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Different Types Of Outsourcing Contracts | Your Project Outsourced - read the full article about IT Staff Augmentation, IT Staff Augmentation and IT outsourcing from INVO on Qualified.One
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hello and welcome to your project outsourced in this series i cover all the essential information about outsourcing your project to an external partner like info and key things you need to be aware of when you scale up your team this way so before we begin subscribe to our channel to never miss our episodes click here to visit our social media profiles like facebook instagram and linkedin for more tips and tricks the purpose of any kind of a contract is to establish the right mechanisms and processes during the cooperation between two parties protection against undesirable actions is very important as they say better safe than sorry right so its very important to know what is the exact type of outsourcing you want to go for because it will determine what terms and conditions youre going to need to establish with your partner think about the key elements of every it project regardless of the type of work we may indicate four crucial areas that you should focus on when it comes to your contract is the scope of your project clear or quite the opposite the latter option requires a more flexible approach during the project and it should be taken into consideration while establishing the terms and conditions of your contract this one is actually a result of the first point i talked about the amount of flexibility you need will determine whether you can go for a more fixed price approach or a time and material approach the next very important thing is your budget are there any important constraints when it comes to this topic or do we treat it as flexible and focus more on the hourly rate this is the thing that must be indicated in the agreement last but not least theres the matter of who will be responsible for the final outcome during the cooperation depending on the type of your project the outsourcing agency may be in charge of everything and take on all the responsibility or simply lend the resources developers for instance to the client who leads the project themselves okay as you can see there are many variables when it comes to the scope timelines budget and whos in charge during the project so its natural that there are different types of contracts that were developed throughout the time if you want to protect the interest of both parties you need to pick the right one that addresses all the different scenarios i mentioned above lets go through the most popular contract types one by one the time and material contract is the most popular type in the it world it is designed for those who want to work on an innovative digital product that will stand out on the market with its functionalities efficiency customer journey appealing interface etc by and large its usually hard to define the final shape of the product beforehand not to mention the division of work thats why agile methodologies were invented to help teams work in such conditions accordingly the contract will be designed in the same way meaning that it will define the work based on iterations feedback and constant planning a time and material contract is constructed so that the client only pays for hours the team spent on the work materials costs are also included which by the name explains the name since there are lots of varieties that may come up during the process note that the offer you receive at the beginning of cooperation is just a rough estimate and its very likely to change the final price will be the hours eventually spent by developers multiplied by the hourly rate that both parties agreed on when would this kind of contract be the best choice if youre planning to build a complex digital product where the final outcome is rather unpredictable choosing this type of contract would be best if the scope requires a more flexible approach this is definitely the way to go lets break down the pros and cons of a time and material contract great level of flexibility the possibility of prioritizing the functionalities working in sprints that allows you to get constant feedback and plan details before each sprint the price is based on the actual number of work hours the team spent on the project it is possible to adjust to the markets changing requirements even after the start of the project despite the benefits of this approach there are always bots and this one has them too its hard to predict the final price of the outsourcing services due to the unclear scope the project must be well managed and kept under control to minimize risks and costs a fixed price contract is pretty straightforward it is just as it sounds it fixes the price regardless of the time and effort to be spent on work a fixed price contract requires clear requirements when it comes to the scope and thorough planning beforehand it works best with simple and straightforward requests where the development stages can be easily settled before the project starts when it comes to more complex projects it might be a little bit risky software houses might insist on higher prices to create a buffer because they cannot ask for more funds when the project turns out to be more complicated than initially assumed so this model works perfectly if you dont have much time to be involved in the project yourself and its easy to clarify the scope and estimate the work time a fixed price may also exist in a hybrid model on a fixed price per iteration basis where the client pays for each milestone separately this way it can be more flexible because between iterations the scope can be reassessed as with every kind of option a fixed price contract has its pros and cons here are the benefits to choosing this one product specification is determined by the client together with the it partner before the work starts the timelines and budget are defined beforehand which allows the clients to manage their resources easier if the scope is well determined the risk taken on by the client is very low and now lets discuss the drawbacks of a fixed price contract the most important drawback low flexibility and even though making changes is possible why the project is are going it may strongly affect price and deadlines which requires making changes in the contract theres a lot of work to be done before the project starts because this contract requires lots of preparation the costs may be higher because the it partner has to factor in the risk costs in the estimation now those two aforementioned types of i.t contracts are designed for creating projects off-site meaning that the it partner takes full control over the project but what about an outsourcing model where you can rent people with the competencies youre looking for and manage them internally this is somewhat different but the model is quite simple lets go over it in a staff augmentation and dedicated teams model the client can manage specialists provided by the outsourcing company directly it allows businesses to quickly build or extend their internal teams with the highly qualified specialists not only developers but also project managers designers analysts qa testers and so on its very similar to having and managing your own employees provided specialists receive access to the clients communication tools project management tools issue tracking systems daily and weekly meetings etc within this type of contract in most cases the billing will be based on the hourly rate it means that you agree on the rate for each specialist beforehand and the specialist provider issues you an invoice based on a report of hours the experts spend working for you you dont have to be concerned with administration costs sick leave or holiday costs because all of them lie on your providers side this kind of contract is designed for those who have the competencies to manage project team members onshore and look for more flexible solutions than hiring teams in-house it has many pros including qualified and experienced specialists available for you in both long term and short term perspective great flexibility you can scale up or down your team within days or weeks you can easily adjust hired specialists if the project scope changes theres no additional employee cost you pay only for the hours spent on the project you receive dedicated specialists for your project ok these were the three of the most recognizable types of it outsourcing contracts but the i.t world is so big and complex that you can find different options that suit your business but in most cases those are just variables of the ones that ive just presented to you so no worries its all about knowing what youre looking for and being transparent about your needs with your potential it partner also the more you know about different contracts the quicker youll find a common ground with your partner alright that will be all for today stay tuned for next weeks episode where im going to tell you about what happens once you make a decision and choose your outsourcing partner if youd like to talk to me about building your digital product write me an email at pdot markovsky at infotech.com to stay in touch with us click here to visit our social media profiles like facebook instagram and linkedin thanks for watching and see you next [Music] week you
INVO: Different Types Of Outsourcing Contracts | Your Project Outsourced - IT Staff Augmentation