Let’s talk about outsourcing. It’s been quite a controversial topic for a long time. Although a great number of businesses have been benefiting from it for years, optimizing production processes, reducing costs and increasing revenues, other companies seem to be denying it and constantly refusing to even explore the benefits it has to offer.
Of course, although being great solutions when it comes to cost reductions, traditional forms of outsourcing like the Time and Material and Fixed Price models have some drawbacks when it comes to longer-term engagements. But likе everything in the world, outsourcing itself is constantly evolving and alternative forms of collaboration that offer different levels of expertise, management and responsibilities have emerged. One great example of such an approach is the Dedicated Teams model. And in the following paragraphs, we would like to explore the pros and cons of this slightly newer and less popular form of collaboration.
Traditional outsourcing models
At its core, conventional outsourcing is an agreement between two companies where one of them contracts the other to do part of its work rather than engage own employees. The reasoning behind such a decision
may be reducing operational expenses, lack of in-house expertise or tight
deadlines. And there’s no doubt, cost reduction may be significant when the supplier is located in highly cost-effective destination such as Eastern Europe or Asia. Plus, traditional outsourcing models can achieve great
results in providing additional expertise and securing extra resources for short-term projects.
may be reducing operational expenses, lack of in-house expertise or tight
deadlines. And there’s no doubt, cost reduction may be significant when the supplier is located in highly cost-effective destination such as Eastern Europe or Asia. Plus, traditional outsourcing models can achieve great
results in providing additional expertise and securing extra resources for short-term projects.
In the constantly intensifying race for gaining a competitive advantage, transparency, security, and trust are starting to dominate as decision drivers when choosing the right model for longer-term projects and cooperation. And here traditional outsourcing is often falling behind. Its main drawbacks are the lack of control and visibility over the development process, which may lead to poorer quality of the work and final results, and the increased risk of exposing confidential data and mismanagement of intellectual property assets.
The model of Dedicated Teams
The Dedicated Team model, on the other hand, is an effective form of collaboration where one company engages a service provider to hire and co-manage (in terms of employment, HR, office facilities and infrastructure) a team of experienced professionals, while at the same time it maintains control over the development process and its IP assets. The main goal here is not just cost reduction but also access to a brand-new talent pool and improved efficiency, quality of work and final product or service through direct project management and long-term collaboration. For US-based and Western European companies exceptionally high results could be achieved with service providers located in Central and Eastern Europe, due to the cultural proximity and numerous similarities in work ethics and attitude.
How companies benefit from the model of Dedicated
Teams
Control over the process
The thing about this model is that it allows companies to directly choose
the resources they will engage and to technically manage them afterwards, leaving matters such as local employment laws, renting and managing office space entirely in the hands of the service provider. One could think of these resources as “Schrödinger's” employees – they are the company’s staff members and they are not at the same time. Legally they are employed by the service provider, but the management of their work is in
the domain of the client. This ensures full visibility and control over the
development process and quality of the final product, while any employment risks stay with the service provider.
the resources they will engage and to technically manage them afterwards, leaving matters such as local employment laws, renting and managing office space entirely in the hands of the service provider. One could think of these resources as “Schrödinger's” employees – they are the company’s staff members and they are not at the same time. Legally they are employed by the service provider, but the management of their work is in
the domain of the client. This ensures full visibility and control over the
development process and quality of the final product, while any employment risks stay with the service provider.
Reduced risk and secured intellectual property assets
Deriving from the direct control over the process, this is probably one of the most important leverages of the Dedicated Team model. Since these
resources are essentially integrated into the company’s structure long-term and not engaged with other companies, the risk of losing corporate know-how due to team configuration changes is minimized. At the same time, the service provider not interfering in the communication between you and your dedicated team guarantees intellectual property stays with you. Of course - make sure this is also contractually secured.
resources are essentially integrated into the company’s structure long-term and not engaged with other companies, the risk of losing corporate know-how due to team configuration changes is minimized. At the same time, the service provider not interfering in the communication between you and your dedicated team guarantees intellectual property stays with you. Of course - make sure this is also contractually secured.
High-quality resources
By choosing the approach of a Dedicated Team, a company benefits from the access to a brand-new talent pool and sometimes even reaches resources with niche or hard-to-find skills. Besides, the collaboration with a reputable partner ensures the attraction and retention of those highly-skilled resources, which leads to the long-term development of the remote operations.
Of course, choosing the right location and provider is crucial. Factors such as talent availability and quality of services are among the most important when researching potential destinations. And the key to choosing the right service provider is to find a like-minded company that shares similar business values.
An additional benefit of engaging resources from another location is the
cultural and skills diversity as it supports the exchange of ideas and
increases innovation.
cultural and skills diversity as it supports the exchange of ideas and
increases innovation.
Scalability and flexibility
The Dedicated Team approach is a delivery model that allows organizations to assemble a team of professionals and expand in-house
resources. In addition, the model provides sufficient flexibility to scale up
or down the capacity according to the business priorities. Surely, having a carefully developed growth strategy is essential for the success of future operations and the creation of a positive reputation among potential candidates. But having the flexibility this model offers can be of great advantage.
resources. In addition, the model provides sufficient flexibility to scale up
or down the capacity according to the business priorities. Surely, having a carefully developed growth strategy is essential for the success of future operations and the creation of a positive reputation among potential candidates. But having the flexibility this model offers can be of great advantage.
When is it better to stick to traditional forms
of outsourcing?
Urgent need for resources
Assembling a highly productive dedicated team takes some time and
requires good planning and careful selection of the team members. Certainly, having a strong and competent partner on your side would smooth and speed up the process, but you have to bear in mind that your active involvement in the recruitment process would be required – it will be ultimately you assessing and deciding who has the right expertise and mindset to be part of your team. Therefore, if pressed by really tight deadlines, hiring an outsourcing partner with a ready-made team that could be immediately assigned to your project is a good option. Of
course, it is important to strictly define the terms and conditions of the collaboration so the project would be completed in due date.
requires good planning and careful selection of the team members. Certainly, having a strong and competent partner on your side would smooth and speed up the process, but you have to bear in mind that your active involvement in the recruitment process would be required – it will be ultimately you assessing and deciding who has the right expertise and mindset to be part of your team. Therefore, if pressed by really tight deadlines, hiring an outsourcing partner with a ready-made team that could be immediately assigned to your project is a good option. Of
course, it is important to strictly define the terms and conditions of the collaboration so the project would be completed in due date.
Complete lack of technical expertise in-house or inability to engage with the nearshore team
Conventional forms of outsourcing are also very well-suited for start-ups
with a great idea but without the necessary technical expertise or for
companies that are looking to expand but are not able to allocate some of their existing resources to engage with the new operations – same as when opening a new office location you’d expect some engagement from the headquarters to make it a success.
with a great idea but without the necessary technical expertise or for
companies that are looking to expand but are not able to allocate some of their existing resources to engage with the new operations – same as when opening a new office location you’d expect some engagement from the headquarters to make it a success.
If there’s no tech expertise in your main location and you’d prefer proceeding with a dedicated team, there’s still a working solution – start by hiring a CTO or a strong technical lead in the nearshore location - “your right hand” on the ground. Having such person in place would secure smooth hiring and development process.
Short-term projects
The advantages of the Dedicated Teams model come from the good planning, long-term collaboration and integration of the new team within the company’s structure. Therefore, in the cases where additional
resources are required for a short-term project, the traditional outsourcing
providers are a preferable choice. Carefully selecting and on-boarding team members would simply make more sense in the longer term.
resources are required for a short-term project, the traditional outsourcing
providers are a preferable choice. Carefully selecting and on-boarding team members would simply make more sense in the longer term.
Freeing in-house employees from boring tasks
Assuming you’ve invested time and efforts in building a great nearshore team – you wouldn’t want people quitting because their potential isn’t put to a proper use. Either create a mix of diverse projects for them or simply use a traditional outsourcing provider to deal with the less exciting tasks.
What type of Dedicated team to build?
The model is applicable in various fields of operations. Should it be software development and quality assurance, support, finance, marketing, business development or a mix of all of them, the additional resources could be successfully integrated with those in-house and further increase their capacity. In the case when the dedicated team grows to a substantial size and the business reaches the point an own legal entity is required, some service providers offer swift spin out options where they are supporting the process of transferring the already hired people.
In conclusion, outsourcing isn’t necessarily a bad thing. Choosing the right approach and partner could result in a successful long-term expansion of the development capacity, a remarkable increase in the quality of work and great diversity of skills and ideas. And all of that on top of cost-effectiveness and increased productivity.