Engagement Models in the Software Development Industry

Introduction

In our blog, we already covered plenty of modern technological solutions and highlighted the most interesting use cases for them. We have also talked about the Software Product Development process and its nuances. This article focuses on setting up collaboration between the client and the IT company through the two most popular financial modes and three possible engagement models with a detailed explanation of the internal processes, and some of our success stories using both. Let’s begin with a quick overview of the two financial models.

Our Financial Models

The right choice between the two most popular models of financial interaction—Time and Materials vs Fixed Price—with an outsourcing company can be an important factor in the project’s success. One of these two will fit your organization better than the other in terms of processes, requirements, and goals.

Time and Materials (T&M)

This is a standard model for product development, construction, or any other type of work in which the employer agrees to pay the contractor based upon the time spent to complete the scope of work and for materials used during the process. In IT, T&M means that the client is charged for the amount of time spent by experts on the specific project and materials like website hosting expenses, domain name, or software subscription fees. The strongest advantage of this model is flexibility, because the direction of the project is free to change, along with the requirements and features. The client can shift the project’s focus, and the development team can adjust to the new vision in the next sprint—a set period of time during which specific work has to be completed and made ready for review.

Pros:

• The requirements are dynamic due to the long-term collaboration nature and dynamic project scope as well.
• Flexibility to change the scope, designs, expert team, or workloads on demand.

Cons:

• Overall lack of budget control is probably the main problem with signing “Time and Materials” contracts. Since the scope and the direction of a project can be changed, there is a risk to go far beyond the initial budget and spend significantly more was expected.
• In some cases, T&M models require deep involvement and micromanagement to make sure that the approved amount of work will be completed in a certain time.

When to implement the T&M model

T&M can be implemented in any project that adheres to Agile methodology, requires a strategy change, and in which different software can be built in the process. It is perfect for startups and mid-sized companies that are constantly evolving. This model is suitable for dedicated teams, and we use it in most of our projects.

Fixed Price

This is a fixed-sum contract in which the service provider is responsible for delivering the project for a specified amount. The Fixed Price model works perfectly when there is a clear understanding and vision of the project along with the predictable specifications, requirements, and rates.

Pros:

• The requirements, price, and deadlines are very clear.
• There is a fixed or limited budget.
• It suits when you are building a Minimum Viable Product (MVP) for a startup.
• It suits when the scope is limited due to a small size of a company.
• Predictability is a key factor, and the expenses for the entire organization need to be planned months ahead.
• There is high transparency of all processes and management ease.

Cons:

• No flexibility to change the project direction during the development phase.

With this model, there is less accountability, which could be both an advantage and a disadvantage. That doesn’t mean you won’t be aware of the process, but the vendor’s team member will be carrying out the management and make all the key decisions to deliver the product on time and within budget.

While Fixed Price has its own undeniable advantages, in the modern world of Software Product Development, the T&M model is far more popular and vital. It is definitely the go-to choice for our partners as well because the vision and the scope of work can change dramatically and often, and this model can help adjust more easily to these changes.

Our Engagement Models

Now let’s take an in-depth look into the three Engagement Models that we use.

Team Extension Model

When you already have a development team and want to add specific technology experts or if you need to scale fast, Team Extension Model (TEM) will help you achieve your goals. TEM allows you to hire one or more software development experts with a specific skill set to complete your team for a particular task.

Challenges we solve

• Local talents are hard to find / expensive.
• Need to scale fast, but HRs is underperforming.
• Need to develop a new feature, but don’t want to switch main team.
• More delivery with the same budget.
• No in-house expertise.

When you need to hire external software developers, you have two options to set up a collaboration:

• You augment an existing IT team with the required experts to complement the skill gaps of your staff without an additional manager.
• You hire a separate team with its own manager and frameworks. This approach is called a Dedicated Development Team (DDT).

The biggest advantage of TEM is the amount of control you have—you pay only for what you need, as the extended team provides services for particular sub-projects for a required time period. If needed, there will be daily or weekly sync calls with each team member. Another advantage is the level of responsibility you share with your employees and the extended team. Everyone feels equally involved and responsible for results, which ultimately, adds to the team spirit. Additionally, compared to other approaches, with TEM you can complete your team and finish your project the fastest, which leads to significant time and costs savings.

Why do we stand out

• Quick turnaround and team gathering – You don’t need to get involved with administrative management or pay taxes, as our Human Resources and Finance departments will take care of those aspects. You will be able to complete your dream team fast by picking the right people to boost the performance of your existing team.
• Flexible payment models – As mentioned above, the real choice lies between Time and Materials vs Fixed Price. While you can use the Fixed Price model, probably the best option is to go with Time and Materials, since it allows you to easily change the direction and scope of your project. We will pick the most suitable financial model for your specific project.
• Aligned to your processes and policies – Our experts, working on long-term projects via Team Extension Model, become a permanent and proactive part of their respective teams adhering to corporate culture, standards and policies. For our 200+ team for PitchBook we even have branded offices:

floLIVE case

Despite the COVID-19 pandemic limitations, there was a need to form an even bigger team than before in a short timeframe. We managed to find 5x more dedicated experts to successfully complete the team for a client with specialists—Lead Architects, Front-End Developers, Back-End Developers, and QA Automation Experts. As a result, the project went to production on time and within budget and managed to make a specified deadline of 9 months, even with such dramatic changes in the core team.

Poynt case

Another interesting project is in the FinTech industry. Our team joined Poynt in early 2019, a revolutionary open commerce platform and the inventor of the Smart Terminal. As we increased our team 6x in 6 months, according to the client demand, we became a primary software development partner for Poynt. We were responsible for two main business directions: the development of a new direct-to-merchant, all-in-one Omni commerce payment solution, and supporting the core business functions of our partner. Our team was divided evenly to cover those business goals and later were offered even more areas of responsibility in this project.

On December 15, 2020, the American publicly traded Internet domain registrar and web hosting company, GoDaddy, announced the acquisition of Poynt, which our team is proud to be a part of. GoDaddy purchased Poynt for $320 million in cash and $45 million in deferred cash payments, subject to certain performance and employment conditions over three years. Our team remained a partner and readily joined the new owners to achieve even greater results.

Our process

First, you need to define the skill sets of the talent required for your project. Here is how we can help you with talent:

• Our talent bank – We already have 500+ experts proficient in the latest technologies and with experience in areas like Custom Software Development, AI Solutions Development, IoT Solutions Development, Integration and Modernization Solutions, Proof of Concept & MVP Development, Fintech Development.
• Additional recruiting activities – If needed, we can leverage our powerful recruiting department to find experts on the market that will suit your needs perfectly. We will take over the hiring process and recruitment hassle, so you won’t feel any difference between our existing in-house talent and recently acquired.
• Talent transfer – If this is possible, we can transfer experts from the most suitable projects to enforce your team.

After we understand your requirements and pick the best candidates, you will be able to conduct personal interviews. After signing a deal, you can add our experts to your team on your timeline. We provide the CVs of the best candidates that match your requirements. Additionally, we can provide a video presentation of the candidate. Next, we set up an interview in order for you to choose the best of them. We also offer special trial period options for all of our clients.

Default team composition

• Web/Mobile Development Services, Quality Assurance, Artificial Intelligence/Machine Learning, and the Internet of Things experts you require.
• Project Manager, Business Analyst, and Team Lead experts if you don’t want to delegate some decisions to the team.

Solution/Product/Project Development

When you need to build a project entirely from scratch with maximum predictability, this is probably the best way to go. We can offer full-cycle product development from start to finish, including stages of defining business objectives, research and design, software development, post-launch maintenance, and support. We will help you define a detailed vision of your product, and estimate precise business goals, deadlines, and budget. Our team will be your software solution development partner from the product inception throughout the development and maintenance phases, with ongoing development, feature improvement, and performance optimization after the release. As a result of our involvement, you will get a fully functional product on schedule, with detailed reports and complete transparency in each product development process stage.

Challenges we solve

• Fixed in-time and budget delivery needed.
• Don’t want or don’t need a permanent team.
• Don’t want management risks.

We have proven domain expertise in building future-proof products. Here are some of the highlights of our recent projects:

Custom Software Development

Probably the biggest example of a successful long-term collaboration is our partnership with PitchBook—the leading financial data provider that covers the global venture capital, private equity, and public markets. The highlights of our partnership include:

• We started servicing PitchBook from a pilot with a team of a few people, grew to a primary Full-cycle technology provider.
• Best Financial & Market Data Solution by SIIA for the eight consecutive years and GeekWires Deal of the Year winner.
• More than 263 applications and microservices have been developed to serve business needs.
• Maintained a 95% CAGR over 10 years, PitchBook now is a part of Morningstar – a global financial services firm with a market cap of over $6B.
• Long-term business relationships that last more than 13 years with more than 250 releases (1 per working day) during only last year.

Web Development

We helped build a web application for a European equity research and investment advisory services provider with 20+ years of experience. The main business goal was to improve the customer experience, providing a convenient web application that would be able to give the most accurate financial information in the shortest time possible. To achieve this, our team had to overcome challenges in User Experience/User Interface Design Improvement, Performance Optimization, and Cloud Migration. After 5 months of development, our team managed to release a version of the web application that was 10x better in performance compared to the original on-premise version.

E-Commerce Development

We developed from scratch a “White-label ready” E-commerce solution, which allows creating marketplaces for selling coupons & gift cards. Our client is a US-based provider of prepaid and payment products in the United States and Canada. The company employs about 2000 people and has hundreds of clients and partners B2C, B2B, including Disney, Staples, iTunes, BestBuy, Target, eBay. Our scope of services included:

• «From idea to acquisition» Product Development.
• Dedicated, managed team gathering and scaling.
• Custom Software Engineering.
• M&A processes assistance: helping with Due Diligence, Screening, post-M&A Integration, etc.
• Post-acquisition partnership: Unification and Consolidation solutions development and support.

Mobile App Development

One of the cases that stand out was the request to build a mobile application for the legendary Seattle landmark known as Space Needle. During the collaboration, our team managed to make a strict deadline in six to seven months and release an app that was downloaded over 1 million times in its first year of release. The mobile app uses Augmented Reality, 4D, and other camera effects. Its many key features are the ability to connect a camera or a device using Wi-Fi or API/Webhook system, the support of multimedia content, the ability to use QR codes, bar codes, location data, user interface buttons, and save visitor data, and the ability to connect the app to the ticketing system.

Artificial Intelligence Development

We delivered two Machine Learning-powered solutions for a leading financial data provider. The first one was a trend detection service—a microservice with a visual interface that helps clients find market trends that are worth investing in. The second one is a market map solution for categorizing information about companies in different industries.

Another notable project is an ML-powered Fraud Detection solution for an E-commerce and financial service company. When the solution was implemented, the company experienced significant cost reduction in solving fraud-related problems, and customer satisfaction improved dramatically. More than 140,000 transactions were analyzed, with 6% of fraudulent data points detected in a year.

Default team composition

• Business Analyst (BA)
• Software Developers
• Project Manager
• Designer
• Solution Architect
• External Technical Lead/Consultant

For projects involving, for example, Artificial Intelligence, the basic team may also include a Data Analyst, Data Engineer, or Data Scientist. In any case, a dedicated team will be formed to carry on the development process and specialists could be added if they are needed to solve specific challenges. We understand the importance of keeping the core team engaged the whole time, and we commit to it, making changes only if necessary.

Our Process

Depending on the project the steps may vary, but generally, we adhere to a similar set of stages.

Defining business objectives

Our manager will contact you to get all the information about your vision, business idea, the problems that need to be solved, your budget, and the approximate timeframe. Your ideas will be protected as we will sign an NDA (non-disclosure agreement) as early as this stage. Our business analyst will process all business information to come up with the most cost-effective solution.

Some projects, like Artificial Intelligence solution development, require Project Evaluation Workshop and Proof of Concept (PoC) development phases. The goal of workshops is to define a problem, pick the correct solution, set data requirements, predict outcomes, and figure out the next steps. This phase usually takes five days. PoC can take up to four weeks and is focused on evaluating an approach to the problem as well as proving its viability and effectiveness. You will receive all market feedback required in less than a month and be able to test your hypothesis fast.

Research and Design

When the business information is processed, our development team chooses the right tech stack for the job. The purpose of this phase is basically to connect business goals with a transparent technological solution that will provide the desired outcomes. When all is said and done, you will get validated and verified requirements, a specification document, a project schedule and estimates, and a detailed structure of the workflow. The research and design phase can take a few weeks, but depending on the project the duration can change. It’s hard to underestimate the importance of this phase because it ensures that both parties know what to expect from the project; also, as a result of this phase they have a rigorous plan on how to achieve all goals.

Development

Now you can fully concentrate on your business objectives, while our team will take over the most interesting part — software development. We adhere to the Agile methodology and Continuous Integration practices, which combined with over a decade of experience will guarantee on-time delivery and transparency of each iteration. Thanks to our flexible communication system, weekly demos, reports, and constant updates you will get the latest insights on each stage.

Each report will contain comprehensive information on every aspect of the process. You will be aware of indicators — problems and challenges the developers faced and the ways to deal with all issues in the context of overall progress. It will also include complete information on each stage with the number of hours spent and the plan for the next stage with scope description and planned hours for each task. The report will give you an understanding of overall progress and how it relates to the initial estimate; also, you will be aware of the statuses of each separate functionality.

During the whole process, our team of Quality Assurance engineers will maintain the security and efficiency of a product with fast bug addressing and regular security and performance checks.

You can make changes and add features anytime. If you decide you need additional functionality, just contact a project manager to get feedback. The project manager will conduct an analysis of new requirements and provide you with information about all the moves that should be taken to implement your vision and how it will affect the final time and budget estimate. We always make sure to introduce new features as quickly and inexpensively as possible without affecting the quality of the final product.

During the product development process, we use the most effective methods and modern tools to deliver results. One of the tools, that helps us stand out among competitors is Metucat. This is an Integrated Framework for developing, maintaining, and evolving data-centric applications with the help of visual metadata. It allows our distributed teams to work on different parts of the product independently, and with Poynt it helped us to save up to 50% of time spent on planning, analysis, and design.

Post-Launch Maintenance and Support

After product launch, we can provide maintenance updates and constant security analysis. Some of our partners have continued working with a part of a product development team for ongoing support and new feature development. We have a client who has been spending more than six years updating and improving their product after release, so this phase doesn’t mean that our collaboration ends here.

Why us?

Since 2006, we have been a trusted technology partner for innovative companies providing them with software engineering and product development services. Our team consists of 500+ in-house Engineers, Project Managers, Product Managers, Business Analysts, and Quality Assurance Specialists that help to build products for clients all over the world. We serve businesses across various industries including Finance, Retail, Banking, Agriculture, and Logistics. Our range of expertise includes Product Development (with Unification solutions and custom Artificial Intelligence and Machine Learning solutions), Cloud Migration, and QA Automation. Some partnerships turn into long-term collaborations, like the impressive 13+ years with PitchBook.

Conclusion

How can your business become a success story and benefit the most from our expertise and experience? Finding the right approach to the partnership is crucial for great results because every case is unique and requires different services to cover all its business needs. You may also need a specific level of control and responsibility for the project, which is why we offer multiple Financial and Engagement models to ensure the best performance from our solution-driven team. Each model follows the Agile development model and Continuous Integration practices for the most efficient and transparent delivery. Based on our years of experience building different projects in various domains, we will help you find the most efficient approach for collaboration. Feel free to contact us if you have any questions about choosing a type of collaboration. Choosing the right model is essential to great results and to building the best product we can together!