Cooperating With Your IT Partner: The Best Models and Their Benefits

In this article, we are going to cover the ways you can cooperate with your IT partner (i.e. software house). Sometimes we encounter companies that want to innovate their product or service through a software solution, but are not sure how to purchase the service.

The article describes the ways you can cooperate with INVENTI, however most software houses offer similar options.

Cooperation models

The most common IT cooperation models include:

Body Shopping	Leasing the working capacity of individual IT professionals.
Team Leasing	Leasing the working capacity of a team of IT professionals.
Team Leasing with Management Responsibility	Leasing the working capacity of a team of IT professionals including team management.
Hybrid mode	delivery of a solution with the possibility to fix the price of individual parts of the application.
End-to-End Project Delivery	Delivery of a solution with price and application scope fixation.

The cooperation models differ depending on the service you’re purchasing from your supplier.

Within the first three models, you purchase the capacity (time) of individuals or teams that implement your desired solution/project.

In the case of Hybrid mode and End-to-End Project Delivery, you are not purchasing the time, but the work output – the IT solution itself.

The selected method of cooperation also determines the degree to which your colleagues are involved during the project (from the highest to the lowest) as well as the degree of risk you’re taking.

Types of pricing models

We distinguish between two main types of pricing models on which we illustrate various approaches and specifics of individual cooperation models. It’s not a complete listing but completely sufficient for illustrating these models.

Time & Material – as the name suggests, you pay for the time of specialists and resources needed to complete the project (like specialized software and hardware). When it is used, billing usually takes place once a month.

Fixed price – both sides agree on a fixed amount for the entire project or its part. It’s usually billed after accepting the work and often divided into a couple of payments: before starting the project and after finishing it.

Let's compare each model based on four factors

The degree of responsibility and risk management.
The extent to which the responsibility and risk are transferred from the client to the IT partner. With a higher responsibility and risk, the price is higher as well.

Pricing model. The way the project budget is built and the work is reported as well as billed.

Level of interaction needed.
The extent to which the client’s involvement is required and expected. How much they enter the actual implementation.

The need for a client’s knowledge of IT.
The expected level of IT technology and development expertise of the client. It’s based on both the risk the client decides to bear and the level of interaction as well.

Body Shopping

As we stated in the introduction, Body Shopping is basically leasing the working capacity (or its part) of individual IT professionals. It’s primarily used when you need to:

Increase your team’s working capacity in the short term.
Perform just a one-off IT activity, so it doesn’t make an economical sense to hire an internal employee for it.
Cover the missing capacities of the team because of insufficient numbers of IT specialists on the labor market.

This type of cooperation comes in handy when you want to keep full control over every detail of your team’s work. With some exceptions, it’s not suitable for a long term cooperation.

Risk management: The client is responsible for managing team members, assigning and evaluating tasks. All risks coming from misunderstanding are on the client side.

Pricing model: Time & Material

Level of interaction needed: Management of individuals takes place almost on a daily basis. You apply the same approach as in the case of an internal specialist meaning you have a detailed overview of who does what.

The need for a client’s knowledge of IT: To reach effective cooperation, the client must know how to specify the project down to the smallest of detail. They should be able to answer questions whether business related or technical.

Team Leasing

Team Leasing is all about hiring a team of IT specialists who have worked together in the past and therefore are well-coordinated. Thanks to that, they’re able to achieve greater effectiveness in a shorter amount of time than a newly assembled team.

We are often faced with a situation in which the product manager of the client assigns tasks to the supplier’s team of IT specialists.

It works very well in the case of one-off projects as well as long term solution development. The scope of it might be changed during the course of it.

Risk management: The client is responsible for managing team members as well as assigning and evaluating tasks). All risks coming from potential misunderstanding are on the client side. These are usually slightly lower.

Pricing model: Time & Material

Level of interaction needed: Team management takes place on a regular basis. You apply the same approach as in the case of your own team meaning you must have a detailed overview of who does what.

Team Leasing with Management Responsibility

This is the same service as Team Leasing except for one difference. A team manager (role), that guarantees everything is going as agreed, is also part of the team. Therefore, the client doesn’t have to take care of individual tasking but just generating work for the team as a whole.

The team manager takes care of daily team management (involving planning, organizing, managing, controlling).

We choose this type of cooperation when we want to have responsibilities divided between the client and the supplier. It’s convenient when the client doesn’t have sufficient IT knowledge or management capacity. As with standard Team Leasing, the client doesn’t have to be clear about the whole project scope right from the beginning.

Risk management: The supplier is responsible for complex team management as well as assigning and evaluating tasks. All risks coming from potential misunderstanding are being shared by the supplier and the client.

Pricing model: Time & Material

Level of interaction needed: The client has to communicate their business requirements to the team on a regular basis. The team manager takes care of the organization of work and delivery of it within the agreed scope.

The need for a client’s knowledge of IT: To reach effective cooperation, the client must assign the work to the team. They should also be able to answer questions related to the assignment – primarily business related.

Handbook

9 steps to successful nearshoring partnership

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Hybrid mode

When a client needs to make use of on-demand development (especially when they want the supplier to bear all of the realization risks) and at the same time, doesn’t have a clear and detailed idea of the final solution, Hybrid mode may be the most appropriate way.

After an initial analysis of the solution, the project is divided into two sub-phases that are then “fixed”, so the client knows how much the specific system part is going to cost.

This type of cooperation is flexible when it comes to changes of the project scope. However, it’s more suitable for bigger projects with a longer duration (8 months and more), with regard to the details of the work organization.

Risk management: The vendor is fully responsible for delivering of a particular sub-phase. All risks related to this sub-delivery are on their side.

Pricing model: Time & Material, Fixed price

Level of interaction needed: The implementation team prepares an assignment, manages implementation and organizes the acceptance of individual project increments. The client approves the assignment and then performs acceptance tests of individual increments.

The need for a client’s knowledge of IT: The client has to be prepared to answer business questions.

End-to-End Project Delivery

End-to-End Project Delivery is the right type of cooperation if you:

Have a detailed idea about the desired solution.
Know that it’s not going to change during the course of the project.
Want the supplier to bear the risks related to implementation.

In this case, there is an agreement between the supplier and the client in which the project scope as well as its price are fixed and therefore the client figures as a validator of individual outputs and the final solution tester.

When there’s a need for a change in the project scope, this change requirement has to go through change management. Then, the time requirement, impact on the project plan and financial aspects of the project are analyzed.

This type of cooperation is suitable for companies that have very little to no knowledge about IT or SW development.

Risk management: The supplier is fully responsible for delivering the project. All risks related to the project are being managed and borne by them.

Pricing model: Fixed price

Level of interaction needed: The implementation team prepares assignments, manages implementation and organizes the project acceptance. The client confirms the assignment and then performs the acceptance process of the entire project at once.

The need for a client’s knowledge of IT: The client has to be prepared to answer business questions.

We hope that you now have a solid grasp on the most common IT cooperation models. Making the final decision about the ideal one fit for your needs and expectations is really up to you and your partner. Considering the factors like the degree of responsibility and level of interaction needed will help point you in the right direction.

To make this process even easier, we’re sure you will find the following article extremely helpful. It includes a clear table of models with their essential characteristics as well as two basic aspects that determine the selection of the right model for you. Find out more in the article How to choose the right IT cooperation model?