IT Engagement Model – A Complete Guide to Buyers

IT engagement model – ultimate ways to outsource software development

Business automation enables enterprises to enhance productivity and engage with prospective clients in an efficient way. While the first step is that you hire developers from a renowned IT company, it is not uncommon to have lots of technology initiatives that observe overrunning of the costs. Ultimately, the result is a big crack in the entire planning which, at times, is irreparable.

The estimation of software development costs is a daunting task as companies need to consider a myriad of factors such as the total number of manhours (and also manpower) required, user requirements, app facilities, app features, IT infrastructure, cost of developers, cost of coding and licensing software, and the like.

What is the IT engagement or hiring-developers model?

Simply put, an information technology company has several hiring models to engage software programmers or developers. The engagement models in the IT industry are the guidelines that outline the business bond between the service providers and clients.

These models set responsibilities, roles, rules, tasks, payment terms, and regulations along with milestones on both sides. Such factors are finely described in service-level agreements (SLAs).

While for new businesspersons it’s always a question of how to hire remote developers, for seasoned entrepreneurs, engagement models in the IT industry are the best ways to hire software developers for their projects. In other words, it is the budget or expense of the final product including the entire software development life cycle and the time it takes.

Why do engagement models exist?

Business deals cracked verbally don’t carry any value. While it may still work for a very small project and local service provider, if the project is bigger and enterprise-level, it is mandatory to carry out the business deals in a standard way.

That said, top software development company draft various engagement models as per the project types and budgets of their clients. The ultimate aim is to provide the best software application development services at the best prices -whether a small, medium-sized, or large project, the software company shall offer different engagement models so that buyers don’t turn down the deal.

Types of software developer hiring models

In the pursuit of flawless business operations, you must understand the engagement models to hire software developers. Each model has its own advantages and features that suit a particular project type and size. In other words, development companies offer a suitable model to their clients depending on the project size, type, and budget. Chiefly, there are two types of engagement models –

  • In-house development
  • Outsourcing

In-house development

As some call it insourcing, in-house development refers to software development that is carried out in your own business organization, within the firm’s premises, or to be precise, on the floor. You don’t get any external resources or assistance for in-house development. You use your own team of programmers and developers (they are your employees, your staff) to build the digital product.

However, it is possible to handpick the resources you have on the floor. You can also allot specific tasks to a specific person or software development team. If needed, you may have to appoint a leader or a manager who will supervise the entire process of the software development life cycle and ensure that the project is not digressing from its business objectives.


Outsourcing, on the other hand, is getting software development in other places (especially in countries where development costs are much lower). Outsourcing has offered excellent opportunities to both parties i.e., buyers and service providers. Especially in the IT sector, outsourcing has been the rage due to its low price and yet no compromise on quality.

There are two main methods to outsource software development projects –

  • Hire freelance software developers
  • Hire a software development company

Hire a freelancer to build software

Ample freelancing platforms allow software developers and programmers to portray their work and showcase their profiles for free or featured with some special subscriptions or fees. But, all in all, freelancers to build customized software tools are available on the Internet. One can hire a freelance software developer directly or from a general portal.

Pros of hiring freelance software developers

There are some benefits when you hire a freelance software developer individually or from a reliable portal.

  • Cheap prices, negotiations possible
  • Pick talent from all across the world
  • You can hire a different expert for different fields or niche
  • You can choose to hire freelancers for specific task-based job

Cons of hiring freelance software developers

On the other hand, market experts opine that there are also disadvantages to hiring freelance software engineers or programmers.

  • They are individuals, hence there is no guarantee of the genuineness
  • Though they might sign legal documents, it’s difficult to catch or reach an individual
  • Fake profiles, portfolios, and case studies are possible
  • It is not uncommon to find a non-responsible freelancer
  • Accountability issues
  • Freelancers generally work on multiple projects so a lack of dedication is possible
  • Deadline issues
  • Communication problems due to different time zone or no other person available as a mediator

Hire a renowned software development company

According to GrandViewResearch, the global size of the IT outsourcing market was valued at over USD 550 billion in 2020 contributing a whopping share of nearly 80% of the total market. The IT service market, in other words, thrives on outsourcing IT projects to the best software development companies in the world.

Types of hiring other companies

The best part of hiring a software development company that is out of your premises is that you don’t need to have hassle about the process of SDLC model as it is taken care of by the software development service provider that you have hired for your project requirements. There are mainly three types of hiring other companies for your software development projects.

  • Nearshore outsourcing
  • Offshore outsourcing
  • Onshore outsourcing

Nearshore outsourcing

Nearshore outsourcing simply means that you outsource software development project to a software company that is near to you. This type of outsourcing is quite specific to your business requirements. Enterprises that require software development services close to their business organization or homes but not necessarily within the same locality are called nearshore services.

The primary cause for this outsourcing is that the dedicated software development teams are available in the same time zone. Even further, businesses that prefer nearshoring also want to meet their teams as and when possible to discuss the process and progress of the project. Nearshore outsourcing enables the buyers to meet all the responsible members for brainstorming and consultations within a short time and regularly.

In addition, another cogent reason for outsourcing to a nearshore software development company is to have development teams from the same culture and traditions. This makes a valid reason especially when the software building requires a local touch or understanding of local users.

Offshore outsourcing

When projects don’t require regular in-person meetings or consultations and when different time zones don’t matter much, the offshoring or offshore outsourcing model works the best for businesses. In this model, the buyer can hire any renowned offshore software development company from any corner of the world and, therefore, one can expect to pull the best talents from the global market.

Many offshore companies offer the cream or the choicest remote software developers for hire to work on your project dedicatedly. Here, in this case, the buyers are allowed to choose the candidates from the floor as they have their resumes and experience details.

Even further, if needed, clients can also choose different experts from different departments; for instance, the best-skilled one from the web design team, an efficient PHP developer, and the best React Native app developer can be hired together to make a website and mobile app from the same offshore software development service providing company.

In all cases, it is not uncommon to arrange emails and virtual meetings in a case where mutual agreement or discussion is needed for clarity.

Onshore outsourcing

The third and least preferred option is onshore outsourcing or onshoring wherein if outsourcing happens within the country (preferably the same city?), it is known as onshore outsourcing. This is applicable in cases where the businesses don’t prefer developing digital or software products with their own teams, but still want the software development project to be carried out under their supervision and within the vicinity of their jurisdiction.

There are some professionals who also label onshore outsourcing when experts visit your premises or stay at your office to develop software products using your infrastructure and resources -what they bring is their expertise.

All three types of outsourcing models i.e., onshore outsourcing, offshore outsourcing, and nearshore outsourcing are adapted to build quality software solutions that fulfill business objectives in defined steps. While each model has its own pros and cons, it utterly depends on the project type, purpose, and size. There is no harm in choosing any model, but you can always seek the top software development company in any case.

Turn your idea into a tangible solution.

The hiring models offered by a software development company

Another set of software development engagement models depends on various factors such as the time software development takes the number of software developers needed (or the teams), and the size of the project. While buyers can always choose the best model that suits their project, you can always ask the software development outsourcing companies to help you out.

Hiring model

Fixed model

What is a fixed hiring model?

The fixed model is defined according to the time and cost estimates which are again based on the project scope defined by the buyer. This type of project engagement model has defined milestones and the time to deliver them. The specification of the project is defined and the scope is fixed with no chance to change, add, or edit any feature or functionalities whatsoever. The cost and time are fixed and so are the project deliverables.

How does the fixed model work?

When the buyer comes up with RFP documentation that contains specific project scope and defined project objectives, the idea and the concept along with the requirements are then sent to the service provider i.e., the software development company. The business and technology specialists at the software company evaluate and work on the feasibility of the project. Ultimately, they carry out the time and cost estimation that is as accurate as possible. The quote is then sent to the client and upon approval, the project kick-starts.

What are the business benefits of a fixed hiring model?

A fixed hiring model comes with some benefits to business owners. Though the model is not suitable for most projects and is not recommended for long-term and complex project that would require multiple changes while being built, there are still some cases where the fixed model is proposed to buyers. Here are a few benefits –

  • Minimized risk
  • No extra expenses
  • Fixed time and cost
  • Clear estimation

When is the fixed hiring model the best choice?

You should consider getting a fixed model for your project requirement in these circumstances –

  • The project scope is defined
  • Business objectives are specified and clear
  • No change is expected in features and project scope
  • Clear deadlines
  • Limited budget
  • Technical documents are proper and in place

Time and material model

What is the time and material hiring model?

The time and material model considers the billing based on actual hours spent on software development (manhours that are put into building software products) and the real cost of tools, materials, and equipment used in building a software. Hence, you will be billed utterly for the human hours used exclusively for your project. The hourly rates are applied and all tasks are clearly delivered as per the milestones defined and decided. This model helps you remain flexible in changing the project requirements with time and resources.

How do the time and material engagement model work?

The time and material model is said to work excellently in developing projects on standard technologies such as Ruby on Rails, PHP, .Net, and so on. Especially, when you require to scale up the team for a specific period (generally 3 months) and you don’t have detailed specifications, to begin with, this model suits the best. The size of the team can be changed as per the needs of the work.

What are the business benefits of the time and material model for hiring?

This type of hiring model is a bit higher than the fixed model and hence comes with some more benefits. Here are the benefits that you can expect with the T&M model –

  • Low cost of software development
  • Agility of workflow
  • Flexibility in time and deliverables
  • Reduced risk of escalation
  • Flexibility to change or scale the team
  • Budget-friendly project development
  • Clear billing – pay as per the use of resources

When is the time and material model the best choice?

One should consider the Time & Material engagement model of hiring for the following circumstances –

  • No detailed project documentation
  • Insufficient documents and clarity
  • The project needs constantly evolve or change
  • Gradual progress is expected
  • Deadlines are not fixed or expected
  • Unsure about project scope and features (may change at any time)

Dedicated developer model

What is a dedicated developer or team model for hiring?

If you are confused about when to hire remote developers for a complex project, look no further and go for the dedicated model. The dedicated team model is an offshore software development company’s flagship model. In other words, a dedicated hiring model for developers is the top hiring model that most businesses prefer for their projects.

In this hiring model, specialists and experts from particular technologies become an exclusive part of your project and they work only on it. The billing happens based on the hourly rates of software developers involved in the project. You’ll be billed monthly and for every team member considering the average working hours. Though this is a standard billing type and cycle, different offshore software development companies may have different billing patterns. You need to clarify it before you hire a dedicated developer team.

How does the dedicated team engagement model work?

You need to provide a general idea of your project with preferably the expectations you have from the digital product at the end. The project requirements are roughly said and the service providers shall work on each of your concerns. Software development companies put their hearts and souls into the project by deploying the best resources at the beginning who are experts in the niche or type of project.

Once the feasibility is carried out by the experts at the offshore software development company, the buyers (you) are asked to choose the best talent they want on the floor. Alternatively, you can also have faith in your IT partner and ask them to put their best programmers and designers to do the job. The dedicated team model shall have a supervisor or a team lead and a project manager who serves as one point of contact for you.

What are the business benefits of a dedicated team hiring model?

Several benefits come with a dedicated team engagement model as it is considered the top model for any outsourcing project. You can easily manage a remote development team when you have a dedicated group of tech experts exclusively working on your project.

  • Total control over the team; in fact, you can build your own team
  • Scaling up and down the team is possible
  • No need to observe and worry about the product development process
  • Flexibility to add, edit, and remove features of the software
  • You get the cream of the talents on the floor

When is the dedicated team model the best choice?

The dedicated model gives you the best choice to get ultimate talent working on your project, exclusively on your project. You can build an effective software development team as per your choice of remote developers. Here are some circumstances you must consider before going for this model –

  • The project is well defined
  • All the project requirements are clear and, on paper
  • When you want to control the entire team
  • When you have some technical knowledge and want to drive the project your way
  • When the project is big, complex, and shouldn’t be having any flaw
  • When intense research is required, and market impact shall affect your project

Let’s schedule a call to discuss right engagement model for you!

In a nutshell

Here is a quick view of all the models to refer to. You can decide yourself or can take the help of your IT partner in choosing the model that suits your project and budget.

Particulars Fixed Price Model Time and Material Dedicated Team
Project scope Small Medium and large Large
Project budget and timeframe Fixed Flexible Flexible
Control over the process Little Significant Complete
Requirements Defined Evolving Evolving
Methodology Waterfall Agile Agile/Waterfall

Choose the model wisely, and you are good to go for your final product.

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