When you have an IT project deadline looming, or your in-house team lags and daily tasks are piling up, you may consider staff augmentation. But navigating the process of bringing in outside help requires understanding outsourcing models.
Gaining a basic understanding of outsourcing models also equips you with deciphering the details of a contract with a third-party provider. Here are the basics of outsourcing options:
Location-Based IT Outsourcing Models
This can include a range of alternatives based on the type of work, including nearshore and offshore outsourcing. Your IT team may have a role that you need to fill but does not require the talent to be on-site, expanding your opportunity to find the right contractor.
Relationship-Based Outsourcing
At times, it’s not the location driving your choice but the type of role you require and how that role will interact with your in-house team. Here are the forms that relationship-based models can take:
- In a staff augmentation model, the third party provides talent that joins your team to manage internal projects or programs.
- A managed team model allows your company and the outsourcing provider to determine which tasks will be fulfilled with desired outcomes stated.
- A project-based model turns an entire project over to the third party with clear specifications and timelines for the desired outcome.
Pricing for Outsourcing Models
In addition to location- and relationship-based outsourcing models, companies may also prioritize a third party for meeting talent requirements based on cost. For many companies, cost savings is a significant driver for outsourcing because they do not need to cover a salary or benefits. Still, they also eliminate the time and cost of the hiring process. Here is how pricing is often structured for outsourcing:
Fixed Price
The service provider has a standard rate, with tools and workspace included in the cost, usually billed monthly.
Time and Materials
This is a popular model in which service providers bid on a project to meet the client’s needs.
Incentive
In addition to an agreed-upon price for the project, this model offers additional incentives for exceeding expectations or timeline requirements.
Shared Risk-Reward
This is similar to an incentive price structure, offering additional benefits when the team reaches a specific milestone in the project.
The decision to outsource shouldn’t be taken lightly, but it offers some benefits that may make sense when a talent shortage and timeline constraints put pressure on your team. For more information about outsourcing models and choosing the right partner for your talent needs, contact us at Proper Connections.