Outsourcing engagement models: overview and choice tips
Tactical Engagement Models
- Staff augmentation is a very simple and quite widely-used model. This tactic makes it possible for businesses to expand the abilities of the current in-house staff with outsourced professionals. The common client’s motivation behind this model is cost efficiency. There’s a chance it would work fine on a short-term basis, although it requires high client engagement to oversee and control the augmented team. In this model, Project Management and Technical Leadership are still the client’s responsibility while simple day-to-day development tasks and testing, for instance, can be assigned to offshore or near-shore companies and their resources for a reasonable price.
It’s quite obvious, though, that this engagement model doesn’t leave much place for innovation from outsourced vendors. Might be for better if you’re dealing with Indian or Chinese companies, but looks like a waste of talent working with more qualified Europeans.
With the Staff Augmentation model the scope of work for outsourced teams usually is quite narrow. It includes low-level technical implementation tasks as well as prototyping, but the idea suggestion and decision-making opportunities of the augmented team members are so limited that the model doesn’t encourage much creative thinking for them to outsource developers.
- Project-Based outsourcing is an engagement model effective for projects where requirements remain the same during the development process. It allows reducing cost and time to release the product by using an outsourced vendor with suitable technical skills. If the product requirements are often changed or the planned collaboration exceeds only the current project, it is better to use strategic engagement models such as Product Development Services 2.0 (PDS 2.0) or Offshore/Nearshore Development Center (ODC/NDC).
- Tactical Consultancy is a common term used to describe several types of services and IT solutions. The client here is interested to utilize the provider’s expertise not available in-house such as localization, UX design, technology advisory, cyber security and so on. Outsourcing vendors usually provide consultancy as a fixed-price short-term service.
Strategic Engagement Models
The following models are grouped as strategic as they rely on long-term innovation-based relationships between a client and a professional outsourcing team.
- Offshore/Nearshore Development Center is an adjustable engagement model that significantly improves clients’ product development power. While the product requirements are still defined by a client in this case, Offshore/Nearshore Development Center (ODC/NDC) team is fully managed and controlled by an outsourcing vendor. This model can be applied to various projects, including but not limited to full-cycle new product development, legacy modernization and maintenance, regular testing services and other long-term activities. However, there are clients looking for innovation boost and complete vendor engagement in the project and its outcome. These clients should consider the following model on our list - the PDS 2.0.
- Product Development Services 2.0 is the newest and the most advanced strategic engagement model. It aims to achieve maximum value in an outsourcing relationship. The term PDS 2.0 came from Forrester`s comparison of traditional PDS executed through Project-based or ODC models with a brand new approach where the outsourced vendor plays the role of not only an implementer but a whole-scale partner co-creating a product with a client. The contract in this model is outcome-based, which means the outsource vendor will constantly be motivated to provide optimization and innovative updates for the product after its release. This way, you share your idea with a strategic outsourcing partner and get your share of income, while the project is completely technically implemented by your outsourcing partner.
- Strategic Consultancy is a long-term analogy of Tactical Consultancy. This model is aimed to improve business processes and overall product quality of a client’s organization. It often encompasses multiple sides of the business and leads to significant changes in the client’s company – it touches basically anything technological innovations can advance.