Business Models

So you have this brilliant business idea which you know has a niche customer base. Now whats important is to get the idea into reality. Its an internet related business so you will require a good development team who can get your idea to realization. If its your first business then getting together a development team will be tough. If you, yourself is not very technical then having a development team in-house does not make sense. As the saying goes, do the best and outsource the rest. Now you need to go to any of the search engines like, Google and Bing to get your potential vendors for development of the web application. You do a thorough research and finally make a firm decision on choosing the company with whom you are comfortable to work with. One important thing that you need to keep in mind after choosing the vendor is in which business model you will engage with the vendor. No body understands your business better than you do, hence, you should have a proper specs document. Be as detailed as possible in your requirements so that the vendor finds no ambiguity and can give you a proper effort estimation.

There are 2 ways of engaging a vendor for your dream project. One is the Fixed Price Model. This is a time tested model but you should have proper specs to go with this model. If your specs are very vague then it becomes very difficult for the vendor to estimate the effort required. This also leads to tension between yourself and the vendor in the UAT stages and it leads to change management and you might end up paying more than what you had budgeted for. One must understand that the vendor company is running a business and when they see very vague requirements then they buffer up their effort and increase their cost but if you have a very well detailed specs document then you can get the estimate in a very scientific way and each module and sub modules will be properly estimated.

If you do not have a proper specs document then its best to first hire a technical writer whom you can explain your concept and who can then prepare the specs document for you. You need to be very careful on this and you should have a thorough read of this document before passing this on to the development team.

If you think that the system is so big that its too tough to estimate and it will evolve over time, then one good option is to hire a team virtually from the vendor. These are known as Full Time Equivalents and you can discuss with the vendor's representative and finalize on the team size. When you decide on the Full Time Equivalent option, you must check the vendor's contract terms properly. There could be a lot of hidden things which the vendor's representative might not tell you. One thing that I can tell you is that in Full Time Equivalent model you become the project manager and you can control the team as you wish, so monitoring and reporting structure should be properly laid out. If you do not do this then you might lose out on non-productive man hours and since you have chosen a FTE model you cannot catch hold of the vendor for mismanagement since you are the manager of the team.

So think properly and lay down all the pros and cons of the 2 models discussed above, before getting into an engagement with your chosen vendor.

Good Luck!