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Distillery
DATE PUBLISHED
12 June 2019
CATEGORIES
Blog, Guide
Each software outsourcing service model has pros and cons. Which type
of outsourcing is right for your business? Our how-to guide helps you
decide.
Execute and innovate faster. From 2016 to 2018, Deloitte saw an increase
from 20% to 49% in the number of organizations moving to outsourced
providers as they innovate.
Source top talent with the right expertise. Gartner’s 2017 and 2016 CIO
Agenda Reports identi ed talent as the “single biggest issue standing in the
way of CIOs achieving their objectives.”
Make smarter use of their resources. As the Harvard Business Review
states, “Full-time employees are the most expensive and least exible source
of labor.” That’s why smart businesses are making strategic use of
outsourced, contract workers to ll gaps in expertise, meet uctuating
demands, and manage certain projects. Did you know that Microsoft and
Google both have contract workforces that either equal or exceed their in-
house headcounts?
Done correctly, outsourcing can be your secret weapon to ongoing
innovation, rapid releases, and sustainable business success.
This guide will help you gain a stronger grasp of how different types of
outsourcing models really work, so you can accurately assess which model is
the right t for your needs.
Finally, we’ll offer up some simple questions to help you assess which model
is right for you.
Don’t miss out. One of these three types of outsourcing models may be the
key to competitive advantage for your business.
These factors are not mutually exclusive. Instead, they’re two perspectives
framing the many different types of outsourcing engagements you can
have.
Onsite Outsourcing
Onshore Outsourcing
Nearshore Outsourcing
Offshore Outsourcing
Multisource Outsourcing
Managed team models, in which the client shares responsibility for and
ownership of development projects with an outsourcing partner, agreeing
on which responsibilities belong to whom.
Project-Based Model
So without further ado, let’s take a deep dive into the three primary types of
relationship-based software outsourcing: Staff augmentation outsourcing,
managed team outsourcing, and project-based outsourcing.
Types of Outsourcing: Staff Augmentation
Synonyms: Extended Team, CoSourced Team
You can seamlessly integrate top-tier engineers into your in-house team.
Since your project is shared between your in-house team and your extended
team, you (or someone else from your in-house team) are in charge of
managing the process and work ows on a day-to-day basis.
Control
The staff augmentation outsourcing model works best for businesses of any
size that have existing in-house development teams.
When you need to add talent to your team quickly — without waiting for
in-house recruiting.
Given the tech talent shortage, recruiting the right in-house talent can take
months or even years.
With staff augmentation outsourcing, you can quickly source the talent you
need to get your work done.
Your outsourced workers give you the added bandwidth you need to
develop products more ef ciently. You get to market faster and iterate faster.
Lower staf ng and HR costs. You gain access to great talent without
having to pay full-time salaries or wasting your budget on “the bench.”
You’re also saving on recruiting, HR, onboarding, and turnover costs.
Lower operational costs. You’re not paying for outsourced workers’ of ce
space, hardware (e.g., computers), software, taxes, bene ts, ongoing training,
You have ongoing access to some of the best engineers and IT experts in the
world. But you don’t have to put up the hefty full-time salaries and bene ts
packages needed to keep them.
Your staff augmentation outsourcing partner does all the footwork to match
you with high-quality candidates who have the right expertise.
Your outsourcing partner supplies the right talent, and you have recourse to
ask for staf ng changes at any time.
Speed to Innovation
More bandwidth + the right expertise + fresh ideas and perspectives from
your outsourced workers = increased speed to innovation.
How It Works
Much like the staff augmentation model, your managed team is 100%
allocated to you and your project.
These teams are usually cross-functional. Roles can range from Scrum
Master to Back-End Developer to QA Engineer and beyond.
Control
You and the managed team agree upon scope, responsibilities, outcomes
(e.g., deliverables), timelines, and service-level agreements from day one.
This includes staying in close, regular contact with your outsourced Project
Manager.
Since responsibility is shared with the outsourcing partner, it’s best that you
have an experienced in-house Project Manager or Product Owner with a
solid background in the area covered by the engagement.
For most businesses, that person will be a Product Manager. It could also be
a CTO, CEO (common for startups), or other lead.
A managed team can come in handy for businesses that lack technical
expertise in the desired area.
Your outsourcing partner can provide the technical expertise and insights
you seek, adding value to your existing knowledge and working with you to
arrive at the best possible solution.
When you want to remain central to the decision making and development
of your product/vision.
Often, clients have product visions that aren’t fully eshed out.
You stay involved and retain decision-making control, but much of the day-
to-day execution happens without your involvement.
It also offers:
They’re likely already familiar with each other’s working styles, having
worked together successfully on similar engagements.
Improved Communication
In part, you’ll select your outsourcing partner to provide your managed team
based on their proven experience with similar projects.
Their past successes help to increase the likelihood that your project will
succeed.
Solution: nēdl engaged Distillery to provide a managed team for their MVP
development project. nēdl’s CTO spearheaded the project and led the
outsourced team, which consisted of a QA engineer, Fullstack Developer,
Project Manager, and Technical Advisor.
Bene ts: With the help of their managed team, nēdl successfully built and
launched their MVP. At their option, they continued working with the
outsourced managed team to make re nements post-launch. The nēdl app
Your outsourcer will fully manage the development process, responsible for
delivering the nal product according to the speci cations you provided and
the agreed-upon timeline.
Control
Although you retain the least amount of control with a project-based
outsourcing model, your in-house Project Manager/Product Owner will still
be in contact with your outsourcing partner from time to time.
Since you know what you want, you can effectively hand off your project,
freeing yourself of the burden of management.
It also offers:
Though this type of outsourcing affords the least amount of control over the
development process, it can be a huge advantage for some businesses.
You could let the project sit in your backlog with “low priority” status, or you
could outsource it with a project-based approach.
By choosing the latter, your team’s time and attention stay focused on your
high-priority projects.
You get the results you seek with minimum effort beyond documenting your
requirements.
Your contract and/or SOWs hold them accountable for delivering on their
commitments.
All that said, if you want to outsource your development project but still
retain more control throughout the process, having a hand in “how the
sausage gets made,” a managed team model is likely a better choice.
Solution: Tool put together the speci cations and requirements for this
project, then outsourced its development to Distillery. The outsourced team,
which worked independently, consisted of a Project Manager, a Frontend
Developer, two Backend Developers, a QA Engineer, and a DevOps Engineer.
Bene ts: Tool received the nished admin panel project on time.
Outsourcing the development of the admin panel and its features allowed
them and their partners to work more effectively and ramp up development
on the game’s other features.
For this reason, they’re most often used in projects in which scope and
They can easily and quickly request change orders to scale resource
allocation up or down to t their changing business needs.
To illustrate, imagine you need more DevOps resources on your team. You’ve
decided to look into staff augmentation outsourcing as a possible solution.
To test this solution, you may want to start with one DevOps Engineer and
three-month engagement. But what happens if:
After the rst ve weeks, you need more than one resource?
You want to keep your rst resource beyond the initial three-month
engagement?
You want to add one or two Backend Developers to your team?
Although this may sound like a better deal than the time-and-materials
contract, it can actually end up costing you more.
After all, every project is unique. No two projects share exactly the same
requirements, people, technologies, purposes, and limitations.
Alternatively, some clients will elect to expand the scope of the original
contract with a change order, although this will increase the nal cost of the
engagement.
That’s why multiple types of contracts are available, to t the differing needs
of those projects.
When it comes to contracts, the best thing you can do is consult with your
outsourcing partner.
Tell them your requirements and constraints. See how their services can best
be customized to t your needs.
After all, your outsourcing partner has been through the process many
times. They can use their past experience and expertise to create a contract
perfectly aligned with your project.
If you do, staff augmentation or a managed team may be the right choice. If
The relatively low level of commitment (as mentioned above, you can get
started with just one resource!) makes it the perfect way to dip your toes in
the outsourcing water without taking on signi cant risk. There’s no need to
have cold feet!
In other words, when you nd the right outsourcing partner, the right
relationship-based outsourcing models often follow.
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