How to choose an engagement model for offshore development?

In this article we want to break down such topic as a choosing right model for offshore software development cooperation. We believe that this will help you to get a clear view of what to choose as a perfect match to your business.

Offshore development has become a popular trend for many businesses over the last years. Outsourced development can give you a wide range of possibilities to control your expenses.

However, choosing a right engagement model for outsourced software development is as important as choosing a right partner.

There are three common pricing models in the offshore development:

Fixed price model

Time & Material model

Milestone model

Outsourced Software Development Payment Models

Of course, there are lots of different variations of offshore software development cooperation models out there. But,  in this article we want to share with you the pros and cons of the most popular models. As a company with 10+ years of web & software offshore development experience, we believe that our appointments will help you to define which type of outsourced cooperation will be a perfect fit for your business.

Fixed price development

Fixed price development is a contract based model which depends on the work estimations. In this model the timeline, scope and requirements are needed to be defined first. Fixed rates can allow customers to pay the pre-agreed price for the final development  product. Because of its strictly defined details, there’s no need in additional supervision and all the project management work can be simply passed to a project manager. It is also good for projects with limited deadlines and budgets. But, despite the fact that it’s clear and simple, it provides you less flexibility rather than the other engagement models. The cost of this model includes a lot of potential risks rather the project will be finished or not. Miscommunication is also one of the potential risks. There’s always a possibility that some misunderstandings, because of some unclarified moments, can lead you to  unsatisfying results in the end. This model will be suitable for you if you have a short-term project with clear goals and deadlines.

Fixed Price Outsourced development benefits

Time and material development

Time and material outsourced development engagement model involves regular payments for completed work. This model will make your development process more gradual and continuous. The payment can be hourly, weekly or biweekly depending on your contractor’s requirements. It can be great for flexible and agile development workflow.  Also, the transparency of this model allows you to monitor the progress of the development flow. However, uncertain deadlines can lead you to the overdued project. Also, with this type of engagement you’ll be needed to manage every step of the development process. This model will be a good fit for you if your project does require a lot of flexibility and the scope of work is unset.

Time & material offshore software development engagement model

Milestone-driven development

Milestone based outsourced software development billing model is used when the contractor needs to be paid pre-defined milestone for a scope of work which was performed over a certain period of time. The amount of the payment is defined by the spent time and achieved progress. The customer pays for actual functionality which was delivered and approved by him. The main disadvantage of a milestone offshore development engagement model is unfixed prices and long disputes. Each type of functionality which can be defined during the project can cost you a different of time and amount of payment. Also, arguing on the quality of the delivered value can take a decent amount of time. The milestone development model is best when you have established business relationships between your company and the development agency.

Milestone-driven outsourced software development engagement model key benefits

Defining the most suitable engagement model for your business

To define the most suitable model for offshore development, you must clearly understand the requirements of your project. You should make your final decision depending on how much flexibility and the quality of the relationships with the contractor are needed for your project. We believe that theese two key appointments will help you to sort everything out and make a final decision on choosing the right engagement model for outsourced software development.

If you still have some questions about pricing models in the IT industry, you can feel free to contact us or estimate project here.  Our representatives will get in touch with you as soon as possible and help you to define the most suitable choice.  As a company with 10+ years of software & web development experience we’ve had to deal with different kinds of companies, startups and engagement models. We are committed to providing you with the high-level service of outsourced web, software or mobile development that we can deliver. We continually assess our performance, the evolving needs of IT-business in general and our client base in particular, then adapt and improve our processes/performance accordingly to ensure we continue to deliver a service that meets or exceeds the needs and expectations of our clients and partners.

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