Top 5 Engagement Models for Software Development: Which One Should You Choose?

Engagement models for software development

The three cornerstones of each project are cost, time, and resources – human and infrastructure, and determining them all at once in a trustworthy way is the most crucial thing for your software project. Every software development company offers a set of engagement model for software development. These models bring with them multiple aspects of functionality, pricing, and client-involvement flexibility.

Each software development model has its own peculiarities and is suited to certain contexts. Any business must thus take a stock of multiple parameters before finalizing an engagement model for its project.

Businesses can in no case afford to overlook the process of choosing the best software development engagement model and simply concentrate on the finished product, which leads them to escalated costs.

Last but not the least, before you actually step to get the hang of different types of engagement models in software development, you must know what an engagement model refers to, and which model suits which situation. Read further to get familiarized with these concepts, so as to make yourself capable of shortlisting the best software development engagement model for your upcoming project.

What is a software development engagement model?

A software development engagement model serves as a means of agreement that specifies the rules, scope, and degree of control for the collaboration between the client business and the software development company. The engagement model helps in outlining the commitments, tasks, costs, durations, and duties for all of the phases involved in developing a solution.

Additionally, a software development model clearly specifies each team member’s role in the project, the tasks that are given to him, the deadline for doing each assignment, and the manner in which the client will pay the IT firm. Therefore, when looking for a software development company to engage technical and commercial specialists for any software project, picking an appropriate model must be among the company’s top priorities.

What are the various types of engagement models for software development?

Each software development company offers a set of engagement models for software development. Not having a prior idea of them can land you in the hassles of choosing the right one for your software development project. Understanding your business needs is critical to identifying the best model, and so to assist you here, we are offering a thorough discussion on the engagement models in software development.

Fixed-price model

The fixed price model is based on the idea of a predetermined project cost. It works best when you have clearly defined project requirements for the solution you want to develop. It is characterized by strict terms and conditions.

In this software development engagement model, at the time of contract signing, the project’s scope and costs are first agreed upon. This agreement is followed during the project execution. The model takes into account precise estimates of the work to be executed.

Effectively, the project costs are tightly related to the clearly specified project deliverables, which are frequently linked to several payment stages during the entire life of the project. Additionally, this approach enables you to clearly track development and lower project risk.

It’s likely that the scope will vary significantly while the project is still in progress. In such scenarios, the software development engagement model uses a change management procedure to accommodate modifications with consent from both parties.

Let’s look at the pros and cons of this software development engagement model


  • The project scope, feature requirements, and launch date are all thoroughly defined and mutually agreed upon with clients.
  • It is not necessary for clients to be involved in project management.
  • This is a perfect software development engagement model for small, and medium-sized firms, the model is preferred
  • In an ideal set-up, the model ensures on-time delivery within the planned budget.


  • There is no flexibility for last-minute adjustments without incurring additional costs.
  • It is not a flexible software development engagement model.

Time and material model

Time and Material is a software development engagement model which is employed when project estimates cannot be obtained. So, this model helps in accommodating changes in the project during its course of execution. However, the hourly price is agreed upon prior to the beginning of the project. The cost for each IT resource is determined and the total number of hours worked is considered.

This software development engagement model is suitable for dynamic projects, like projects where the scope can change anytime and experimental projects. The capability to adjust and change work methods at any time without going too far or incurring additional costs is the main characteristic of this model. When the client is looking for external or dedicated resources, then this engagement model is the best choice.

The model easily adapts itself to the demands of the project in terms of how to allocate time and expertise. The time and material model, as opposed to the fixed price model, enables projects to start up faster and caters to evolving project needs in a more transparent manner.

Let’s look at the model’s pros and cons:


  • Offers flexibility to add or remove resources as the project requires
  • Large-scale projects can be easily driven using this model
  • Well-suited to maintenance projects
  • Offers great flexibility and gives greater control to the client


  • Client has to be involved
  • It is not suitable for projects which have strict timelines
  • Project cost can cross the predetermined budget
  • Susceptible to delays that can be caused by sudden change requests

Dedicated team model

Dedicated team is an engagement model for software development that comes in handy when clients want to outsource or build an offshore team.

To establish a full-fledged offshore development center, software development businesses offer the dedicated team model. In this instance, the software development company serves as both an outsourced provider and an HR firm.

The client selects the specialists from the list provided by the software development company that possesses the necessary expertise. Each team member will be of the highest caliber and follows the best work ethic. So, the resources bring both technical and soft skills to the table.

This software development engagement model adapts easily to business culture, processes, best practices, and technology with ease and integrates smoothly with your current structures. The team grows more connected and its members become more dedicated to the project’s success as long as cooperation continues.

The concept is ideal for ongoing collaboration on large-scale, complicated projects. Both Agile and Waterfall techniques can be used with it, yet it still maintains a great deal of flexibility.

Here are the pros and cons of the Dedicated team model:


  • Clients get access to highly experienced developers. The ready availability of expertise helps your project move along quickly.
  • Clients have the option to allocate resources based on their requirements, establish deadlines, and modify the specifications as needed.
  • Clients can assess the project development in real time and possess complete control of the process.
  • By selecting the appropriate resource team and infrastructure design, the clients can avail huge savings.


  • Your personal engagement is essential for the project’s success, therefore you must plan ahead and understand the development process.
  • To guarantee that the team produces its best work, the client must have a clear understanding of the project’s objectives.

Milestone billing model

In the milestone billing software development engagement model, the client is billed in a series of payments. The payment is initiated at the accomplishment of a “milestone,” or a predetermined checkpoint that shows progress is being achieved. By agreeing on milestone payments with your client, you can gradually pay the software development company as the project progresses.

In this software development engagement model type, minor cost segments are added to the overall cost, and milestones are set during the first project phase. As mentioned, funds are released when a milestone is reached.

For instance, John, a business client, agrees to engage with the milestone billing. $6500 is what we quote for the entire project. He pays $3250 after our team successfully achieves the first project milestone. The remaining $3250 will be paid after the delivery of the next milestone.

In this case, there are two clearly defined goals for completing the project. The total fees of $6500 are not paid after the completion of the project, rather they are paid when each milestone is reached. So, the cost of the project remains unchanged.

Let’s look at the pros and cons of milestone billing:


  • Good for clients who prefer to be in charge and have greater influence over the process
  • It offers great transparency as everything is dictated by a milestone.
  • Good for companies that require cash flow before the job is finished
  • It is suitable for large-scale projects with many components, each of which is a sub-project.


  • Because the client must approve milestones, some service providers really don’t trust this model and won’t use it.
  • The model proves time-consuming as a delay in the payment will prevent the software development company from working on the next milestone.

Staff Augmentation model (Extended Team model)

In the staff augmentation model, highly qualified people are hired on a contract basis to meet the software development needs of the business. Simply put, this software development engagement model provides you with highly skilled workers that assist you to achieve all of your project goals.

Staff augmentation enables organizations to expand their software development teams. As a result, many businesses frequently use this software development engagement model. Here, the technical and non-technical teams collaborate with the client’s in-house staff.

Before going for staff augmentation, you must understand the process flow and assess the team’s expertise and experience. It gives you an opportunity to decide whether to partner with a software development company for augmenting staff.

Let’s look at the pros and cons of this software development engagement model:


  • Flexibility to hire developers at the time of need, for example during the holiday season.
  • Staff augmentation allows hiring specialists in a short span of time. This is especially useful as specialists are hard to find locally and when the recruitment process can take months.
  • You do not need to worry about costs like office rental, bills, and equipment, so it is cheaper to outsource as compared to building an in-house team.


  • Whenever a new team member joins the organization, the team’s procedures and monitoring tools have to be augmented. Both full-time employees and part-time workers have to go through the same process.
  • Since you’re paying highly talented individuals to join your team and augment it from the outside, boosting your capacity could result in higher labor expenditures if it takes longer than you anticipated.

Drawing comparison amongst the engagement models in software development

Here, we have summarized all models against various parameters, to simplify for you the process of identifying the most suitable software development engagement model.

Parameter Fixed-price Time and Material model Dedicated Team Milestone Billing Staff Augmentation
Payment Method Decided prior to the beginning of the project The payment is based on the number of hours worked Payment is made on a monthly basis Payment is based on achieving predetermined  milestones Payment is made on a periodic basis (monthly, weekly, etc.)
Budget Is predetermined Cannot be predicted Can be predicted Is predetermined Depends on the resources hired
Flexibility No Yes Yes Yes Yes
Project-size suitability Small and Medium Large-scale Large-scale Large-scale Large-scale
Requirements Defined Can evolve Can evolve Defined Can evolve
Best Suitable Projects in which the business is clear about the objectives Project scope and duration are unpredictable at the beginning of the project. The business demands long-term support and maximum control over the project You want to mitigate scope creep to the highest possible extent and see the project as a combination of sub-projects. You are looking to fill the gaps in your talent pool and extend your team if your in-house team lacks certain skill sets.

How to choose an engagement model for software development project

Choosing a software development engagement model involves considering the following factors:

What does your project type and scope speak about?

To better understand the requirements of the stakeholders, the first step is to create the project scope and categorize the items that are within your scope and out of your scope. Establishing the model is the next important step before choosing the right software development engagement model. It’s also important to think about the type of software you’ll need and to be certain of the requirements you’ve gathered.

What is your budget?

Understanding the required budget after compiling all the relevant company requirements is the next essential step. Visit the websites of various software development companies to seek advice and learn about the software development engagement models they offer and if they fit your budget. You must also try to search for freelancers, and for that, go through various websites to check what are their periodic (hourly, weekly, monthly, as well as milestone) rates.

Everyone desires flexibility

Flexibility is a crucial component of any engagement model, in addition to the money, schedule, and resources. It is taken into account to guarantee that client changes can be made at any moment and that the agile technique is used for better collaboration.

Time-to-market is crucial

Evaluate every software development engagement model against the desired time-to-market. Each project comes with its own set of complexities, so ensuring that a model doesn’t account for delayed deployment and impact the time-to-market.

Management competency cannot be ignored

Management must be competent enough to maintain constant control over the project’s development and to effectively communicate with the team about future plans. Software project management is an important criterion when choosing a software development engagement model.

Confidently choose a software development engagement model

Here are the two questions that, earlier, might have been making you look for the right answers:

  • Which are the best engagement and pricing models to hire software developers and agencies?
  • What engagement model is best for software project development?

However, by now, you might have developed enough confidence to go with the right software development engagement model. There are various engagement models in software development, however, we have drawn the curtain and discussed here the ones that are mostly used when outsourcing software development.

Finoit can assist you in selecting the best engagement model for software development that fits the specifics of your project. By contextually leveraging engagement models, we have offered expertise to clients across industries. In case, if you are willing to practically understand how engagement models in software development work, consider getting in touch with our team of experts.

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