Selecting Outsourcing Engagement Model

Model selection in terms of Outsourcing Engagement Models is not a trivial process and your choice depends on large number of factors such as nature of the outsourced activities, organizational maturity, budget, risk tolerance, and so on. Below are some simple guidelines that you may consider when making the selection. See also earlier post Offshore Model Selection: T&M vs. Fixed Bid for relevant info.

Resource Augmentation / Classic Augmentation / Extended Team.

  • One of the easiest ways to start with offshore outsourcing.
  • Scales well both up and down (adding or taking resources off the project).
  • Works well for poorly defined projects and activities.
  • Requires high management overhead.
  • Tends to be costly especially for not well defined activities.
  • Doesn’t leverage vendor’s processes / structure / quality.

Project-based Augmentation / Task-based Augmentation.

  • Good transitional model, in particular applies well for large number smaller projects.
  • Scales up and down reasonably well.
  • Offers good control of the scope and budget
  • Offers less control over the resource productivity.
  • Requires fairly high management overhead.
  • Requires high maturity of the vendor processes and structure.

Project Outsourcing / Full (Activity) Outsourcing.

  • Good model for well defined projects with clear scope and deliverables.
  • Requires minimum management overhead.
  • Well control budget (assuming well defined project and low scope creep).
  • Very dangerous model for large (scope / duration) projects.
  • Very high risk due to low control of productivity and performance of the resources.
  • Requires exceptional maturity of both customer and the vendor.

Offshore Development Center (ODC) / Captive ODC / Captive Teams.

  • Could very cost effective in terms of total cost of outsourcing.
  • Offers ultimate control of the resources.
  • Allows using cohesive processes across organization.
  • Very high management overhead.
  • Very high internal resource / cost impact.
  • Requires customer to perform many operations in offshore location.

Hybrid Model.

  • Inherits pluses and minuses of the underlying models.
  • Some minuses could be addressed by combining model.
  • The pluses of the underlying models become weaker.

Build – Operate – Transfer (BOT).

  • Inherits pluses and minuses of the underlying models.
  • Introduces wide spectrum of new challenges, as both vendor and the customer need to operate well in three distinct different phases with completely different models.
  • Requires exceptional maturity of both vendor and the customer.

Disposable Outsourcing.

  • As I mentioned in my earlier post the model falls out from the list above since it’s more like an overall approach toward outsourcing rather than just a way to structure the engagement.
  • The model could be applied on a top of different models.
  • Minimizes risk associated with outsourcing.
  • Is more expensive than underlying models.
  • Offers add-on value in many aspects of the project, e.g. reducing impact of turnover

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