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Choosing between software consultancy and turnkey deliveries - Which one is right for your project?

11.11.2020 14:27

There are two main delivery models for software development services. Turnkey deliveries are built-to-order projects where the software supplier independently builds a software solution according to predefined specifications and delivers it to the customer. In a software consultancy model, the software development partner’s experts work with the customer’s management and experts.

Both models have their merits. Choosing between the two depends on various things such as the customer company’s own capabilities, resources and business strategy.

Consultancy accumulates knowledge

Many industries have a long tradition of outsourcing software development. However, as the world becomes more digital, the role of software is changing. Software is becoming an increasingly integral part of many business operations and a key factor for many companies’ competitive advantage. Today, more and more companies also employ their own software development teams.

When choosing between a turnkey delivery or a software consultancy, you should consider your core business and how the alternatives support your company’s strategy. Does the software project involve developing the very heart of your business? Or are you building a complementary business enabler that you want to get up and running quickly? Or is it both: at the heart of your strategy but want to accelerate your journey? 

Having external software consultants working in close cooperation with your team allows you to build strategic in-house knowledge and skills. Your own experts get to learn the latest technological best practices and the consultants’ business insights from various fields applied to your business. This way, the knowledge accumulates within your company - something that might not happen in a turnkey delivery model.

Extra hands vs. independent teams

In the traditional software consultancy model, a partner provides a number of specialists that work alongside the customer’s own development team. This provides more capacity and competences resulting in the ability to do more in less time.

Today, hiring entire consultancy teams is becoming popular, too. A team can work independently on a specific part of a larger project. An independent team often results in less management overhead but might provide less opportunities for knowledge transfer between different teams.

In any case, the consultancy model requires that the customer company has the resources to lead the work by prioritizing development efforts and maintaining an overall vision of the product being built. This typically means business leadership in the form of a product owner.


TURNKEY DELIVERIES

CONSULTANCY MODEL
  • Good for projects outside your core business.
  • Requires less resources and involvement from the customer company.
  • Fixed pricing and project scope makes change management challenging.
  • Suitable for well-known solutions and productized offering
  • For custom solutions often more expensive than other models
  • Accumulates knowledge within your organization.
  • Requires capacity to lead the consultancy teams.
  • Gives more flexibility and room for changes
  • No risk-buffer baked in pricing
  • Builds on undocumented trust which is a difficult notion in B2B
  • Unorthodox way of purchasing for traditional industrial company purchasing departments

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Good to know about pricing

Turnkey deliveries typically come with a fixed price tag for the entire project. In the consultancy model, the customer essentially hires expertise that generates costs as the project goes on.

Complex custom software projects are difficult to plan and prone to changes along the way. That is why turnkey projects often come with a high upfront price tag - the software supplier prepares for potential surprises along the way. Should the customer require warranties, the customer needs to be involved in designing the acceptance criterias incurring effort on the customer side. 

A third model between these two models is known as a design-to-cost model. Think of it through analogy: the furniture company IKEA decides first the price of a new chair model. This price tag then becomes one of the design criteria while designing the chair. The initial decision on price tag is not a random number - there is a reasonable amount of expertise used when settling to a figure (both market and manufacturing related). 

This design-to-cost model often provides an ideal balance between estimating up front and taking advantage of the agile development merits. In this model the cost is estimated with reasonable effort in advance, and the resulting budget is taken as a planning criteria in planning meetings just as all other factors. Product owners, software developers, and architects become cost-aware. 

In all three models, proper project planning and estimation is important but the depth and effort spent on them varies.

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