial product discovery is done where two things become clear:

  1. Magnitude of the project(approximate time & resources required)
  2. Degree of clarity on features(deciding between fixed vs t&m)

 Time and material model is carried out in various degrees. Some vendors state an approximate no. of months required to finish the tasks. This usually happens in short 3-6 month engagements. Projects have been also known to involve teams for 2 years or more where teams bill clients in monthly cycles and clients are also happy with the resources. They work closely with the client’s in-house team(even onsite) for continuous product development. The table below lists out the pros and cons of both models. T&M works best when project scope is not fully clear and keeps evolving. It also gives quality higher precedence as compared to time and cost. Unlike other outsourcing models, the duration of the project is not set at the beginning.

 1

Monthly Retainer

 This model involves on-boarding 1 or more resources to an existing team. Best suited for clients with in-house teams that need extra hands, vendor teams also subcontract work to other teams in this fashion. Once the required skill set is identified, interviews are conducted to select suitable resources. Billing is done on a monthly basis and the resources need to be micro-managed by the client. There are no deliverables or timelines. The resource works for a standard 8-10 hours a day/5-6 days a week and carries out the tasks that are assigned to him on a periodic basis. The difference from other outsourcing models is that the resources are managed by the clients; the development team need not worry about it (especially in the case of on-site engagements).

Setting expectations

The sales staff at app development companies are always under a lot of pressure since their performance directly affects the company’s revenue.

 It’s easy to lose sight of the foremost responsibility here – understand a customer’s needs clearly and pitch the best approach based on inputs from technical and other senior staff. It could either be a suitable outsourcing model, use of the right APIs or even the decision to turn down the opportunity due to risks. Each customer has a different need and deciding the outsourcing model takes precedence. It affects the way the project would be done and quality of the product built.

 Looking to outsource? We’re here! We’ll help you find a team to work with.

Author Bio: Pravir Ramasundaram is our in-house content writer here at ContractIQ. Keep coming back to read more of his articles on mobility & outsourcing.

Building an app? Tell us about your project

We'll connect you with the right team for your project, for free!