Top 8 Offshore Software Development Models: How to Pick the Exact Right One for You
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!
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.
How you choose to engage with your employees builds your foundation. And we all know, your foundation affects whatever you’re trying to build on it. 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?
Engagement models can be distinguished by the style of work, the terms and conditions under which employees are paid, and the degree to which they are involved. Let’s look at these engagement models and what sets them apart.
#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.
Pros and cons of fixed-price
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.
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
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.
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
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.
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.
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
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.
#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
Other offshore management models you should know
Beyond the four popular models we have discussed, there are other important engagement models you may find interesting:
#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.
#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.
- 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.
Engagement models set the tone for any business relationship. They establish roles, responsibilities and are crucial to the successful outcome of a project. Getting this right should be your top priority because it forms the basis for the entire working relationship. And if you’re unsure of the most suitable model, outline your objective, budget, and idea. It will help you make an appropriate choice.
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!
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).
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.
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).