Fixed price vs dedicated team

If you’ve decided to work with an IT outsourcing company, a question arises: “What work model will be the best for the project?”. There are a few models you can work with. Today we will describe two of them – the fixed price and dedicated team.

What is a fixed price model?

This is the pricing model suitable for projects with strict requirements. Such projects have a plan set in the stone and can’t change it during the accomplishing. Fixed price projects have a limited budget that’s why it is called a fixed price. Usually, the business owner of such a project knows in advance the number and type of specialists needed, number of tasks and terms to complete them.

Fixed price contracts can be a short time contract or a long-time partnership. The first variant is about full construction projects. The contractor implements the project or part of the project from a start to end and leaves the project. It can be software development without further technical support, for example.

The long-term partnership means limited tasks or work hours per month for a long period of time. This can be technical or customer support, etc.

Pros and cons of a fixed price model

For better understanding let’s have a look for the advantages and disadvantages of the current model.

Pros:

  1. Exact conditions. Fixed price projects have a totally clear technical task, budget, and terms. This allows to make the project quite predictable and smoothly manage it because you can take into account all the risks in advance. 
  2. Defined time-to-market. The project will be done in clear terms, so the business owner knows exactly when the product will be in the market.
  3. Development under the budget. The responsible contractor will accomplish the project in time and under the budget. With the right approach, such projects don’t need additional investments, thus you wouldn’t overpay.

Cons:

  1. Risks. There are always many risks during the project life. A fixed price approach allows to calculate them pretty accurate but there is still a possibility of new risks arising. Thus, the project might need reevaluation. 
  2. Estimation. Such projects need very accurate estimation and planning before start. Unfortunately, scrupulous planning might take a big part of the project budget.
  3. Planning. The contractor might need a highly-qualified Project Manager to make a strict plan. delegate tasks and manage all the processes. 

What is a dedicated team?

Dedicated teams are provided by a Managed Service Provider (MSP). These are outsourcing companies that can provide you a full team of specialists. The difference between fixed price projects and dedicated team is that you might not know how many specialists you need and exactly how long the project development will be. You as a customer describe the problem you want to solve and the MSP gathers the team for your requirements. A dedicated team can consist of different talents with different levels of skill and a different stack of technologies. For example, it can be a dedicated development team or dedicated DevOps team or hybrid team that includes a variety of specialists.

Pros and cons of a dedicated team

We collect for you the common benefits and drawbacks of a dedicated team approach. These lists might help you to understand what model to choose.

Pros:

  1. Payment. You’ll pay for ready parts of the project with clear and predictable bills.
  2. Flexibility. In projects with a dedicated team, you can change any part of the project almost at any moment. The same is about team composition.
  3. Durability. The team will work with the project for a long time and will know all the features that will allow making better decisions. 

Cons:

  1. Pauses. The project can be paused for a while if you need to add new specialists.
  2. Control. If you work with the team directly you might manage all the issues by yourself. This problem is easily solved by hiring a Project Manager on your side or the contractor’s side.
  3. Uncertainty. Without a clear technical task, the project might not be accomplished for a long time and the result might be different from what you expected.

Conclusion: what to prefer?

So, offshore dedicated team or fixed price project? The answer is totally yours. Every model has pros and cons and every model is suitable for different projects. If you still have doubts, you might consult with the contractor and understand what will be better together.

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