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Does Your Business Need a Dedicated Development Team? There Is a Better Option

Chief Business Development Officer
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Expert in offshore development strategies for technology companies and startups. Legal background in M&A, IP rights, and contract law.
24 March 2021
8 min

Once a company has opted for offshoring, it’s crucial to compare several possible business models and choose the one that fits the business best. Although this task may sound quite simple, it creates a lot of confusion in practice. That’s why I decided to compare two popular cooperative practices for Informational Technology companies and clarify the main differences between the dedicated software development team model and an R&D center.

 

What are the most common misconceptions? Do you want to learn which option is more beneficial? Keep reading because this is the article you were looking for.

 

What’s a Dedicated Development Team

 

A dedicated development team is a cooperative model, according to which the BPO provider presents the client with IT experts who are working on the vendor’s office premises. Accordingly, the customer hires an already formed group of committed engineers who can build, test, and release software. There could be  a crew of designers, QA managers, DevOps engineers, a dedicated web development team etc. The team may vary in size from two to dozens of specialists, while the scope of the dedicated team services is also customized to a particular project.

 

Advantages and Disadvantages of the Dedicated Development Team Model

 

In order to get a holistic view of outstaffing services, it’s crucial to weigh the pros and cons of the business model. In case you feel overwhelmed by doubts, I listed the advantages and disadvantages of this form of partnership for you.

 

dedicated-development-teams

 

Fast Results Vs. Indifference

One of the most common reasons to use an outstaffing model is fast results. It’s possible to estimate how many specialists you need for a specific project and decide whether you want to hire more for the purpose of its faster completion. Accordingly, you can scale up and down the external staff based on your convenience. Sounds good? Partly, yes.

 

However, as long as the employer treats their employees as a workforce rather than colleagues, it’s no surprise that the dedicated programmers would likely be more committed to their personal income than to your product. In the case of working on short-term projects, they are not interested in your company’s growth and product excellence. Such indifference can have a negative outcome on the provided IT services.

Reduced Costs Vs. Pricing Ambiguity

Another point why businesses hire dedicated software developers is cost reduction. Naturally, offshore coders come from entirely different labor markets with smaller pay scales. Hiring lower-paid human resources may seem a solution for enterprises that seek to minimize expenses.

 

On the other hand, it could be challenging to foresee the specific price you’ll pay in total by the end of the development process. Similar to traditional outsourcing, unexpected costs usually arise due to dozens of adjustments and fixes. In fact, only the client knows how the final product ought to look, so an extension of the editing process is almost inevitable. Thus, it’s difficult to estimate both project duration and total expenditures.

Focus on Business Development Vs. Indirect Team Management

Among the advantages of the dedicated software development team and other business process outsourcing services is the ability to keep the focus on most essential tasks. Using BPO services, you and your key employees can free up some time to engage in activities that require much attention and personal participation.

 

When it comes to the drawbacks of the dedicated team model, the problem of indirect management appears. To begin with, without an effective means of communication with foreign colleagues, a remote working style might be a challenge. Particularly in the case of the dedicated development team, all operations are managed through an intermediary. Quite often it requires hours of negotiations and tons of paperwork to set up a temporary partnership.

 

 

Financial Pitfalls of the Dedicated Team Model

 

As regards the challenges of a dedicated development team, there are several important points to take into account. As I have said before, dedicated coders are often engaged in the project for cost-reduction purposes. However, if we stop for a moment and think about it from a different perspective, we will discover new financial concerns. 

  • Buy-out Fee

First of all, from day to day you invest time and resources into external software developers. By assigning tasks to the dedicated team members you also enable their constant learning and evolving. Consequently, they grow with your enterprise, earn valuable experience and coding skills. However, when the project is over you either lose the human capital you have previously invested in, or pay a buy-out fee to keep working with brilliant IT experts. It’s not the best possible scenario, is it?

 

Alternatively, you can let Alcor’s recruiters assemble your professional team with zero buy-out fees. People.ai is a software product company which develops an innovative business tool for B2B sales with the help of machine learning technology. They decided to extend their engineering team in Ukraine, so we hunted down over 25 rare IT talents who successfully joined People.ai. From the beginning, the client company was the only employer of these software developers, so no buy-outs to think about.

 

  • Difficulties of Receiving Investments

It is clear that in the case of start-ups and small-size businesses, even minor investments can play a crucial role in further development. To be honest, the first thing investors pay attention to before putting their money into someone’s idea is the presence of a skilled team of engineers. An outsourced labor force usually scares them off, because great ideas mean nothing without trustworthy specialists who can bring them to reality.

  • Loss of Revenue-generating Expertise 

Quite often companies use the narrow expertise of dedicated developers to fill the knowledge gaps in terms of product creation. Considering the fact that the product is your main asset and the possibility to generate more revenue, the delegation of its development is a slippery slope for both startups and big enterprises. Thus, it is better to assign this task to your in-house team.

 

Is There a Better Alternative? Consider Starting Your Own R&D Center

 

An R&D center is a new trend for those who decided to step back from the conventional forms of outsourcing. Basically, it’s a representative unit of the company in a foreign country with lower labor costs. Lately, I wrote detailed instructions on how to set up a successful R&D hub. The efforts are definitely worth it, because this model merges costs reduction, an opportunity for scaling, quality IT services, and many other perks I advise you to consider.

 

 

Full Control

The first distinction between an R&D office and the dedicated team model is the ability to control all the expenses and inner team processes without any intermediaries. That is the place where a business owner can establish the rules and enjoy full transparency.

Long-Term Basis

While dedicated software developers are the external human resources for specific projects, the R&D team consists of regular employees working on a full-time basis. It ensures high engagement in the development of the product, as these specialists see the direct results of their work, grow with your company, and root for mutual success. Moreover, various bonus systems and training can motivate your team to work even better.

Employer Branding

Another advantage of an R&D hub is your own branded office and corporate culture. Considering that there are no third parties when it comes to employment, you can select people with the right mindset to be part of your team, share common values, follow universal corporate policies, and pursue the same goals. All these points can boost your employer branding and make your offshore recruitment far less challenging. 

 

In addition to the stated benefits of an R&D center, with Alcor you will get:

Fast Recruitment

We can ensure the fast filling of positions not just because Ukraine has such a vast talent pool, but due to our large database of contacts. The recruitment team will present you only with the best candidates with a proven track record. Moreover, you will stay updated during the entire hiring process with the help of our weekly reports about processed CVs and conducted job interviews. You are welcomed to take part in the candidate’s selection and make the ultimate decision at the final stage. To make the recruitment process even less stressful, we also prepared a list of guarantees for you:

 

recruitment-guarantees

 

Legal Compliance and Protected IP Rights

In Alcor, you can get the full set of legal services needed for the successful operation of an R&D center in Ukraine. Our team can help you with tax planning because we know how to make use of government tax incentive programs. According to it, Ukrainian developers pay only 5% of their monthly income when properly employed as independent contractors. Apart from that, by cooperating with us your company will keep its competitive edge due to secured intellectual property rights. Alcor will not have access to your product development, corporate insights, and confidential information. All in all, we can ensure both legal and profitable business in Ukraine for you – as we did for Grammarly, a product-based IT company that improves written communication.

Transparent Pricing 

All our business process outsourcing services are accompanied by the fundamental principle of transparency. We will keep all the detailed records, so you are free to control the ongoing processes. In Alcor, we also do not charge any up-front investments, buy-out, or other hidden fees. You pay only for what you use, that’s it.

 

In a nutshell, if you are considering Ukraine as an offshoring destination, Alcor will be happy to take care of your operational tasks. Of course, there are loads of things to know before transferring part of your business here, but we will be happy to assist you with any queries.

 

Final Thoughts

 

To sum up, a dedicated development team model has significant limitations worth taking into account. Among other BPO services, there is a better alternative – your own R&D center. This model can address the weaknesses of a  dedicated team of developers and double its benefits.

 

Alcor is an all-in-one place to establish and run fully equipped R&D offices in Ukraine. We provide recruitment, legal compliance, real-estate, accounting services, and make them work in synergy.

 

Contact Us

We will provide you with statistical data regarding the number of developers in Ukraine and their average salaries. The discussion will proceed with the expected hiring deadlines and our recommendations on managing payroll, equipment procurement, and compliance matters.

We respect your privacy and will never share your data with any third party or spam you

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