Collaborating For Success: Understanding Custom Software Development Engagement Models

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Collaborating For Success: Understanding Custom Software Development Engagement Models
Understand software development engagement models to leverage their capabilities to build a good relationship with your offshore software development company.

Cost, time, and resources define the success of any software development project. However, not all custom software development companies in USA can optimize all three without outsourcing. Hence, they must leverage the services of an offshore software development company. This technique is a popular means of achieving software development excellence without investing in additional resources or expertise. Further, implementing software development engagement models help strengthen relationships between the outsourced and the outsourcing companies.

What Are Software Development Engagement Models?

Software development has witnessed a steep increase in competition. To retain clients, software developers offer a variety of software development engagement models. However, companies must understand their pros and cons to maximize results. Selecting a suitable model helps assure quality and maintain transparency throughout the SDLC. 

Defining software development engagement models

They are guidelines that describe the boundaries of control, responsibilities, and collaboration between two software development companies. Both participants also discuss and finalize terms related to:


  • Project costs
  • Commitments of both parties
  • Duration of collaboration
  • Tasks involved
  • Associated costs 
  • Other obligations, if any, like security


These terms, conditions, and guidelines apply to all steps involved in offshore and nearshore software development. However, companies must thoroughly understand each model to maximize the utility of available software development engagement models.  

Benefits of engagement model for software development

Let us begin by understanding the benefits of implementing the right engagement model. They include:


  • Defining the number and quality of resources required helps predict project costs accurately
  • Documenting every aspect of the project helps eliminate hidden costs
  • Offers flexibility to opt for a different engagement model if project requirements change midway
  • Software development companies can afford a better tech stack by outsourcing to an offshore software development company
  • Helps clients gain a competitive edge by offering quality software at affordable pricing
  • Provides greater control to outsourcing software development companies
  • Enhanced communication between the team members of the participating companies
  • Can resolve disputes arising during the project duration
  • Makes the software development cycle smooth and seamless


But to capitalize on these benefits, software development companies must choose the right engagement model. The right model will help foster a synergy between the participating companies by ensuring a common vision and shared understanding. They also help streamline the software development process and improve quality. The ultimate result is software that aligns perfectly with the client’s demands and expectations. 


However, every software development company in New York must implement an NDA before outsourcing. A Non-Disclosure Agreement or NDA prevents the outsourced company from divulging project details. This enhances the security of the developing softwares. 

Engagement Models Every Custom Software Development Company Can Leverage

Many engagement models are present in the digital landscape. Hence, selecting the right one might prove a hassle for a software development company in NYC. Standard engagement models that help scale the project scope include

Fixed-Price Models

Perfect for projects with a well-defined project scope. The time and cost estimates get fixed at the initiation of the project based on its scope. Defining milestones along with pre-determined delivery times helps in agile software development. However, this model offers no scope for editing, appending, or deleting any feature or functionality. 


  • Minimized risks
  • Fixed costs and delivery schedules
  • Precise estimations of project deliverables
  • No scope for hidden or extra costs


  • Lack of flexibility and adaptability
  • Risk of financial strain


This model is not meant for long-term complex projects. However, a nearshore software development company must opt for this model for projects with limited budgets and time constraints. They can also select this for projects with clear deadlines and accurate technical documents.

Time And Material Models

As the name suggests, billing gets done based on the actual manhours spent on the project. Software companies also include the cost incurred in building or buying software and other equipment required for project completion. Applying hourly rates along with pre-defined delivery milestones increases the flexibility of this model. Hence, a custom software development company must use this model for projects with variable requirements.


  • Low software development costs
  • Workflow agility with transparent billing
  • Flexible in terms of time, resources, and deliverables
  • Reduced escalation risks


  • Limited cost predictability
  • Project cost overruns are common
  • Risk of disputes arising over billed hours


Additionally, budget tracking and management is a complex procedure in this model. Hence, developers must choose this model only when a project lacks documentation and clarity.

Milestone-Based Models

Here, software developers declare project milestones at the beginning of the project. The associated overall costs also get divided into small segments. After the developers achieve a milestone, the costs incurred for the same get paid.  Then, the offshore software development company moves to the next milestone. 


  • Very beneficial for clients
  • Staggered payment 
  • Prompt delivery of milestones
  • Better time to market


  • Lacks clarity of timelines and resource requirements
  • Possibility of the budget getting exceeded


Also known as the Service Level Agreement or SLA model, the milestone-based model is ideal for process-oriented organizations. But, this model works best if there is clarity on the milestones and the role and responsibilities of the resources. 

Dedicated Team Models

This is the flagship model for companies offering offshore custom software development services. Most outsourcing software development companies select this engagement model. Here, dedicated technical experts and software specialists work on a project. Billing is monthly and based on the work hours they contribute. Individual team members get billed based on their average working hours. Therefore, choosing this model over the other software development engagement models proves financially lucrative. 


  • Offers total control over the team
  • Software companies can select their team
  • Flexibility to scale up and down
  • Edit, add, or change features easily
  • Access to a high-quality talent pool


  • Resource cost remains fixed
  • Underutilization of resources
  • Managing team dynamics can be challenging


A custom software development company with a well-defined project scope must opt for this model. Complex projects requiring specialized technical talent must also be executed using this software engagement model.

Offshore Development Models

The best software development company in USA will mostly endorse this engagement model. Here, the outsourced offshore software development company works like an extension of the outsourcing company. These companies work remotely in different locations. 


This model is popular because it helps improve the quality of software developed and ensures its completion within time. 


  • Operational cost-effectiveness
  • Flexibility in resource scale-up
  • Difference in time zones ensures more work hours
  • Easy access to a skilled pool of dedicated talent
  • Complete control over the outsourced team


  • Security may be a cause of concern
  • Language might present a barrier
  • Different work cultures might affect work output


Yet, in this model, the advantages far outweigh the disadvantages. Digital security techniques ensuring safe data exchange between countries also help resolve security concerns.


A software developer can also create project-specific engagement models in software development. But like the popular software development models mentioned above, the participating companies must endorse it. 

In Conclusion

Software development engagement models help facilitate a better relationship between the participating companies. Additionally, it enables an offshore software development company to gain more clients. The choice of engagement model depends on the budget, project delivery timelines, and business demands. Hence, software development companies must ensure the selection of an engagement model that is best suited for the project.

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