October 19, 2020
4 min read
To access the strong global IT talent and accelerate development, companies are increasingly choosing to engage in outsourced projects or expand their in-house staff with a dedicated development team. In this blog post, we’re going to break down these two business models, and discuss the best fit for different companies.
Faring well in a hyper-competitive market requires moving quickly with the best possible staff, and both large and small companies are increasingly trusting their software development to offshore teams. While some of them do it traditionally (project-based outsourcing), others favor a newer approach to offshoring, known as outstaffing or the dedicated teams model. Both of these options entail cooperating with a remote team — yet in a different way.
In software development, project-based outsourcing means delegating a project to a third-party IT services provider. Such an arrangement is usually based on either a fixed-price or time-and-materials contract and implies collaboration with a nearshore or offshore vendor to take advantage of lower labor costs.
This is how project-based outsourcing typically functions:
As we’ve mentioned above, one of the most common outsourcing pricing options is fixed-cost project pricing. In this case, the cost of the deal is defined from square one. A fixed-price contract works well if you have precise expectations of the vendor and their team but can be a huge drawback if the solution needs more polishing or the scope changes after development begins.
Another widespread pricing model is the time-and-materials option. This pricing plan fits projects the scope of which is difficult to assess.
Here is the list of main advantages and drawbacks of outsourcing.
Dedicated development teams also consist of offshore developers engaged in projects, however the projects are for one customer and the relationship tends to be much longer in nature. Dedicated teams become an extension of your in-house team, with offshore experts provided by an offshore software development company to work specifically on one company’s projects. The team is typically in close communication with your team and develops close working relationships and a full understanding of your business. Even if they are on another continent and don’t work for you directly, they become very involved in your company’s world.
This is how dedicated teams work:
A dedicated team’s pricing depends on three things: labor costs in your dedicated office’s country, the size of the team you want to integrate and its composition. Aside from these three components, the total amount also includes a services provider’s fee.
Let’s consider an example of Satellite’s dedicated team pricing.
For instance, you need a small team of four people, two software engineers, a UI/UX designer and a project manager. In this scenario, your monthly billing for this team will amount to approximately $18,000. Since dedicated teams can be extended, you can always ask for a customized solution and the pricing will change accordingly.
Here is the list of main advantages and drawbacks of dedicated teams.
Both project-based outsourcing and dedicated teams imply working with an offshore team yet in practice they are quite different. Choosing between them is an important decision that depends directly on your business goals.
Outsourcing is suitable for satisfying short-term business needs and getting peripheral tasks out of the way. However, it remains a temporary solution and won’t fit those companies that are looking for a way to reinforce their in-house software development.
As a business model, dedicated teams suit pretty much everyone, from VC-backed startups to global companies. They help you scale up, successfully go through the explosive growth stage and fit large software development projects.
Develop and scale your amazing software product with Satellite. We help you build a dedicated development team that works as a natural extension of your company.