Way back in 2011, Marc Andreessen authored a ground-breaking article in which he stated that “software is eating the world.” Originally published by The Wall Street Journal, it is often cited as the moment when the benefits of the digital revolution moved into mainstream consciousness.
More than a decade later and the co-founder of web services innovator Netscape has not only been proven right but has also seen software become the defacto platform for the connected society. Enterprises – whatever their core business – have either evolved into digital companies or are taking steps to ensure that they don’t join the long list of corporate dinosaurs.
Meeting an increased demand for digital products and services can be a challenge. For an increasing number of business leaders, there is a defined need to rethink the ways that they engage with software development. To further muddy the waters, how software is being developed is also morphing, thanks to advances such as AI, automation and tools that radically simplify the job of app development.
Taking all the above into account, we want to share our experiences of the most common engagement options, as well as consider new approaches that can help enterprises accelerate innovation and become more agile.
How Should Businesses Navigate Software Engagement Models?
Many factors affect how organizations engage with software development, including what they ultimately get and how much they pay for that service.
Here are just a few of the most common considerations:
Naturally, companies will want to integrate a software engagement model that ticks all their boxes, but we need to remember that there is rarely a one-size-fits-all solution.
In fact, there are often several paths to consider before you can even start to move forward with identified digital initiatives. Taking that into account, the six models detailed below are a good place to start.
Over the last 18 months, we have seen a great deal of innovation in low-code/no-code platforms, automation and AI. This means that projects that an enterprise might once have outsourced can realistically be developed in-house.
That doesn’t necessarily mean they will be created by the developers in the IT team. The rise of codeless software means that non-techy employees are increasingly able to create digital products or analytical capabilities. According to Gartner, for example, low and no code software platforms will be the dominant way of making software by 2024.
Pros: Codeless creation is changing the software development landscape. Tactical, high-volume digital products will become easier to create.
Cons: The underlying reasons that enterprises choose to partner with specialists for digital engineering projects haven’t changed. Strategic, high-value, complex work drawing upon specialist, sought-after skills will still require enterprises to either build up those capabilities in-house or hire digital partners who can deliver.
Enterprises agree in advance on what needs to be done within a certain budget, which is then set in stone. At least, that is the theory.
This model was a very common method of getting software made, however it is ebbing in popularity nowadays as enterprises seek more flexibility from development partners.
Pros: The advantage of this engagement model is knowing in advance exactly what you’ll get, how much it will cost and being able to plan around that. For it to work optimally, you should be confident that the deliverables and scope of work will not change.
Cons: In rapidly evolving market conditions, it pays to be agile. That might mean tweaking the scope of work as you go along, or even moving the goal posts more fundamentally. In a fixed-price scenario, anything other than the smallest deviations will add to the final cost. The development partner shoulders the financial risks associated with a project overrunning, which is reflected in the price. This lack of wriggle room can mean that this is not usually the most economical model.
The “time and materials” model allows for a lot more flexibility and is perfect for situations where the solution is not immediately obvious or easily defined. Equally, where ongoing innovation or continual improvement is required, the T&M model can work well.
At its simplest, the enterprise sets out the specialisms it requires, agrees a billing rate for the different skillsets and then draws on the development partner’s expertise as needed.
Whereas the fixed price model requires upfront involvement (creating a scope of work, briefing the development partner, then letting them get on with the work) the T&M model tends to require enterprises to be more hands-on in how they direct the project.
Pros: If the project requires a phase of research, ideation or discovery, the flexibility of the T&M model can work well. With a trusted partner, transparency, objectives and timelines, this model provides bang for buck as well as flexibility.
Cons: Fluctuating budgets and increased involvement are a turn-off for some enterprises.
This model is great when a dedicated team is required to work as an extension of the enterprise’s in-house team.
For software development and testing, this is a valuable, cost-effective resource that enables work to continue round-the-clock in multiple timezones. It is also easy to scale up and down, another reason why it has proved to be a popular engagement model when enterprises want to ramp up their digital capabilities quickly.
Pros: A flexible engagement model that allows enterprises to extend their IT teams virtually, access specialist skills, tools and platforms, accelerate development and collaborate quickly and efficiently. Well suited to larger projects.
Cons: Clear communication and efficient workflows are a must and team “fit” is not guaranteed. Close involvement is usually necessary.
Similar to the offshore model, except that the specialists join the enterprise IT team onsite. The enterprise is responsible for paying the wages of the digital engineer(s) as well as expenses and a contractor fee.
An onsite team is a predictable, transparent arrangement that can be more cost effective than the T&M model and enables enterprises to have a dedicated addition to the team with pre-determined, specific skills.
Pros: If you need to bolster your internal capabilities, this can be a great option. Expect and encourage digital engineers seconded to your internal team to share their insights and perspectives to fully take advantage of the many “soft” benefits of this arrangement.
Cons: This option feels a lot like hiring a new employee – the skillset and fit need to be just right. Finding the right person can be labor-intensive and you may have rigorous contractual obligations relating to their notice period.
The digital services firm manages all aspects of the project according to a set of SLAs and with clear reporting and project management requirements.
It is particularly suited to situations when an enterprise recognizes the importance of the digital initiative but is unwilling or unable to commit to the ongoing maintenance themselves, for instance when the project is vastly different from their core business.
Pros: Often seen as the “Rolls Royce” option because enterprises get complete end-to-end development, management and support relating to a particular project. The digital services company will select the people, tools and infrastructure for the job as well as providing timely progress and other reports.
Cons: Costly and can feel risky handing over management of a digital project.
And the Right Model is…
As the pace picks up on the rate of digitalization and enterprises set their sights on increasingly ambitious digital goals, choosing the right engagement model is an important part of ensuring projects run smoothly and gain acceptance internally.
Apexon has been focused on digital technologies for more than 18 years. In fact, we were confident that software had the capacity to eat the world long before Andreessen wrote his op-ed in the WSJ.
In that time that we have tried many different ways of working and recognize there are inherent advantages to each path. At times, a hybrid approach makes most sense. For example, a T&M phase to initially design and scope out the tech requirements, followed by a fixed price project when it comes to execution.
When it comes to solving our customers’ digital challenges, our approach has been to meet our customers’ technology needs wherever they are in their digital lifecycle or maturity. We apply this principle to engagement models too, because the most effective solutions are those that deliver value to everyone involved.
Eventually, the decision as to which software engagement model is best will come down to the specific set of requirements that an enterprise has. Digital first has become digital only and leveraging the different solutions or offerings plays a significant role in not only business optimization strategies but also the development of processes or products that deliver what the connected society wants.
Once you know the answer to that question, then picking the right model at the right time should be an easier decision to make.
Apexon’s team of digital engineers are equipped to deal with the toughest digital challenges and pain points. We help our clients differentiate their brands by enabling new forms of digital engagement, reinventing business processes and developing entirely new business models.
To find out how we can make your digital ambitions a reality, please contact us by filling out the form below.