Major Outsourcing Models and How to Use Them to Your Benefit


There comes a day when the success of your business depends heavily on your IT people. Whether it is a new functional corporate website, a web store, profound testing or performance optimization of software your company has been using for years, your IT department’s resources could simply be not equal to the task.

Hiring a few high-class IT professionals is a challenge for most companies. For one, IT people like to work in IT environment, with people, whose expertise can help them solve tough problems, challenge their abilities and evaluate their achievements. Secondly, your company will often have the difficulty even with identifying the qualifications of the person you need, not to mention the quest of finding suitable candidates. Last but not least, IT professionals will cost you, they are in high demand and the market for them is constantly growing.

No wonder IT outsourcing in all its shapes and forms has become such a popular service in the past decades. IT professionals create companies that are focused on providing such services, offering their clients access to top-notch international IT knowledge base and scalable resources for their projects or ongoing tasks.

For the clients outsourcing makes even more sense when you think about avoiding additional costs of hiring, providing insurance, computers and other equipment, office space, training and managing your IT staff. This frees up internal resources that would otherwise have to be spent on all the paperwork for each person hired directly, thus allowing business owner and his staff to focus on the core business.

Depending on the type of work, the way the client wants the project to be managed and the flexibility the project will require, as well as the budget, the client should consider one of the three major outsourcing models out there. Each of them is effective in its own way, each helps you optimize your expenses and resources, you just need to decide which one works better for your business.

Fixed Price

You have project, a deadline and a fixed budget. On the plus side, once you have written a very specific and detailed project description with all the requirements and deadlines, according to which your project will be implemented, compared the bids from potential contractors and chose one for your project, your company’s internal resources are involved to the bare minimum. The contractor’s project manager will coordinate the workflow and keep you posted on progress and inform you in case of any deviation from the schedule. On the other hand, you do not know your team of IT specialists all that well, neither can you adjust any aspects of your project once the project has started including the scope and the price, even if you do face the need to cut your expenses or have new information regarding the project and want to make adjustments. So you might want to keep this model for small-scale projects that do not require much adjustment. With fixed price paid per project your contractor is also unlikely to hire the best professionals or introduce the most efficient solutions for the client if their implementation requires a lot of time.

Time & Material

You have the flexibility to change the general project scope and prioritize tasks within this project on the fly, and you pay for the time your contractor has worked on your tasks. This is more or less the opposite of the Fixed Price model. The good thing is, you are in greater control of the situation and you can adjust your contractor’s priorities and deadlines. As for the cons, unlike the Fixed Price, in Time & Material the client is responsible for the risks that might occur during implementation. For example, should your company face the need to reduce expenses for the project, a part of your project could end up unfinished or delayed. Also, to mitigate the risk of client not approving some of the hours the contractor had to spend working on the project, the latter tend to charge higher hourly rate. Just as it happens with the previous model, here you do not have a say in who works on your project, so the code quality risk is rather high.

Dedicated Team (aka Outstaffing)

You get the professionals according to the set of skills you are looking for, they work on your tasks exclusively, and you manage their workload, tasks and priorities, only they are not on your payroll. As opposed to the previous models, Dedicated Team allows you to influence the quality of work by choosing the best professionals, while still getting the benefits of outsourcing including cost reduction and freeing up internal resources. How it works: your contractor helps you identify the qualifications, looks for suitable specialists, holds initial interviews, later you interview the best of them. The contractor hires the people you choose and they work from the contractor’s office and deliver results by deadline. A good contractor will also help organize any of this staff to travel and work on-site, if the client wants to get to know these people better. The crucial ingredient to this model’s success is a good project manager working on the client’s staff who hires, fires, prioritizes tasks and evaluates work. Things to keep in mind: when you hire highly professional staff, be sure to use all their skills and abilities to keep them motivated. Also, the pricing model is right if you are looking at a long-term project with adjustments made on the fly, but the budget is not pre-defined and will depend on the price of the professionals you are hiring and the time required to get the project implemented.

These three outsourcing models offer greater budget flexibility and control. Outsourcing lets organizations pay only for the services they need, when they need them. It also reduces the need to hire and train specialized staff, brings in fresh engineering expertise, and reduces capital and operating expenses.

It is important to remember that the success of each outsourcing model depends on how well you can build your communication with the outsourced team. We are planning to touch on communication issues and solutions in outsourcing in one of our next publications. You are invited to ask questions or comment to this post.

MavenEcommerce provides top-notch outstaffing service from its office in Kyiv, Ukraine. To learn more please follow this link.

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Yulia Samoteykina

Yulia Samoteykina


Yulia is a Marketing Manager at MavenEcommerce, and has almost a decade of experience in project management, sales and marketing, having worked in traditional as well as online marketing. Her interests include business, startup culture and latest trends in technology. Yulia speaks four languages and has travelled the world, her love of reading encompasses a wide range of genres and publications, and includes history, fantasy, thriller, world news and IT blogs.

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