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Is Outsourcing to a Dedicated Development Team Right for Your Business?

September 23, 2019

Every SME, large enterprise, or a rapid-growth startup sooner or later have to decide between hiring a dedicated development team or extending an in-house one. Learn the pros and cons of having a dedicated development contract, how the remote team works, and how to set up an effective collaboration with the remote vendor.

Starting from 2000, enterprises and software companies in developed countries are experiencing a growing demand for qualified software developers. Employment of software developers is projected to grow 24 percent from 2016 to 2026, much faster than the average. Software developers will be needed to respond to an increased demand for computer software. At the same time, they face the challenge of expensive IT services and lack a technically skilled workforce in their locations.

Overall while the employment outlook for tech professionals of all kinds in 2019 looks extremely rosy, thousands of software development outsourcing companies around the world provide a vast variety of outsourcing IT services. 

How to Decide Whether to Outsource IT Development

  1. Consider fixed price contracts
  2. Determine time and material contracts
  3. Weight the benefits of dedicated developer contracts

How to Outsource Software Development

First, we’ll look at the different conditions and possible collaboration models. In 2019, many IT outsourcing companies will offer one of the following business models or billing models:

  • Fixed price contracts
  • Time and material contracts
  • Dedicated developer contracts

The three categories above offer a variety of pros and cons for different individuals. Each option benefits a various clients in different ways.

it outsourcing business models

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Considering that many customers who work with longterm projects are interested in the dedicated model, let's talk about its advantages and disadvantages, as well as highlight features that you need to know before deciding to use this model.

Compared to other billing models, the dedicated developer contract is more personality-centered. Dedicated software engineers can join forces with in-house staff and work as a united front for an extended period of time. And, more importantly, the is involved in project coordination and has full management control over the team.

Our experience shows that clients choose the dedicated contract option when they need to extend the size of the team within the company, but there is no time, money, or desire to hire and train new specialists. Basically, by hiring offshore software engineers, the client can overcome high development costs in their location and significantly save on IT expenses.

For example, we at DevCom have a team that has been working with the same client on their same project for 10 years. The Clutch review below is the proof that a dedicated team really means “dedication” to the project and its success.

dev com review

Being “dedicated to quality” is a highlight of having a dedicated developer contract, as the investment in the engagement grows as it continues.

The critical factor which makes software development more/less expensive is not only salaries. For example, each in-house employee costs the sum of his or her gross wages but this is in addition to other employee-related expenses, including:

  • Recruiting expenses
  • Basic salary
  • Employment taxes
  • Benefits (insurance, health coverage, paid time off, and meals)
  • Space and office maintenance
  • Other approaches

So, how can the hiring process be made easier and quicker? Here’s the solution – hiring a vendor of IT talents.

5 Main Pros and Cons of the Dedicated Development Contract

There are plenty of advantages and disadvantages of this model, each depending on the business’ needs and capabilities.

Five advantages of a dedicated development contract:

  1. Integration with the client's company and its IT department.
  2. Full control over the project processes and teamwork.
  3. Fully predictable costs and budget control.
  4. Elasticity that gives the power to scale, grow, or decrease the team when it is necessary, while only paying for actual resources used.
  5. The agile approach means that isis possible to adjust conditions.

Overall, these pros all point to the control, independence, and flexibility the dedicated development contract offers to vendors. However, there are potential downsides that may make this option the wrong choice for some businesses.

5 drawbacks of a dedicated development contract:

  1. All risks for the project success are on the customer
  2. Low efficiency for short term projects
  3. More expensive than time and material model
  4. The approach of the team members can take some time - 1 or 2 weeks
  5. Client invests a lot of time into project management and coordination.

These disadvantages indicate a significant amount of time and financial investment in the contract, especially for shorter term projects that don’t always require it.

Regions for Outsourcing Software Development

While selecting the dedicated development team, the company should take into consideration a lot of criteria such as:

  • Geographical proximity
  • Time difference
  • Language requirements
  • Qualification requirements
  • Cultural similarity

There are no more or less suitable countries for outsourcing, and you need to look for the ones that meet your requirements. Below are the most popular outsourcing destinations, according to the before mentioned attributes. You’ll see that Eastern Europe, Southeast Asia, and South America top the list of areas for outsourcing.

outsourcing software development

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These three regions are the most common areas chosen for outsourced projects. Below, we’ll look at the variety of reasons for their popularity.

  • Eastern Europe: Ukraine, Belarus, Poland, Romania

This region is excellent for outsourcing. They have a large number of high-quality developers and provide the best possible quality of the services. Eastern Europe is the ideal option for clients from Western Europe and the USA because of its superior quality, cultural and geographical proximity and possible time difference.

  • Asia and the Middle East: India, Vietnam, Pakistan, Iran

The region is attractive for certain companies because of the cheapest rates. At the same time, it is the riskiest one, as it is hard to solve any legal disputes in case they occur.

  • Latin America: Peru, Chile, Ecuador, Mexico, Brazil

Latin American outsourcing is the well-balanced option for US companies, because of the geographical proximity and small time difference.

Whether it’s having a high quantity of skilled developers, offering inexpensive rates, or small time differences from major development locations, these regions have proven to be strong outsourcing options.

How Does A Dedicated Development Team Work?

The same way you carefully select only the best employees for your business, your offshore agency selects only the best local engineering talent to join your team on the remote options. Your role once you select an agency, then, is to sit back and choose your development team from our pool of vetted IT experts.

Outsourcing companies provide all equipment, network environment requirements, and project management services to develop the project. With a dedicated team working on your business, what is considered “outsourced” on paper will feel like an extension of your own team.

bezos two pizza

A team is the most valuable asset as a group of people working on one general idea of the product. As we can see, Jeff Bezos’s “two-pizza team” rule still holds true for most of the IT companies globally.

By signing the agreement on the work on the “Dedicated Team” model, the client receives at his disposal a team of specialists who are selected according to the requirements of the project. A classic dedicated team usually includes 5-7 team members: front- and backend developers, QA, UX/UI designer, DevOps, and project manager (optional).

The vendor bears responsibility for attracting new specialists and administrative support of the team. The performance of the team and KPI of each specialist is regularly monitored, and if necessary, adjustments are made to the workflow.

Dedicated Development Stages

Below are the various stages of a dedicated development contract, beginning with the client sending their inquiry.

dedicated development stages

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The image above describes the process for DevCom customers. In most cases, outsourcing companies use custom agile or scrum approaches that are designed to controlthe project. It reduces your risk, increases transparency between the teams, and gives you predictable project velocity.

Is a Dedicated Development Contract Right For Your Business?

In general, dedicated development is a simplification of the development process. Now that you know the pros and cons of a dedicated model for software outsourcing, and vital moments that must be considered when on the way for hiring an outstaff team for your project.

Ultimately, if you’re looking for a flexible, fully integrated, predictable engagement with an outsourced partner, a dedicated development contract with a vendor could be the right choice.