Dedicated Software Development Teams: the Tell-All Guide

This article provides details to help you make the right choices, covering topics that include:

• Advantages of a dedicated software development team
• The main approaches to dedicated software development
• What is an offshore dedicated team?
• The best countries to find an offshore dedicated team
• The legal aspects of working with a dedicated software development team
• How a dedicated software development team works in practice, the workflow: from an initial discussion with a dedicated development team vendor to continuous delivery of your goals and objectives
• Myths and fears about dedicated software development
• Examples of successful companies that relied on dedicated software development to fuel their growth

Before COVID-19, it was argued that physical co-location and face-to-face communication was required to build an atmosphere of trust in the workplace. The idea doesn't seem so valid anymore, and a growing number of companies leverage outsourcing to access global talent from anywhere in the world, without all the expenses and risks associated with in-house staff.

A dedicated team (also known as outstaffing) is an outsourcing model of collaboration between a client and a dedicated development company where:

• A client hires a team of professionals, a dedicated software development team, from a software development company to satisfy the client's business needs.
  
  
• The dedicated software development team works as part of the client's in-house team and focuses exclusively on the client's initiatives, projects, and tasks at hand.
  
  
• The software development company takes care of all recruitment, administrative support (salary, PTO, sick leaves, etc.), equipment, and other items the dedicated software development team might need.

Cost-efficiency and immediate access to top-notch talent

In most cases, it's considerably cheaper to hire a dedicated team than to hire in-house. Adding new employees to the payroll means additional cost—both in the time it takes for new staff to join and the indirect costs listed below:

• Vacations/paid-time-off (PTO)
• Benefits (healthcare, vision, dental)
• Payroll tax
• Workers' compensation and liability insurance
• Risks commonly associated with the workforce (conflicts, injuries, lawsuits, etc.)
• Sick days (especially due to COVID-19, considering that in-house staff may co-mingle in one location)
• Bonuses
• Shares/equity in the company
• Providing office space for staff (hot desks, etc.)

When you hire dedicated developers, the company providing the dedicated software development team takes care of all the costs above while providing reasonable rates.

Hiring in-house also means incurring additional costs from:

• Recruiting
• Performance reviews and salary increases
• Exit interviews
• Project management staff
• Training

When you work with a dedicated software development team provider, you get access to top-notch engineering talent in any part of the world.

Greater focus and productivity

A dedicated software development team works as part of your in-house team and is 100% focused on your projects and initiatives. Having a fresh look at the tasks, the dedicated software development team can provide more innovative and practical solutions for the project's challenges.

Being thankful for the opportunity to work with your company, the dedicated software development team is more motivated and will strive to perform better than your in-house team. The dedicated software development team knows intrinsically that if they don't perform better, they may eventually be let go, and this drives a portion of their desire to succeed and excel.

Also, the dedicated team tends to improve the client's processes and ways of working because it impacts them first and foremost. Where necessary, the dedicated software development team will introduce best DevOps practices like continuous integration and continuous delivery (CI/CD), which greatly improves the way the client delivers software.

Because of their remote-working nature, the dedicated software development team tends to write things down, in effect building the client's knowledge base, wikis, and work processes.

The short-term and long-term benefits that a dedicated software development team brings can help the client stay competitive even after the dedicated development team is gone.

Adaptability

The dedicated team model implies increased flexibility. Whenever the current needs and requirements of a project change, the dedicated software development team vendor can quickly reconfigure the dedicated development team to accommodate change:

• Increase or decrease overall size of the dedicated development team.
• Increase or decrease the dedicated development team members in a given role. For example, add more QA engineers for a period when more testing is needed.
• Dynamically allocate dedicated development team members to different projects within the client's company.

Clear visibility and control over processes

From a practical standpoint, a dedicated software development team is just like your in-house team, with the only difference being that it works remotely. A good dedicated software development team has no problem working independently. The dedicated software developers will ask questions or schedule calls with your in-house staff only when needed to minimize distractions.

On the other hand, if you need to work more closely with your staff, you can manage the dedicated software development team directly or via a team leader appointed from among the dedicated development team members. Such management often implies day-to-day communication with the team, including daily standups, sprint planning and review activities, demos, and PoC presentations. As a result, you can closely align your internal team and a dedicated software development team to deliver on the target objectives in a given month or quarter.

Apart from many dedicated team model's advantages, it's essential to understand when you shouldn't use the model.

In principle, the dedicated team model can be used with both Agile and Waterfall software development methodologies. Both methodologies can be effectively used to produce high-quality software.

To choose the right approach for building software in your organization, it's essential to understand how both methodologies work, their advantages and disadvantages. After a methodology is chosen, it's easier to understand the benefits a dedicated software development team may bring to the project. Let's discuss the two methodologies at length:

Waterfall methodology

The Waterfall methodology is highly-sequential in that it follows a specific sequence of stages or phases. Each phase below must be fully completed before the next step is started:

1. System and software requirements: gather and document requirements.
   
   
2. Analysis: determine business requirements and current ways of working.
   
   
3. Design: craft the software architecture.
   
   
4. Coding: develop and create unit tests, integrate modules according to the determined software architecture.
   
   
5. Testing/verification: test the software system-wide (integration testing, system testing, user acceptance testing).
   
   
6. Operations: installation, migration, support, and maintenance of the finished product.

Agile

When you consider hiring a dedicated software team, it's important to differentiate between IT outsourcing and IT consulting to be able to choose the right dedicated software team vendor. The table below summarizes the functions of both IT outsourcing and IT consulting to help you understand the difference:

If you managed to find a dedicated software development team vendor that truly embodies all traits described in the Consulting column above, you'll reap the following benefits:

• You'll be able to deliver high-quality software in the most efficient way.
• You'll get long-lasting benefits by improving your processes and ways of working.

There is a whole spectrum of dedicated software team vendors who lie somewhere between Outsourcing and Consulting. Most vendors claim they belong to the Consulting column, whereas in reality, they fall more into the Outsourcing column.

Let's compare onshore and offshore dedicated teams and discuss their advantages and disadvantages.

An offshore dedicated team is located in a country different from the client's location. For example, for a company in the US, an offshore dedicated team would be a team located in India, Poland, or Georgia.

An onshore dedicated software team, on the other hand, is located in the same country as the client. When a company in the US hires a dedicated software team located in the US, such a team is called an onshore dedicated team.

Let's review benefits and disadvantages of onshore and offshore dedicated teams.

The global IT-services outsourcing market is growing at a remarkable pace. Driving this growth is the need to reduce operational costs and the lack of IT engineering talent. And this is precisely why more and more organizations, including Fortune 500 companies, are working with outsourcing providers to increase efficiency and the bottom line.

When it comes to choosing locations that provide high-quality IT talent and dedicated software development teams, in particular, consider the following aspects:

• Technical education quality in the country/region
• English language level and pronunciation
• Cultural differences and similarities
• Availability of skilled IT professionals
• Outsourcing vendor rates
• Time difference

Considering the factors above, here is a list of the most popular outsourcing destinations:

• Asia-Pacific region (India, Philippines, China, Vietnam)

  Advantages. Because of a large population, the countries in this region have a large number of specialists working in the IT sector. These countries offer some of the most competitive rates in comparison to other outsourcing destinations. On average, the rates range from $20 to $40 per hour.

  Disadvantages. However, substantial cultural differences between these countries and the Western culture may lead to certain communication issues. From the Western clients' perspective, the following issues exist when working with dedicated software development teams from the Asia-Pacific region:

  • Poor English. It mostly applies to staff from China and Vietnam. But even specialists from India often have a very strong accent, which may impair effective, brisk communication.
  • Lack of creativity. Very often, instead of custom, well-thought-out solutions, they use code created by someone earlier. This can cause issues with intellectual property rights and have a substantial negative impact on the final product.
  • Will say 'yes' to everything. In some countries from this region, like China or India, frankness can be regarded as rude rather than honest. For example, if you are promised that a task will be completed by the end of the week, it might not necessarily mean that the task will be completed by then. It can mean just that your request was heard.

  Summary. You should consider this outsourcing destination whenever you need to outsource simple tasks at the lowest price. But if you're looking to develop a business-critical software system requiring strong software-engineering skills, you are better off hiring a dedicated software development team elsewhere.

• Latin America (Mexico, Brazil, Argentina)

  Advantages. Because of a convenient geographical location and time difference, this destination is growing in popularity among the US customers. Good English proficiency and a decent level of IT education enable the outsourcing vendors to provide a wide range of IT services.

  Disadvantages. On the downside, outsourcing software development to vendors from this region can be quite expensive due to relatively high rates and taxes. The average rates range from $40 to $80 per hour. Additionally, some customers complain that Latin American software developers often lack discipline and punctuality, which can lead to subpar performance and delays in project delivery.

  Summary. The bottom line is, you should carefully weigh all the factors before deciding to outsource to one of the countries in Latin America.

• Eastern Europe and Caucasus (including Poland, Romania, Ukraine and Georgia)

  Advantages. The countries in this region are known for their high-quality IT education system and cutting-edge IT competencies, including software engineering, quality assurance, database, and data-science skills.
  Apart from that, IT specialists from this region are known for their high English proficiency and cultural values that closely match those in the West.

  Disadvantages. However, even with the governments backing the IT sector, the IT services rates might seem relatively expensive in comparison to the Asia-Pacific region. You can hire professionals for $30-$80 per hour.

  Summary. On the upside, you can get dedicated software development teams of top-notch IT professionals who give you the best value for your money. The outstanding quality and timeliness of the development services make the Total Cost of Ownership (TCO) substantially lower compared to that of inferior-quality services from other regions.

Given the above-mentioned facts, as well as a convenient geographical location and comparatively small time-zone difference, the Eastern European and Caucasus region is becoming an increasingly popular outsourcing destination among the companies that operate in Western Europe, the US, and Canada.

When you are looking to hire a dedicated software development team, it's essential to understand the difference between price and cost. Price is the amount you pay per hour or per week for the dedicated development team. Cost is your total cost of ownership (TCO) that includes all other expenses. These expenses include indirect and hidden costs, including:

• Loss of reputation. Includes costs related to a damaged brand and loss of goodwill.
• Customer dissatisfaction. Includes refunds issued to customers.
• Lost revenue. Costs related to lost opportunity for upselling or getting more customers.
• Increased development time. Costs occurring when software development takes much longer than agreed upon.
• Poor quality. Costs related to subpar quality of the software.
• Increased downtime. Costs related to excessive downtime caused by low-quality development and/or DevOps processes.
• Fines paid to regulators (in regulated industries). Includes fines paid for poor compliance with data protection regulations worldwide:
  • GDPR (General Data Protection Regulation) in the EU
  • DPA (Data Protection Act) in the UK
  • CCPA (California Consumer Privacy Act) in the US
  • PIPEDA (Personal Information Protection and Electronic Documents) in Canada
  • and others in the process of being written into law

You should always estimate the total cost of ownership and risks when you hire a dedicated software development team.

Fixed price model

The total budget on the project, the scope, and the deadlines are approved before development starts and remain unchanged regardless of how much time and expense will be actually spent by the outsourcing vendor.

Fixed price tradeoffs: If the work takes developers less time to complete than what was agreed upon, the client will overpay. On the other hand, if the agreed deadlines are too tight, the outsourcing company will rush the work, which will compromise the quality of the final software product.

Downsides of fixed price: Once all the requirements are agreed upon, the client cannot introduce changes, even if user expectations or market conditions differ.

The fixed price model is more appropriate for short-term projects, where it's easier to calculate all costs upfront correctly, and scope changes are less likely to occur.

Dedicated team model

When you're working with a dedicated development team, the software requirements, scope, and deadlines may change over time. The company providing the dedicated development team can quickly adapt to changes by:

• Reconfiguring the dedicated development team: increasing or decreasing overall team size or the quantity of team members in a given role
  
  
• Dynamically allocating dedicated development team members to different projects within the client's company

Dedicated team vs fixed price model - tradeoffs

Let's compare the dedicated team model with the fixed price model in terms of responsibilities:

[1] A good dedicated software development team vendor will appoint a team leader with a strong technical background, who will act as a business analyst, project manager, or product owner based on the various needs of the project over time.

The dedicated team model and staff augmentation model, though very similar, are quite different when it comes to responsibilities:

[2] Depending on the project needs, good dedicated software development team vendors will assign technically experienced team leads to act as a business analyst, project manager, or product owner.

It's a proven fact that dedicated software development teams have helped many companies achieve remarkable results. Whether you're looking to hire dedicated programmers or considered doing it in the past, you may have encountered some myths or had some fears about the dedicated team collaboration model. Let's look at some of them in-depth.

"All talent must be in-house"

Some people, including VC investors, have an opinion that "all talent must be in-house." However, when reality strikes and you have to ship what you promised to the board (whether your company is public or private), you have to look outside your organization for help. And this is where a dedicated development team can help you deliver on your promises in a productive and cost-efficient way.

"All talent must be in one physical location"

The global situation with COVID-19 has proved that many companies can operate efficiently with the majority of their staff working from home. Because of the many benefits of working remotely (no stress of commuting, no workplace interruptions, more flexibility, and so on), this way of working is likely to stay with us even after the COVID-19 crisis. A dedicated software team is just like your in-house team, where both work remotely.

"We are not good at outsourcing"

An experienced dedicated software development team lead will do this:

1. Understand current processes/ways of working
2. Set up DevOps infrastructure to make it:
   • Easier for engineers at the client company to work
   • Possible for dedicated software development team engineers to work well
3. Suggest improvements to the ways of working and processes

Overall, it's great for the client—it's like having a free consultancy built-in.

"We lack documentation"

Good dedicated software development team leads will help get the information out of the client's subject-matter experts (SME) and write down all their discoveries, in effect, building the client's knowledge base.

"We don't have well-defined chunks of work to give out"

It's dedicated development team leads' responsibility to flesh out the backlog and write up the user stories, tasks, tickets, etc. When a team lead is highly technical (7+ years of programming experience) and does the role of a business analyst (who at other companies is not very technical), this process is MUCH more efficient. When a team lead is not doing a business analyst's work, they are programming or leading programmers. And that's why a good dedicated software team provider always uses highly-technical team leads for business analysis tasks.

Non-Disclosure Agreement (NDA). If your project involves confidential or sensitive information, and you are planning to share it with a dedicated development team, you should execute an NDA with the dedicated software development team company. It is typically done before going into a discussion of the project details. An NDA is a legally binding contract that stipulates what information is considered confidential and requires the contracting parties (the dedicated software team provider and the client) to not disclose confidential information, with substantial financial penalties and other legal remedies for failing to do so.

Statement of Work (SOW). SOW specifies project-specific activities, requirements, timelines, deliverables, standards, acceptance criteria, and other important items pertaining to the work to be performed.

Master Service Agreement (MSA). This agreement regulates the relationship between your company and the dedicated software development team vendor. Typically, an MSA includes generic terms such as service overview, payment terms, dispute resolution, intellectual property ownership, and indemnification.

Once you've selected your dedicated software development team vendor, it's time to start the collaboration. These steps outline a sample of what the process looks like with a reputable vendor.

1. Initial discussion. At this stage, you get acquainted with the dedicated software team vendor, see their portfolio, get to know their areas of expertise, and scrutinize their customer references.
   
   
2. Sign a Non-Disclosure Agreement (NDA), a legally binding agreement that stipulates which information is considered confidential and requires the parties (the client and dedicated software team provider) to not disclose confidential information for a given period of time.
   
   
3. Discovery phase. At this stage, the dedicated software team vendor will work with you on refining the following:
   • Technical roadmap
   • Your business objectives for the next quarter and year
   • Things promised to the leadership team/board of directors
   
   
4. Technical kick-off phase. In this phase, the dedicated software development team vendor aims to understand your ways of working:
   

   To gather the necessary knowledge about your company's workflows and processes, the dedicated development team vendor may require technical access to lower-level and non-production environments, repositories, file systems, and other systems.

   • People
     The dedicated software development team vendor tries to get to know what departments you have, your organization layout, the responsibilities of key staff, and so on. Here are some questions the vendor will try to find answers for:
     • Who's the product owner?
     • What are the different products or systems, and how is ownership/responsibility broken down across department leads or other key staff?
     • Is there a shared team for enterprise architecture and/or where do critical technical decisions get made?
     
     
   • Processes
     Here the dedicated software team vendor tries to understand the following:
     • What environments exist
     • How the environments are created
     • Who has access to the environments
     • How and where artifacts are built
     • Whether there is continuous integration and continuous deployment (CI/CD) in place
     • What the testing process is like
     • Where the testers are located (offshore or co-located with your team)
     
     
   • Technology stack
     The dedicated software team vendor works with architects to find out as much as possible about technical infrastructure:
     • Frontend
     • Backend
     • Which cloud(s) or data centers are used
     • Networking technologies (if applicable)
     • Firewalls and security infrastructure
     • DDoS mitigation layers (if any)
     
     If new systems are going to be built, the dedicated software team vendor starts proposing target architecture.
   
   
5. The dedicated software team vendor gathers strategic and technical requirements.
   
   
6. Sign an MSA and SOW. Good dedicated software development team providers will delay this phase until all the requirements have been gathered.
   
   
7. The dedicated software development team's work begins. Team leads start working with the client's staff. Software engineers begin working on features and bug fixes.
   
   
8. Continuous delivery of your key goals and objectives.

The popularity of IT outsourcing and dedicated software development teams is continually growing due to enormous long-term and short-term benefits, including access to a vaster range of expertise and removing the need for daily management of non-core activities. When done properly, outsourcing helps companies small and large drive growth and create a competitive advantage.

Even though many successful companies hide the fact that they use outsourcing/dedicated software development teams for the core build-out of their products, we've managed to gather a number of inspiring success stories that should help sweep away any doubts about whether or not to hire a dedicated software development team. These companies have relied on outsourcing to fuel their success:

Here are the key takeaways from this article:

• Hiring a dedicated software development team is a cost-efficient way to access engineering talent in any part of the world.
• Dedicated software development teams provide the highest value when hired for long-term projects with a vast scope and fluid requirements.
• An offshore dedicated software team is a cost-efficient alternative to an onshore dedicated software team.
• It's vital to invest enough time in finding a good dedicated software development team. Start by narrowing down your search to a region that is most likely to fit with your goals and objectives (hint: evaluate the total cost of ownership).
• An offshore dedicated team located in Eastern Europe and Caucasus region (Poland, Ukraine or Georgia) is likely to provide high-quality services at reasonable rates.
• Here are the traits of a good dedicated software development team:
  • A good dedicated software team is 100% focused on your projects and initiatives
  • A good dedicated software team tends to improve the existing processes and ways of working
  • Because of a more vulnerable position, a good dedicated software team needs to perform better than your in-house team
  • A good dedicated software development team has no problem working independently. They will ask questions or schedule calls only when needed minimizing distraction for your in-house staff. Alternatively, you can also involve a dedicated software team in your daily standup calls and processes
  • A high-quality dedicated software team company can appoint a team leader with a strong technical background, who will act as a business analyst, project manager, or even a product owner (if required)

You can always contact us if you'd like to explore hiring a dedicated software development team.