Daria Spizheva

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May Ohiri

Software Development Expert

Top 8 Offshore Software Development Models: How to Pick the Exact Right One for You

Updated on June 23, 2023

Scaling

👍 Rating — 4.43 (7 votes)

Development models – also dubbed “engagement models” – for offshore software development refer to the different mechanics of working with remote software developers or partners.

Since developing software is often complex, laying the proper groundwork from the start becomes even more crucial to lucrative and lasting collaboration.

Development models are like the backbone of partnerships – things go awry quickly if they’re not there. And this becomes even more crucial as the stakes get higher and the software platform becomes more and more complicated and robust.

We have witnessed firsthand how these models work, and we have observed all the different ways software companies ingrain them into their operations. One thing is sure: the better companies get at managing the finer points of individual relationships, the higher performing their software development team will be.

And if you are confused about the various offshore software development models, or how to roll out one, you’re not alone. We know how overwhelming it is to sort through a long list of options for the right fit. To help you choose the best model for your specific needs, we’ve laid out a cheat sheet below–enjoy!

Looking for the perfect offshore development partner? TurnKey is your best bet. We help you hire, you call shots.

What are offshore software development models?

An engagement model in offshore software development defines the terms of collaboration between an employer and their software developers (or software development partners if you use outsourcing or offshoring). It lays out both parties’ responsibilities, duties, and payment mode.

You’ll want to select your model carefully as your project’s final outcome is strongly influenced by which model of engagement you choose. Getting this wrong at the outset can lead to a slew of other issues later on in the development cycle.

As a blogger who writes extensively about cost-effective remote software development teams, I have come to realize that in the world of software development, the way you engage with your developers can make or break your project and have a profound impact on the outcomes achieved. Extensive research and personal experience have taught me that a strong foundation is crucial for building sustainable and efficient teams.

If you try to create a duplex on a foundation laid for a studio apartment, you’ll struggle with structural issues and design problems. Or maybe what you tried to build will completely collapse. (In other words, don’t let that happen here!)

That said, it’s important to keep in mind that there’s no one-size-fits-all model of employee engagement in software development. Instead, there are various models that can be used to meet different companies’ demands.

The complexity of your project and your preference for partnerships will determine which engagement model is best for you and your company.

What types of offshore software development models are there?

When it comes to building cost-effective remote software development teams, engagement models play a crucial role in defining the style of work, payment terms, and the level of employee involvement. In this section, I’ll walk you through the distinct engagement models and share the features that set them apart from one another.

#1. The Fixed-Price Model

The fixed price engagement model is one of the most common in the software development industry. Before development begins, the project cost and timeline are determined and agreed upon.

In this case, both parties (the company and the developer) carefully plan out the entire scope of the project ahead of time using specific project requirements, a budget, and estimated duration of engagement.

This model allows you to clearly estimate the total development cost from the beginning. The developer is expected to follow the terms of the agreement, including the budget.

When is the fixed price suitable?

When a clear understanding of objectives and the development requirements are established.
When adopting the waterfall software development methodology. Here the software development cycle is broken down into different stages. The conclusion of one stage leads to the next in a linear, sequential order. (That said, it can also function well with Agile, where the developers break down the project into smaller segments and may charge according to completed milestones.)
When projects have a duration of a few months or less.

Pros and cons of fixed-price

👍 Pros	👎 Cons
Certainty and clarity—you have an idea of the requirements and timeline at the start.	Can be more expensive because you’re fixing costs without leaving room for flexibility once engagement progresses.
Doesn't require close monitoring because the development team already knows what to do.	Establishing the project’s requirements and scope can take a long time, delaying the actual start of the work.
There is clarity on the deliverable, and everyone knows what to expect.	There is little flexibility and no room for modifications.
Being on the same page from day one fosters efficient collaboration and trust with development partners.

#2. The Time and Material Model (T&M)

The T&M model is more flexible than the fixed price model. The developer’s charge is based on expertise and time (most likely on an hourly rate basis).

This model is ideal for continuing development projects where the project scope and requirements are unclear. That is, you know what you want or intend to achieve, but there are no defining pathways or a fixed end date guiding the project.

If you know you need work but are unsure how long it will take or what the work will entail, rather than making a wild guess and ending up locked into an engagement that doesn’t end up fitting the project, you can use the T&M model.

Because it’s negotiable and uses a time-based payment system for the amount of work, tasks, resources, materials, or other expenses incurred during the development process, it allows you the flexibility you need.

With the T&M approach, the client has more say and participates more actively in the project development

Pros and cons of the T&M model

👍 Pros	👎 Cons
Highly flexible—allows for project/budget modification.	Requires more of the client’s attention along the lifetime of the engagement.
Supports the Agile development methodology.	With no end date, there are no assurances that the project will be delivered on schedule.
Allows the client more influence and control.	Disparity between the project's actual costs and the expected estimate.
The project can begin almost immediately.	No framework can be built before the project begins.
Enables continuous development and continuous improvement.	No milestones to mark progress along the way, harder to manage expectations.
More cost-efficient.

When is the T&M model suitable?

When it is not feasible to define the project’s requirement
If there is a strong possibility for modifications during the development process
For long-term projects that can last for several months to a few years
For further development of a Minimal Viable Product (MVP)

#3. The Outsourcing Model

The Outsourcing approach is usually adopted when a company needs to augment its in-house development team. A great short-term solution, outsourcing helps companies flex their teams for a specific period and particular project; the company can end the engagement once the project is complete.

This is also great when you need a developer with a niche talent that you don’t already have on staff. Maybe you need a QA tester or a senior java developer to work on a specific project. Rather than employ the person permanently, you can simply hire one to contribute during the duration of the project.

You are responsible for paying their rate or salary, any associated costs, and a fee to the agency who finds you the talent you need. This model is also called the “Open Book Model” because of its unparalleled cost transparency.

Pros and cons of the Outsourcing model

👍 Pros	👎 Cons
Transparent costs.	Time zone issues if your outsourced talent is far away from where you work.
Faster development start.	There is always a strict termination term. Clients must give 2-3 months' notice before terminating the agency’s services.
Cost-efficient.	Requires more of the client’s attention.
Allows you to manage the talent.

When is the outsourcing model most suitable?

If you need specific expertise to collaborate with your in-house team
When you need a developer for a specific project
When you need a developer within a specific time frame.

#4. The Offshoring model

Offshoring is used by companies who need to create a long-term arm of their business, either for a certain project, a niche product, or just to handle growth without exhausting their core, in-house team. When you hire offshore talent, you have the opportunity to add additional team members for a period of time or to engage specific tech expertise you may be missing at home.

This article offers a brilliant explanation of offshoring and all of its many benefits.

You find and partner with an offshoring agency who conducts staff recruitment and onboarding for you. These new workers join your in-house staff, but they are still (technically) workers for the agency. And they work for a longer period of time, so you get to know them, and they get to know your company, product, customers, and people.

Offshoring with an agency saves you time on recruiting and saves you having to learn about different country’s nuances, language, and skill niches. It also reduces your development costs because generally speaking, the countries you’re hiring from have lower costs of living and salaries are commensurate.

Pros and cons of offshoring teams

👍 Pros	👎 Cons
Reduced development cost: Offshoring offers high quality at lesser rates.	You don’t always know if your talent is only working on your project or if you are their top priority.
Niche and speciality expertise can be found overseas.	Differences in time zone and language barriers can impede workflow.
Better collaboration and efficient work relationships can be built over time.	Culture shock—work styles, communication, sense of urgency, and prioritization can all be misunderstood or lower than expectations.
Clients have greater control and significant involvement.	You can’t be sure if the talent you get is the exact talent you need—maybe you just got who was available.

Does offshoring sound like the solution you need? Worried about culture fit and time zone differences (not to mention how to search the globe to find what you need)? We’ve got the solutions for all these pain points.

Call turnkey.

#5. Yourshoring (aka Advanced Offshoring!)

See that “Cons” list above? Ouch. Want to know how to erase it? Call TurnKey—we’ve been in your shoes and had the same problems. So we created a solution. It’s offshoring, but better, because it’s customized for you and eliminates all the pain points with traditional offshoring.

We call it YOURshoring.

We’ve prioritized, optimized, and strategized so you don’t have to. The inefficiencies are gone when you Yourshore with TurnKey. We:

Source niche talent who fit YOUR need
Ensure they’re dedicated to YOUR projects and timelines
Motivate and inspire them to learn YOUR culture and ways of communication
Incentivize learning advanced English
Create a culture and a career they feel in control of and happy to be part of
Help you integrate your offshore team with your in-house team

At Turnkey, we assemble an offshoring team that is built around your needs. We don’t just provide you with whoever is available. We ensure that you lock in a long-term solution that advances your company goals, scales your product, and vibes with your team and vision—all under budget and on schedule.

When is Yourshoring most suitable?

When you seek ongoing collaboration, clarity, and communication
When the project is long-term and requires complete dedication from A-level talent
When you’re ready to build a remote extension of your development team that can help your product skyrocket

All set to ditch the cons list and go all pro? Yourshoring is the answer. And TurnKey is the way to make it happen. Let’s build a winning dev team together.

Call us today.

Meanwhile, some prominent tech startups have already leveraged Yourshoring. ResNet, a venture-backed company, faced the challenge of building a cutting-edge product platform that could adapt to the ever-evolving needs of their expanding customer base. To overcome this obstacle, they strategically decided to partner with TurnKey to establish a dedicated software development team from scratch. The goal was not only to create the platform but also to ensure its long-term sustainability.

ResNet has achieved remarkable milestones since embarking on this collaborative journey with TurnKey. Over the course of 24 months, they have successfully developed and released more than 800 features, demonstrating their agility and commitment to innovation. Furthermore, the development team has written an impressive 300,000 lines of code, a testament to their expertise and productivity. Perhaps the most remarkable achievement is the 0.0% churn in the development team, indicating high employee satisfaction and a strong bond between ResNet and their dedicated team. This success story stands as a testament to the value of partnering with a trusted and experienced staff augmentation agency like TurnKey to build and retain an exceptional team capable of driving continuous growth and delivering outstanding results.

TurnKey’s boots-on-the-ground presence along with decades of experience building and scaling teams, mitigates against most of the cons people typically associate with offshore development (lack of transparency and high churn), while offering most of the pros (similar if not better quality of talent than in the US at a lower cost). That’s the Yourshore difference.

Ryan Founder & CEO at ResNet

Other offshore management models you should know

I have come across several noteworthy offshore management models that go beyond the commonly discussed approaches, which I thought would be of interest to you:

#1. The Service Level Agreement (SLA)/Milestone-Based Model

The service level agreement outlines the basis of collaboration between a client and the service provider. It establishes the expectations and deliverables according to milestones. Every milestone in this model must be clearly defined with delivery dates.

The two fundamental components of your project service agreement should be management and services. The service segment should outline the services that are offered and those that are not, as well as the roles and responsibilities of each party.

#2. Hybrid model

The hybrid model is a blend of the onshore and offshore engagement methods. It is suitable for clients who require both in-house support and remote services.

#3. Managed services

This model can be helpful for non-technical leaders who are building technical companies, products, and teams (provided you trust who you hire 100%). It gives the vendor complete control over work processes including onboarding the needed talents, providing necessary tools, building infrastructure, ensuring timely delivery, and managing the scope of the project.

We’ve talked about how non-tech leaders can build technical teams before. Learn how “the not-so-technical players” can contribute to software development teams’ success.

#4. High-touch and low-touch onboarding

The high-touch and low-touch onboarding are two distinct collaboration methods that specify the vendor’s role in implementing the SaaS offerings.

High-touch onboarding: This model requires the vendor to play an active client-support role in implementing the service. This can include organizing training, providing a step-by-step guide, and in many cases, ongoing support.
Low-touch onboarding: The low-touch model is more of a self-serve client management culture—the vendor does not need to play an active role. This strategy works best for products that are self-explanatory and user-friendly.

Choosing the right offshore engagement model for your business needs

We know. It’s a lot. If you’re still unsure which method is best for your company (and when), we can help.

The first thing you should know is that there is no one best engagement model. There are only suitable models specific to your business type and demand. So how do you know which is suitable for you? Let’s roll!

The project stage: What stage of development are you? Are you still at the ideation stage? Or you just know what you want but don't have a clear picture of how to go about it? You may need to adopt the fixed-price or T&M engagement model.

Already have a roadmap? Skip straight to Yourshoring, kid.

We got you.

Skillset of your workforce: Do you need a particular skill or expertise to handle a project or product build, and don’t have that niche expertise in house? Yourshoring is awesome for that—specialty talent is abundant overseas (plus with the time zone differences, they work while you sleep!).
Size of your team: Have a smaller team who is already stretched thin, but really need to get a short-term project completed? Outsourcing is helpful here. You hire, they complete the task, and boom—everyone walks away happy. Maybe your team is a blank slate—how are you going to assemble (and pay for) a full team? The Yourshoring experts at TurnKey can lay out the framework, find the exact talent you need, and do it all on budget, on time, and on point.
Your budget size: If you are on a limited budget, Yourshoring is your best bet (we’re sensing a theme here…are you picking up what we’re laying down?). Quality talent at a lower cost is yours with TurnKey, plus you’ll be able to hire the developers you need, when you need them.
Project scope: Are you looking at developing a market-ready product? Is it an ongoing project with a longer development duration (hello, Yourshoring!), or is it a short-term project (great for outsourcing)? The project scope should also be a defining factor in choosing an engagement model.

Summary

When building cost-effective remote software development teams offshore, engagement models play a pivotal role in setting the tone and ensuring a successful working relationship. After researching this topic, I emphasize the importance of getting the engagement model right as it forms the foundation for the entire collaboration. By clearly defining roles, responsibilities, and expectations, businesses can establish a framework that supports effective communication, efficient project execution, and shared objectives. It is crucial to find the most suitable engagement model, and if unsure, outlining your objectives, budget constraints, and project idea can provide valuable guidance in making an informed choice.

Taking the time to assess these factors will help you select an engagement model that aligns with your specific needs, promotes cost-effectiveness, and sets the stage for a fruitful partnership. Companies like TurnKey Labs, with their expertise in building remote software development teams, can assist you in understanding and selecting the most appropriate engagement model to drive project success.

Did we blow your mind? It can be confusing… but the ideal solution is pretty clear to us. If you need a short-term solution, we’ll help direct you. And if you need us, we’re here!

Call TurnKey!

FAQ

☝ What are the different kinds of engagement models?

While there are several engagement models in the software development industry, the four more popular models include: Fixed-Price model, Time and Material model, Outsourcing, and Offshoring/Yourshoring (TurnKey’s optimized solution).

What is meant by the engagement model?

An engagement model in software development defines the terms of collaboration between an employer and the software development partner. It establishes the responsibilities, duties, mode of payment, and level of control for both parties.

Which engagement model is best?

It depends. Outsourcing can be great if you need a specialty talent for a short period of time. Or if your in-house team is slammed and you have another project that has to get done.

Offshoring is great if you are good with saving money, hiring niche expertise, and having people work for you around the clock (who isn’t?!). And of course, Yourshoring is the best long-term solution (it’s offshoring but the way YOU want it).

#Offshoring

June 20, 2023

TurnKey Staffing provides information for general guidance only and does not offer legal, tax, or accounting advice. We encourage you to consult with professional advisors before making any decision or taking any action that may affect your business or legal rights.

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