Cooperation Models for Software Development: How to Choose the Right One

15 April 2022 • 14 min read

Co-Founder at Softermii

If you’re reading this, you’ve probably given software development a lot of thought. Whether you have a development team or not, you will frequently require the services of contractors.

In this case, you’ll need to choose one of the software development cooperation models. It is the first step to understanding how to manage your workflow and ensure the success of your project. Your right choice will define the level of parties’ involvement, help calculate the cost of your software, and establish a time frame to create your product.

But how can you select a software development collaboration model that is ideal for you? We’ll talk about this and even more in this article. We will discuss the pros and cons of the most common options for cooperation, including popular pricing models.

Cooperation Models in IT Explained

Let’s assume you have decided to hire a contractor to develop your software. Outsourcing and outstaffing are the two main ways to do this. These IT cooperation models are the most common ones and suitable for many companies.

Before analyzing them in detail, let us define what we mean by cooperation models. They regulate the development process by determining the responsibilities of the contractor and client company. That is how you distribute the tasks and roles, as well as set time frames and budgets for successful project implementation.

Choosing the appropriate cooperation approach is crucial. Why so? Let’s face the fact: the majority of IT projects fail. We’re not exaggerating: just 29% of them succeed. Here are a few reasons why this happens:

Exceeding the set budget
Missed deadlines
Inability to meet business goals

As a result, we believe that integrating your ideas with the contractor’s experience in the form of a suitable cooperation model can significantly boost your chances of prosperity.

We can now analyze the models of cooperation in IT in greater detail. As a company that provides remote software development services, we can tell you a lot about outstaffing and outsourcing. We’ll also describe various pricing models such as a dedicated team, time & material, fixed price, and a hybrid one. Keep reading to find out more.

Outsourcing vs Outstaffing: Key Difference Between These IT Cooperation Models

Outsourcing and outstaffing can be called the classics of cooperation models for software development. Both these options suggest that the contractor handles a significant part of project-related processes.

However, each of these approaches to workflow organization is unique. That is why we recommend checking out our comparison of IT models cooperation.

Outsourcing

Outsourcing is a model of cooperation involving the transfer of all product development responsibilities to a service provider. It means that you do not need to gather an in-house team. You can just become a customer of a reliable IT company that will do the job for you.

The contractor’s work includes support at all stages of development, quality assurance of the final product, compliance with deadlines, as well as search and retention of employees. Your role in this collaboration model is purely managerial: you discuss product requirements with your project manager, who passes the specifications to the team.

It is the best model of cooperation with IT companies for organizations that need specific software but don’t have the expertise to build it themselves. It’s also suitable for businesses without an in-house development team.

Pros	Cons
Cost-effective model of cooperation: much cheaper than having an in-house team	Limited control over the development team’s internal processes
Ability to find a contractor anywhere in the world	Outsourcing is more expensive than outstaffing
Ability to focus on key business objectives while the vendor develops software for you
No need to hire, train and retain staff
No need to manage the team directly
Flexible team
Fast product release on the market

Outstaffing

Outstaffing is a model of cooperation that involves supplementing the existing in-house development team with individual remote specialists. In this case, the service provider takes all responsibilities for hiring, training, and retaining employees. You get access to professionals your team lacks.

Which businesses will this type of collaboration suit best? If a company has IT personnel but lacks niche specialists, such as AI developers, it is an obvious candidate. Outstaffing is also suitable for companies that experience heavy workloads and need to expand their human resources quickly.

Pros	Cons
Instant search and hiring of employees	The need to manage remote employees alongside in-house ones
Access to a wide pool of specialists	Full responsibility for the efficiency of outstaffing specialists
No need to locate, employ, and retain employees
Lower price compared to outsourcing

Most Popular Pricing Models for Software Development

Outsourcing and outstaffing are broad terms describing cooperation models in software development. In addition to deciding on how to set up your workflow, you should also select how to calculate your budget. There are several pricing models for this.

Dedicated Team

A dedicated team is one of the models of cooperation with a software company, which involves providing your business with employees who will work exclusively on your project. As a result, you will have a fully staffed team that will commit all of their time and experience to building your product.

This type of collaboration typically necessitates a monthly compensation for all team members and extra administrative fees.

What kind of firms are most likely to benefit from this form of collaboration?

Those who seek long-term cooperation
Those who want the team to dedicate all their time & effort only to their business

Pros	Cons
100% commitment to your project	The need to constantly maintain the team’s motivation
Flexible requirements and scope of work	The importance of clear specifications so that your partner does everything according to your requirements
Consistent monthly budget
A stable staff with extensive experience

Time & Material (T&M)

It is one of the software development outsourcing cooperation models in which the cost of services depends on the time and materials spent by the team on the development of your project.

Generally, this model involves hourly pay and is used when the exact cost and volume of work are difficult to predict. T&M is best suited for medium-term projects.

Pros	Cons
Ability to track progress at any stage of development	Defining the budget in advance is difficult
Flexibility in the scope of work: T&M model, in particular, can be combined with agile methodologies like Scrum	You need to stay in touch with the contractor to ensure that the final product fits your specifications

Fixed Price

This model means that the company is looking for a contractor to undertake specific tasks for a fixed price. This approach to work is the exact opposite of T&M.

The fixed price model is best suited for short-term projects lasting 1-2 months. It is possible to use this approach in long-term ones, yet, it is very unlikely since it might be challenging to plan the development process carefully.

Pros	Cons
Fixed price of the project, no additional fees	Inability to make changes to the project
Clear deadlines	Limited possibility for development process management
Predictability of the development process

Hybrid Model

The hybrid pricing model suggests the combination of T&M and fixed price.

How it works:

There are two teams involved in your project — onshore and offshore. The first one takes on responsibilities for business analytics, customer communication, and various organizational processes, so here you can apply the time & material model. The offshore team will be directly involved in your product development, for which you can set a fixed price.

A hybrid model is suitable for:

Those who run long-term projects that may change over time
Those who are working with an offshore development team for the first time and want to avoid risks

Pros	Cons
Financial benefits and flexibility in payment	Suitable only for long-term projects
Effective communication with the onshore team	All other disadvantages of T&M and fixed price models
Elimination of risks

Tips for Choosing a Cooperation Model for a Software Development Project

Many factors, including the type, duration, and scope of the project, might impact your choice of the best cooperation model. Your budget and level of engagement in product development management are significant considerations as well.

Let’s examine the key criteria for choosing the appropriate models of cooperation with software outsourcing companies.

Project Duration

The duration of the project directly affects the type of cooperation. Working with a dedicated team, for example, is ideal for long-term initiatives, whereas a fixed-price approach is perfect for short-term ones.

Project Scope

Does your contractor need detailed specifications for your project? Will it be possible to make adjustments to your product during development?

For example, a fixed price model necessitates strict requirements and does not allow changes to the project. In contrast to this model, T&M provides complete flexibility in development, and therefore the scope of your project will change dynamically.

Your Involvement in the Development Process

You should also decide on how much you want to be involved in the development process. If you adopt a dedicated team model, your engagement will be significant because the final result will directly depend on your supervision. The same applies to the T&M model.

Payment Scheme

Different cooperation models necessitate different budgets and payment methods. Thus, a dedicated team model supports monthly pay, T&M — hourly pay, and a fixed price is as clear as it sounds. The hybrid model will integrate the previous two payment schemes.

Work Schedule

Before cooperating with a contractor, carefully consider whether you need full-time workers or if part-time ones will be enough. For example, a dedicated team suggests only full-time employment.

Let’s compare all the models of cooperation according to these criteria. For your convenience, we’ve compressed all the information into a table.

IT Cooperation Models Comparison
Criteria / Cooperation Models	Dedicated Team	T&M	Fixed Price	Hybrid Model
Project Duration	Over 6 months	Up to 6 months	Up to 2 months	Over 6 months
Project Scope	Flexible project, detailed specifications are not required	Flexible project, detailed specifications are not required	Strict project plan, detailed specifications are required	Flexible project, detailed specifications are required
Your Involvement in the Development Process	High involvement	High involvement	Low involvement	Adjustable involvement
Payment Scheme	Monthly rate	Hourly rate	Flat fee	Hourly rate and flat fee
Work Schedule	Full-time	Upon agreement	Part-time	Upon agreement

Our Experience in Providing Software Development Services

You’ve learned about the basic cooperation models for software development. Another factor to consider before beginning a collaboration is selecting a dependable service provider.

Our company has already provided dedicated teams to many customers, proving its reliability. If you choose, you may soon be among them.

What we offer:

Specialists with experience working with worldwide companies
Wide choice of professionals: from junior to senior
Specialists with at least a B2 English level
Exclusively certified experts
Complex software solutions
Product management services

Here are two of our recent projects:

MediConnect

MediConnect is a messenger app for doctors and healthcare product companies. This application kills two birds with one stone: it makes it easier for physicians to find medical supplies and allows product companies to reach out to their customers.

Challenges we encountered:

The need to simplify the process of communication between doctors and healthcare product companies
The need to develop an accessible interface with a payment gateway

Solution:

We have implemented Azure speech recognition technology, allowing users to communicate without language barriers
Our team has added audio and video communication features via VidRTC
We have integrated the PayPal API to allow users to make in-app purchases

We have developed a messenger that has opened new sales channels for more than 360 medical companies. Since over 9,000 doctors use our app now, these companies may quickly find their customers.

RadPad

RadPad is an end-to-end mobile application for landlords and renters in the US. This platform featured over a million housing options when the client contacted us. Our objective was to make the process of finding accommodation as simple as possible.

Challenges we encountered:

The difficulty of setting up a functional housing search
The need to ensure high privacy of the platform
A large number of integrations and their complexity

Solution:

We’ve created property listings with multiple filters, videos, and location searches
Our team has implemented two-factor authentication and identity verification
We have integrated a payment gateway, third-party libraries, and SDKs for analytics, customer support, event tracking, and more

Despite the project’s complexity, we managed to create an easy-to-use application that assisted our client in increasing earnings.

Final Thoughts on Cooperation Models in Software Development

If you have decided to outsource your product development, proceed with your plans. You have several options for organizing the workflow. Choose a convenient model like outsourcing or outstaffing and delegate your development processes.

Don’t forget to take into account all the criteria for selecting one of the appropriate IT collaboration models. Primary considerations include the scope and duration of your project and the budget you’ve set up for it.

Keep in mind that your dependable vendor is already waiting for you. If you need a dedicated team for software development, feel free to contact Softermii.

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Written by:

Andrii Horiachko