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Team Extension versus Managed Teams

Which IT outsourcing model to choose?
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Today IT outsourcing has become a way of life not only for large companies but also for startups and small players.

Farming out business functions to a third-party supplier streamlines workflows, provides access to expert assistance, boosts flexibility and even employee well-being. Interestingly, 15% of small businesses outsource to give more free time to their in-house crew. 

There are different ways to divide the workload between an in-house team and an outsourcing supplier. Team extension, the more hands-on method, allows companies to address dynamic business demands by integrating third-party professionals in their internal structures. Managed teams, in contrast, maintain the distinction between the client and the supplier and allow outsourcing more project-related functions. But which one is right for your organization?

What is team extension?

The team extension model allows companies to upgrade their core development squad with the top talent and niche skills. You don’t just hire an external team –  you augment yours by embedding the supplier’s professionals in it.

With team extension, the entire development process, including knowledge and project management, remains under your control. At the same time, the outsourced professionals act as parts of the business. They engage with colleagues as if they were your own employees. This setup is ideal for businesses that cannot keep up with recruitment speed themselves or are experiencing other roadblocks related to human resources. 

What are managed teams?

In contrast to the extended team model, managed teams operate autonomously from the local teams. The relationship between parts is maintained by key decision-making and communication roles, which are established before the collaboration begins. Typically, an outsourced project manager reports to the in-house product owner or a similar position. Their regular exchanges are essential to keeping the tasks and timelines on track.

Team extension versus managed teams: questions to answer

What expertise are you looking for?

Team extension services focus exclusively on niche expertise and building teams around different technologies. It is a go-to solution for companies that lack the skills or resources necessary to progress but want to handle the management aspects of the project. With team extension, you can benefit from knowledgeable and cost-effective IT talent. At the same time, you can maintain control and decision-making in the hands of internal project managers or a CTO. 

Meanwhile, managed teams work as full-fledged support entities, able to cover both development and management processes. The managed teams’ partners are ready to step in any area the client company needs reinforcement. From product and project management to team or performance optimization.

Team formation: how involved do you want to be?

Typically, the team extension model gives more control over the hiring decision. After outlining the requirements, companies can interview candidates from the supplier’s selection and compose the extension of their team by themselves. The setup of managed teams, on the other hand, is determined by the outsourcing partner. 

While the primary factors to forming a successful extended team are the developer’s experience and expertise, companies should not overlook the candidates’ soft skills. Working hand-in-hand with your in-house staff, external professionals must be agile and resonate with the state of mind of people in your organization. The two parties can become truly integrated only in a healthy collaborative environment.

How much are you willing to delegate?

Although extended team members are capable of assisting in large-scale projects as a whole, it is more common to delegate out smaller tasks throughout different project stages or short-term undertakings to them. If you are building an MVP or simply need to hit the project’s finish line in time, the reinforcement can step in at a moment’s notice. In the meantime, your in-house team can concentrate on the core processes, keeping the critical knowledge ownership and decision-making power inside the organization. 

Managed teams are often hired for complex, high-volume projects from conception to completion or in cases when an outsourced project can be separated from its core. Externalizing technology tracing and process autonomy means giving up the control you can maintain with team extension. Because of that, establishing strong accountability through efficient communication is paramount. 

What are your planning capabilities?

Kicking off collaboration with a managed team requires considerably more preparation than employing the extended team model. For starters, a detailed brief is essential to achieve a mutual understanding of timelines, budgets, and other requirements. Not being able to foresee the development’s process and provide the supplier’s party with thorough documentation puts organizations at risk of inefficiency or even scope creep.

The extended team’s interoperability and proximity to your organization make it more flexible when it comes to planning and change. For example, if your product development process involves a large amount of user feedback, it is easier to strategize its implementation and communicate the dynamic changes to an extended team, ready to take up even spontaneous tasks. 

How distributed is your own team?

While managed teams usually provide their services remotely, the extended team members work together, on-site at the customer’s location or at least nearby. Looking at our best team extension practices, we can say that relationships intermediated by emails are less constructive than the ones established by working in the same place. Therefore, we highly encourage everyone to start the collaboration by bringing the team together to smoothen out the differences. If your own team is highly distributed, you might need some extra effort to benefit from the extended team model. 

A short checklist: which model is right for you?

Choose Team Extension if:

  • You want to be an active participant in the formation of the outsourced team.
  • You are looking for reinforcement when it comes to ad-hoc tasks and growing backlog. Sometimes, on a very short notice.
  • Your project is critical to the organization, so the core knowledge, process ownership, and decision making power must remain internal.

Choose a Managed Team if:

  • You need to outsource both IT and management functions.
  • You can provide a thorough project brief clearly covering timelines and requirements.
  • Your own team is distributed, so you are looking for remote collaboration.
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