software development outsourcing types and models - CodeNinja Inc.

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Software Development Outsourcing Types & Models – Best Explained

In this blog post, We will cover Different Software Development Outsourcing Types and Different Types of Outsourcing Models, Along with comparisons between offshore development vs staff augmentation models, time and material vs fixed price vs project-based software development outsourcing contracts, and US-based onshore development vs offshore development from emerging markets.

Once you decide on outsourcing software development, you ask, ‘where to outsource?’ ‘what are the best locations to outsource?’ and ‘how to outsource?’

Related Article: What is Software Development Outsourcing? Basics, Comparison, Cost

Over the period of time, we’ve realized that there is a huge confusion between software outsourcing models and types. And, many don’t even know ideal destinations for outsourcing software development services.

CEOs and top management teams of small to enterprise levels acknowledge the fact that globalization is the most critical challenge and it was difficult during the past decade to identify work strategies and to choose which countries to do business with.

The US-based market is competitive and costly whereas emerging market resources are reasonable and deliver quality code at half the price and sometimes quarter the price.

Different Types of Software Development Outsourcing Models

There are Different types of outsourcing models but each one is different and holds different working principles. Some common ones are:

Dedicated Development Team Outsourcing Model

A team of developers is dedicated to working on a specific project for the duration of the project. This can be a good option for companies that have a large, complex project that requires a lot of coordination and collaboration among team members.

IT Staff Augmentation Outsourcing Model

Hiring additional IT personnel to support an organization’s existing staff. This can be done for various reasons, such as to provide additional expertise or fulfill a skillset gap or handle an increase in workload. The augmented staff can work onsite at the organization’s facilities or remotely, depending on the organization’s needs.

Related Article: What is IT Staff Augmentation and Its Working Principles

Time and Materials Outsourcing Model

The client pay for the actual time and materials used by the development team. This can be a good option for projects with well-defined requirements and a fixed budget.

Fixed Price Outsourcing Model

The client and the development team agree on a fixed price for the project, and the team is responsible for delivering the project within that budget. This can be a good option for projects with clear requirements and a one-fixed timeline.

Let’s Get into Software Development Outsourcing Types:

There are 4 Types of Outsourcing which are:

1. Offshore outsourcing

This is when a company contracts with a software development team in another country to handle all or part of the development process. This can be a cost-effective way to access a global pool of talent and can allow companies to scale their development efforts quickly.

Related Article: Offshoring Software Development – When to Outsource and How to Manage?

2. Onshore Outsourcing

This is similar to offshore outsourcing, but in this case, the software development team is located within the same country as the company that is outsourcing the work. This can be a good option for companies that want to maintain close communication and control over the development process, but still want to access specialized skills or expertise that may not be available in-house.

3. Nearshore Outsourcing

This is a variation of offshore outsourcing where the development team is located in a nearby country, typically one that shares a similar time zone or language. This can be a good option for companies that want to take advantage of lower labor costs in another country, but still want to maintain relatively close communication and collaboration with the development team.

4. Hybrid Outsourcing:

This is when a company combines elements of offshore, onshore, and nearshore outsourcing to create a customized solution that meets their specific needs. For example, a company may use a team of offshore developers for some parts of the project, while using onshore or nearshore developers for other parts.

Overall, the best outsourcing model for a particular company will depend on a variety of factors, including the specific needs of the project, the company’s budget and timeline, and the availability of talent and resources in different locations.

Offshore Development vs Staff Augmentation

Offshore Software development and IT staff augmentation are two different approaches to using external resources to help with software development. In offshore development, a client outsources the entire software development process to a team of developers who work exclusively on the project. This approach is often used when a client needs a large team of developers with specialized skills, or when the project requires a significant amount of development work.

In contrast, staff augmentation is a more flexible approach that involves adding individual developers or teams to an existing in-house development team. This approach is often used when a client needs to add specific skills or expertise to their team, or when they need additional resources to help with a specific project.

Offshore Dedicated DevelopmentStaff Augmentation
An entire software development project is outsourced to an external team.Adding individual developers to the existing team in-house in order to deliver the project on time.
A dedicated team works exclusively on one single project and won’t work alongside any other project.Augmented staff can be deployed on various projects, as it depends on the availability and requirements provided to the outsourcing company.
Ideal for long-term complex projects where requirements evolve.Ideal for short-term projects with tight timelines.
Often hired to deliver a complete project starting from zero.Often resources are hired with specialized skillsets or to fill certain skillset gaps.
The model supports long-term project development and offers flexibility and scalability.The model supports businesses in achieving urgent deadlines and speeds up the development lifecycle.
Offshore Development vs staff Augmentation – CodeNinja Inc.

Software Development Outsourcing Pricing Models

In software development Outsourcing, there are several outsourcing contracts pricing models that companies can use to charge for their software development outsourcing services.

These include:

  • Time and Material Contract
  • Fixed Price Contract
  • project-based Pricing Contract
Time and Material ContractFixed Price ContractProject-based Contract
Time and material pricing means that the client is charged based on the amount of time and materials that the development team spends on the project.Fixed price pricing means that the client and the development team agree on a set price for the project before work begins.Project-based pricing is a hybrid of the two models, where the development team provides the client with a fixed price for the project, but also includes some flexibility for unforeseen work or changes in scope.
This model is best suited for projects that are complex and have a lot of unknowns, as it allows for flexibility and allows the client to pay for only the work that is actually done.
This model is best suited for projects with well-defined requirements and a clear scope, as it provides the client with predictability and allows them to budget for the project more accurately.
This model is best suited for projects that have some uncertainty, but where the overall scope and requirements are relatively clear.
Supports agility and flexibility.Does not support agility what’s fixed in the requirements, needs to be done.  Minor changes in the project scope can be done.  
Ideal for long-term complex projects.Ideal for short-term projects.Ideal for short- and long-term projects both.
Time and material vs fixed price vs project-based – CodeNinja Inc.

US-based Onshore Development vs Development from Emerging Markets

There are a few key differences between development in the United States and in emerging markets. One core differentiating factor is the level of economic development. In general, the United States is a highly developed country with a strong economy and advanced infrastructure,

while many emerging markets are still in the process of developing their economies and building up their infrastructure. This can impact the types of development projects that are undertaken and the resources available for those projects.

US-Based Onshore Development

The United States is a leading country in the field of software development, with a large number of highly trained and experienced software developers and a thriving technology industry. There are many advantages to using US-based software development companies, such as access to cutting-edge technology and expertise, as well as a strong focus on quality and reliability.

The US also has a well-established legal and regulatory framework for the technology industry, which can provide added protection and security for companies and organizations working on software development projects. However, it is worth noting that software development in the US can be relatively expensive compared to some other countries.
The average cost of software development in the US is $100-450. (Source: Qubit Labs)

Emerging Markets Software Development Cost

The cost of software development in emerging markets can vary depending on a number of factors, such as the specific country, the type of project, and the level of experience and expertise required. In general,

However, it is likely that software development in emerging markets will be less expensive than in more developed countries, due to factors such as lower labor costs and a large pool of available talent. This can make it an attractive option for companies and organizations looking to develop software on a budget.

However, it is important to keep in mind that cost should not be the only factor considered when choosing a location for software development, as quality and reliability are also important.
The average cost of software development in emerging markets is $25-199. (Source: Qubit Labs)

How CodeNinja Differs From Others in Software Development Outsourcing?

  • You, get improved exposure to the untapped global talent of highly educated and trained professionals.
  • You can hire experienced talent as per your project requirement, experience, and time zone without any compromise on code quality.
  • CodeNinja offshore outsourcing can lower your in-house development and operation costs from anywhere, ranging from 30% to 60%.
  • Our offshore developers consider asset protection first priority and therefore offer higher risk management. Trusted developers/outsourcing company, already working with international clients.
  • We’re specialized in the cutting-edge technology stack and pretty much cover all the latest technologies, frameworks, and tools. We have a lot of expertise in diverse industries.


It’s a highly proven fact now that software outsourcing saves time and effort given the fact that you opt for the right software development outsourcing model and its types. More or less, software projects can be segregated based on outsourcing models and types. However, if your project is unique, you can always ask for consultation and head in the right direction.

CodeNinja is a premium destination for software development outsourcing as we’re into this business for the last couple of years. Not sure? Set up a call and get a business quotation for free.

Lets Schedule a call and see what we can do for each other.

Lets make it happen, together.

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