8 Engagement Models in the Software Industry: Choose the Fit that’s Right for You

The BTC Team

An engagement model in the context of the software industry is a framework that governs how a vendor provides IT or Software Services. It is similar to how Generative AI serves as a pioneering force in the realm of artificial intelligence, propelling innovation and creativity to new frontiers.

It determines how the parties involved engage with one another for the duration of the contract, and it forms the basis on which the responsibilities, obligations, and commitments are defined.

A suitable engagement model should be chosen based on what works best for the unique requirements of an organization.

What are the different types of engagement models?

There are many different kinds of engagement models, and organizations must select the one that is most suitable for them. The choice should be based on the various techno-business requirements, along with financial and logistical considerations.

Let’s take a look at eight popular Engagement Models that are in use today and the scenarios they are best suited for.

1. The Fixed-Price Model

The Fixed Price Model is associated with a pre-determined project cost. It’s ideal to use when you have well-defined project requirements for the solution or application that you wish to develop.

The project scope and costs are agreed upon at the time of signing the contract, and the execution of the project is performed in accordance with this agreement.

The project costs, in this case, are closely linked to well-defined project deliverables, which are typically tied to various payment milestones during the course of the project. This arrangement also helps you visibly monitor progress and minimize project risk.

It’s possible that the scope could undergo a significant change during the course of the project. In this case, a Change Management process is invoked that allows for changes to be accommodated with approval from both sides. This will include any related costs and timeline implications if any.

2. The Time & Material Model

Popularly abbreviated as the T&M Model, this engagement arrangement is preferred when the scope of work associated with a project isn’t fully defined and will be continuously evolving.

The vendor agrees to provide resources for pre-determined skill sets and specifies a time-based billing rate for each resource type.

The T&M Engagement Model is ideal for:

  • Continuous Product Evolution Programming
  • Complex Large-Scale Projects
  • Research and Consulting Assignments
  • Solution Design
  • Support & Maintenance Contracts

The T&M Model is well-suited when you need a Requirements Analysis Exercise to reach a defined scope. Then you can move to a Fixed Price Model for development based on the outcomes of the Exercise.

One of the most significant advantages of the T&M Model is the flexibility it provides in terms of project specification evolution according to changing markets, technology trends, or business priorities.

T&M arrangements are typically accompanied by stringent project and time management, along with tracking and reporting practices. This provides enhanced value for the time and resources invested.

3. Offshore Development Center

This model involves teams that are an extension of the client’s team and that are placed at different location(s).

An Offshore Development Center (ODC) can be maintained by an offshore development organization that’s proven its offshore delivery capabilities.

There are multiple benefits to using this model, including, but not limited to:

  • The cost-effectiveness of operations,
  • Teams that can scale up and down as needed, and
  • Greater coverage of work hours in a given calendar day (as long as multiple time zones are acceptable).

The dedicated team provided by an ODC will offer a set of resources with relevant and pre-identified skill sets. The client has full access to and control over these terms of work allocation, status tracking, reporting, and getting changes accomplished on short notice.

Apart from these three often-used engagement models, other variants exist, some of which are combinations of the above.

Let’s take a look at them…

4. The Service Level Agreement (SLA)/ Milestone-Based Model

The Milestone-based model is typically well-suited for process-oriented organizational setups.
It aims to deliver specified milestones/SLAs in a project. For this engagement to work well, the milestones must be clearly defined with no ambiguity, and the roles and responsibilities clearly demarcated between the parties involved.

5. IT Staff Augmentation

This model allows you to supplement your in-house team with resources supplied by a vendor company. It allows for flexibility in scaling up teams based on seasonal demand and helps to cut costs associated with the full-time hiring of employees.

Staff augmentation is a good option if your development or QA requirements are closely coupled with the work being done in-house but require in-person rather than remote collaboration.

6. Hybrid (Onshore-Offshore) Model

This model is a mix of the Onshore and Offshore models. It can be an ideal fit if you require both an onsite presence as well as remote support.

7. Managed Services

This is an engagement model where the vendor manages the service for you in an end-to-end and holistic manner. They handle all requirements that arise within an area of work.

Managed Services typically include tasks like:

  • Staffing the right people on the project,
  • Using the required tools and infrastructure,
  • Implementing processes and best practices as suited to the project,
  • Maintaining documentation,
  • Producing project reports, and
  • Ensuring that deliverables are deployed in a timely manner.

This model is well-suited for organizations that must focus on their core business, rather than investing in areas where they aren’t experienced. The organization can outsource the entire work of software development, maintenance, or quality assurance. Everything will be managed end-to-end by a 3rd party.

8. High-Touch Onboarding and Low-Touch Onboarding

These two models are well suited for companies that provide SaaS (Software as a Service) offerings. They specify how the vendor will help with the implementation of the SaaS offering.

High-Touch Onboarding:

With this model, the implementation team provides training and assistance in configuring the solution through a very involved and hands-on approach.

High-touch onboarding processes typically have a dedicated Customer Manager or Account Manager who oversees and manages the client account and helps arrange for support as needed.

Low-Touch Onboarding:

This approach is better suited for more simplistic software, tools, or plugins, and where the client requires very little onboarding assistance or configuration to begin using the program. Many of these are available for direct purchase with an automated sales process.

With Low Touch models, all customer queries or issues are typically handled via an online or automated customer helpdesk.

How to choose the right engagement model?

These are some questions to ask to help you determine what model is right for your organization or project and to help you choose a vendor that can aptly provide services using that model.

  • What stage of ideation or implementation is your project currently in?
  • Do you need niche skillsets or commonly encountered ones?
  • Do you have a really short timeframe to be market-ready?
  • Is there a very tightly-coupled dependency on in-house teams for getting additional development and QA work done by externally-supplied resources?
  • Are you working off certain budget constraints or looking to significantly improve ROI margins for your business with this project?
  • Do you need additional resources for a few months or weeks only, or do you have a longer-term requirement?
  • Do you have in-house project management and software delivery expertise?
  • Does the vendor have proven industry experience for the kind of services you are looking for?

Choosing the right engagement model can be vital to ensure your project and organization are set on the path to sustained success.

How BTC can help

Boston Technology Corporation offers a variety of Software Services with flexible Engagement Models tailored to your organization’s needs. Get in touch to learn more and explore how your organization can benefit from them.


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