Companies across the globe partner with outsourcing vendors to augment their development capabilities, tap into new expertise, and optimize costs. They often choose to hire a dedicated development team as it allows them to scale easily, reduce costs, and mitigate risks.
But is a dedicated development team the best fit for your business needs, or should you prefer another cooperation model? And how to select a software development partner and make your cooperation a safe and smooth experience?
N-iX has helped over 100 companies, from small businesses to Fortune 100 leaders, build and extend their engineering teams (up to 100 people). We hope you will find our best practices based on real-life experience useful.
The article covers:
- Dedicated development team model and its benefits;
- Time&Material model;
- Fixed Price model;
- Where to look for a software development vendor;
- How to choose a software development vendor;
- How to sign a contract with an IT outsourcing vendor;
- How to manage your software development team;
- Companies that successfully cooperate with dedicated development teams.
Firstly, let’s explore the engagement models in more detail.
Dedicated development team vs. other engagement models
Within this cooperation model, you hire a team of developers that are entirely focused on your project. Compared to other models, when professionals work on several projects at the same time, a dedicated development team model ensures knowledge accumulation within your project. Thus, the model is the best fit for long-term projects (at least one year long).
It is also a very flexible model. You can change the requirements, the scope of the project, and the number of developers.
What concerns the pricing, you and your vendor agree on a monthly cost per each engineer allocated to your project. The budget is estimated beforehand. However, it can be adjusted in the course of the project.
Benefits of a dedicated development team
You get a team of developers entirely focused on your project
Under the dedicated development team model, your developers are dedicated to your project. Thus, your software development partner cannot engage them in other clients’ projects.
Knowledge preservation on the project
Your dedicated development team acquires deep expertise in your specific domain. It keeps, shares, and grows the product knowledge within your project throughout the cooperation.
You work with the set team that knows your project thoroughly. So, even if there are some team composition changes, your dedicated professionals will ensure a successful knowledge transfer.
You can scale your team easily
Cooperating with a dedicated development team allows you to scale the team according to your business needs while avoiding potential risks. For instance, our long-term partner Lebara has grown their dedicated development team at N-iX from 10 to 100 dedicated developers over a few years.
When signing the contract, you and your software development partner agree upon the notice periods, according to which you need to inform the vendor about your scaling needs in advance.
Your vendor mitigates the risks
If you need to scale your dedicated development team up, the vendor finds the best specialists for your project that meet your specific requirements.
When you need to scale the dedicated development team down, your IT outsourcing provider is responsible for rotating the specialists to other projects and tackling HR expenses. Therefore, you don’t need to worry about any HR activities and risks.
What’s more, your IT vendor ensures that the best professionals join your project by offering a trial period. During this time, you can understand whether the specialists meet your expectations. If not, your outsourcing partner is responsible for finding the new ones who satisfy your specific demands.
You can predict and optimize costs
The dedicated development team usually costs 20% less than the T&M model and 35-40% less than fixed-price projects. Moreover, this model makes the budget more predictable and transparent. Before the project kick-off, you and your vendor agree on a monthly cost per each engineer allocated to your project.
Developers are usually allocated full-time with a long-term assignment duration (over one year). Full-time involvement and long-term cooperation allow minimizing the total monthly cost by avoiding management overheads, bench charges, and other additional costs on top of the monthly rate.
You decide on the scope of your responsibility
We have already mentioned that the budget gets more predictable and transparent if you choose to hire a dedicated development team. But transparency concerns all aspects of cooperation with your vendor. It is a very flexible cooperation model, which allows you to choose and modify the scope of project-related processes you want to take part in.
For instance, you can interview all team members by yourself. Or you can choose to interview only the leading positions and find experts who will help you build the whole team. For instance, most of our partners at N-iX trust us with choosing the right people for their team based on the previous successful experience.
Cooperation with a dedicated development team is the best fit for long-term projects that need flexibility. However, for short-term collaboration, many companies choose T&M or Fixed Price engagement models.
The Time&Material engagement model is usually used when a client needs an expert on a short time project or for a certain project phase. For example, if you need a DevOps professional on-demand, it doesn't make sense to hire these specialists full-time because it will lead to unnecessary expenditures. So it is more efficient to pay these specialists only for the work done.
Usually, you pay the hourly rates, so this model is suitable only for short-term projects, or else it is not cost-efficient.
What’s more, the vendor does not ensure that professionals work only on your project. Thus, when it comes to long-time projects, where knowledge accumulation is critical, the model is no best fit.
The fixed price model is the best fit for the clients that have a certain budget and not enough capacity for software development on-site. This type of engagement allows mitigating most project risks, as the vendor must deliver the whole project or a certain part of its scope within a defined budget and time. So your outsourcing provider takes on most responsibility for delivery.
However, this is the least flexible model among these three, as any changes in the project plan require a complex change approval process. That’s why you need to know exactly what you want and have very clear requirements for the project.
Also, this is the most costly model as your outsourcing vendor includes all the risks it takes on in the price. Due to all these factors, this model is suitable only for short-term projects (up to 6 months).
Your collaboration with the vendor is typically based on one of these three engagement models. However, your software development partner can also offer you a combination of any of these models.
For instance, we at N-iX always work with our partners on the contract that best meets their needs. Therefore, sometimes we offer a hybrid model that combines the benefits of the dedicated development team model with the flexibility of the T&M contract. For instance, we can use it when a client needs a DevOps engineer or an Architect to join the dedicated team for a certain period of time. Also, besides having a dedicated team at N-iX, a client can request one or several fixed-price projects they have. So you should always have flexibility in mind when looking for an outsourcing provider.
Eastern Europe is an alluring outsourcing spot that is home to over 1M software developers. Also, businesses often choose this location due to reasonable pricing for IT outsourcing services.
Let’s take a closer look at three Eastern European countries that house the biggest number of developers, namely Ukraine, Poland, and Romania. We will also compare these countries in terms of tech education, skills of the local professionals, their rates, and more.
The ICT sector has become the 3rd largest export service industry, amounting to more than 20% of all Ukrainian service exports. The government sees ample opportunities in the IT sector and cooperates with software development companies to make the legislation more transparent and attract more business.
- IT hubs
There are five biggest IT hubs in Ukraine: Lviv, Kyiv, Odesa, Dnipro, and Kharkiv. DOU states that the vast majority of Ukrainian developers (over 70%) live in Kyiv, Kharkiv, and Lviv.
Learn more about the major Ukrainian IT hubs.
- Talent pool
Ukraine boasts the second-largest number of professional developers in Eastern Europe (192,000 specialists).
Times Higher Education World University ranking recognizes nine excellent Ukrainian universities that graduate new professionals each year.
DOU states that 75% of Ukrainian software developers have a university degree. What’s more, almost 25% of senior PMs have two degrees.
Learn more about the education of Ukrainian developers.
- Language proficiency
Most of the respondents in the DOU survey assess their English level as the Intermediate and Upper-Intermediate. However, the situation with the leading positions is better: almost half of the respondents indicated Advanced level and above.
Rates of Ukrainian software developers differ depending on their programming language, experience, and city. Generally, the rates in Kyiv are the highest, as the cost of living there is also higher, compared to Lviv, for example.
- IT hubs
Poland boasts seven major IT hubs, which house over 85% of all developers in the country. They are Warsaw, Krakow, Tri-City, Katowice, Poznan, Wroclaw, and Lodz. However, the vast majority of Polish specialists live in Warsaw and Krakow.
- Talent pool
Poland is home to over 295,000 professional developers, which is the most significant number in the Eastern European region. However, 40% of these specialists work for the BPO sector, thus are not available for outsourcing.
Poland also boasts a well-educated workforce: the Times Higher Education World University ranking recognizes 19 excellent Polish universities.
- Language proficiency
Polish developers have a strong command of foreign languages. Bulldogjob states that 100% of the surveyed speak English. What’s more, the English proficiency index ranks the country 11th among 100 countries in the world.
Rates of Polish professionals differ between the cities and depend on the seniority level as well as the position. However, Bulldogjob has gathered the average rates among the cities. As we can see, developers in Warsaw have the highest rates, while professionals in Rzeszow - the lowest.
To learn more about software development in Poland.
- IT hubs
Bucharest, as the capital, is the primary IT outsourcing hub in the country. The cities of Cluj-Napoca, Timișoara, and Iasi also offer developed technology infrastructures, making them an alluring spot to hire dedicated team.
- Talent pool
Romania is one of the three countries in Eastern Europe with the most significant number of tech professionals. Software development companies in this country employ 119,100 specialists.
Times Higher Education World University ranking recognizes 13 best Romanian universities. Top-3 educational institutions in Romania are Babes-Bolyai University in Cluj-Napoca, the University of Bucharest, as well as the Polytechnic University of Bucharest. ICT students represent 6.8% of the general number of students.
To know more about the Romanian developers.
- Language proficiency
The EF English Proficiency Index (EF EPI) lists Romania as a country with high English proficiency.
The rates of Romanian developers also differ depending on the factors, such as location, position, etc. However, the salaries amount on average of $25-49 per hour.
To learn more about the software development market in Romania.
Your business success heavily depends on who you partner with. So, here are a few steps that will help you to select a reliable software development partner:
- Compile a long list of vendors you will consider based on their service quality, experience, expertise, security standards, etc.;
- Assess the reviews, references, success stories, video testimonials of the longlisted providers. You can find this information on the companies’ websites, their LinkedIn accounts, and ranking platforms, such as Clutch, Manifest, Goodfirms, etc.;
- Take into account the providers’ size and their recruitment capabilities, as mid-size and large vendors are more likely to have resources you need internally;
- Opt for the provider with a powerful employer brand. This way, your partner will be able to find top experts for your own dedicated development team much faster;
- Look for a vendor that has substantial experience in building dedicated development teams that deliver solutions you need, preferably in your industry;
- Make sure your partner complies with security standards, including ISO, PCI, HIPAA, and has an effective information security policy;
- Choose the provider that does everything possible to understand your business needs and requirements, sets up extra calls with you, and sends you follow-ups. Communication and empathy ensure the success of your partnership.
These aspects are of the utmost importance when choosing the company to hire a dedicated development team. But legal aspects of your potential collaboration are also critical for your success.
Here are the critical aspects that the contract needs to cover to protect your business from potential risks:
- Penalties in case of non-compliance to the contract terms by any of the parties;
- Liability clauses that define limits of responsibility for both you and your partner;
- Warranty clauses that guarantee a certain quality level of the services your vendor provides;
- Notice periods - time frames of the project kick-off as well as scaling up and scaling down a team. Vague notice periods can affect project execution and delivery;
- Data protection rules, including deidentification, reidentification, as well as anonymization of data;
- Client’s ownership of the code, when the code is delivered and paid for;
- Agreeing on the governing law if the contract is international.
Your outsourcing partner will also want to mitigate possible risks, so here are a few standard points they will include in the contract:
- Strict deadlines for issuing an invoice and invoice payment and the outlined penalties for missing payments;
- Non-solicitation clauses that prohibit hunting your outsourced developers to your on-site team.
Even though the contract regulates many processes and outlines the terms and conditions of the cooperation with a dedicated software development team, it cannot address all the problems. Management of your own dedicated development team is no easy task, so we have gathered some tips to help you with that.
You get to choose the level of responsibility for project management. There are three options here: an extended team, a managed team, or an outsourced team. Let’s view them in more detail.
- Extended team:
In this case, you are fully in charge of product development and team management. You interview the candidates, make all decisions, set up your policies and processes. Your vendor only helps you with flexible scaling and administration. So, this is the model when you get maximum control over your project.
It is a good fit for you to get additional development capacity for your existing team.
- Managed team:
If you choose this option, you share the risks and responsibilities with the vendor who hires a dedicated team for you. You share your product vision and make critical decisions concerning the project. The vendor, in turn, is responsible for technology alignment and overall team management.
The managed team model is a good idea for businesses that want to build a core development team and want to avoid management overhead.
- Outsourced team:
This is the option when you entrust all the processes and decisions to your vendor. The provider develops a custom solution, and you get a finished product. In this case, your outsourcing partner is fully responsible for building a team, developing a product, and tackling all the risks.
Allocate a delivery manager to your project
The delivery manager is responsible for tracking whether the work is going as planned, and the team's performance is good. That is why this professional is of utmost importance on your project.
No matter what level of responsibility you choose: extended, managed, or outsourced team, N-iX allocates the delivery manager to your team free of charge.
Unlike project managers, delivery managers do not tackle the technical issues of the project. They track how the work is done, rather than what is done. Therefore, they ensure service quality and successful delivery.
Delivery managers establish smooth communication among all team members and the client if needed. These specialists choose the collaboration tools used on the project, ensure knowledge transfer, etc.
Use the Agile approach
Agile plays a central role in the efficient management of your own dedicated development team. It’s not by chance that leading tech companies around the world use Agile methodologies. Sprint planning, daily stand-ups, demo sessions, retrospectives, backlog grooming are important Agile ceremonies that will help your dedicated software development team deliver desired results. For instance, N-iX dedicated development teams use these Agile ceremonies to integrate smoothly with the clients' processes as well as to ensure maximum productivity.
Find out more about Agile software development outsourcing.
We mean both client-vendor and client-team communication here. In the first case, you have to clearly explain your needs and expectations to the vendor to get the best results.
In terms of client-team communication, you should agree with your dedicated development team on the right tools to collaborate effectively in the digital environment. Here are some examples of collaboration tools you can use:
However, it is a good idea to choose a limited number of tools for your dedicated development team. If your dedicated software development team starts trying out different applications, there will be a lot of miscommunication that will result in the loss of productivity.
Also, your on-site and dedicated team need to know each other, participate in the demo sessions, etc.
Find out more about managing a dedicated development team remotely.
Those were the best practices of managing your own dedicated development team. Now let’s view some success stories of the companies that benefit from cooperation with the dedicated development teams.
Lebara is a European telecom company with 5M active customers. The company partnered with N-iX back in 2014 for the full-cycle development of new products and their maintenance.
At the beginning, Lebara fully controlled the development, but with time, the company has entrusted more control of processes and project management to the N-iX dedicated software development team.
This process has accelerated, and eventually, our client assigned all R&D capabilities and part of project management to N-iX. Now, Lebara’s development center at N-iX comprises over 100 professionals that work in various directions, from mobile development to Big Data.
Currencycloud is a global B2B platform that delivers cross-border payments as a service. They partnered with N-iX in 2013 to accelerate the development of their white-label Currencycloud Direct application.
In 2015, our specialists became involved in payment processing and development and maintenance of Cash Manager, a client-facing virtual wallet. Since 2018, N-iX engineers have been engaged in the migration to microservices. Currently, our experts are responsible for a third of the client’s total R&D capabilities.
N-iX dedicated software development team contributed to the development of core products as well as on-time delivery of new products and features and helped to reduce time-to-market thanks to the new automation testing framework.
A leading peer-to-peer lending company
This fintech company based in Australia and the UK that offers services to 250,000 active customers. The company partnered with N-iX in 2016 to modernize their product and develop its new functionality.
The cooperation started from a small dedicated development team and further expanded to 36 specialists working for this client.
Our professionals have improved the scalability of the solution, ensured a high level of security of the users’ personal information and better testing coverage, as well as improved product quality and decreased time-to-market.
How N-iX can help you build a dedicated development team
- N-iX has over 18 years of experience providing IT services. We have delivered a variety of successful projects with diverse engineering and business challenges.
- N-iX has offices across Eastern Europe. N-iX presence in these countries allows you to tap into the talent pool of over 500,000 professionals;
- The vast majority of N-iX projects are based on the dedicated development team model. We build and manage teams ranging from 5 to 50 specialists as well as development centres of 50-100 professionals;
- N-iX provides technical infrastructure, encourages continued education, and invests in the professional growth of your dedicated development team;
- Our professionals offer broad expertise in Cloud, DevOps, Big Data, Business Intelligence, IoT, and many other tech domains.