Software Outsourcing Models: 4 Most Popular Outsourcing Models to Choose

Software Outsourcing Models

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Software Outsourcing is an arrangement whereby a company contracts a software development outsourcing company to develop software for its use. In the modern world of globalization, outsourcing software development is the most ideal step for a company that needs specific software to optimize its operations. There are four types of software outsourcing models, they include:

1. Time and Material Contracts

The unique feature of a time and material contract is that the customer pays the software developer per hour and per material used in the custom software development. This type of contract is usually used when the type of software project to be embarked upon is so large that the time within which such project is to be delivered cannot be estimated.

2. Fixed Price Contracts

Another type of software development contract is the fixed price contract. The unique feature of this type of software outsourcing contract is that the customer pays a fixed one-time price for the entire project to be handled by the software developer. This type of contract is very favorable to the company or customer requiring the software development service as they only have to pay an agreed price irrespective of the time or material that would be expended on the project by the software developer. This type of contract is usually used when the amount of time and material to be used for a project can be accurately estimated.

3. Revenue Share Contracts

A revenue share contract is a type of software development contract that is used in the case of a software that is developed for commercial purposes. This is when the company requiring the software to be developed intends to sell it to others for profit. Under this circumstance, the software developer can reach an agreement with the customer in which no fees would be charged upfront however, both the client and the software developer would share equally in the proceeds.

4. Hybrid Contracts

An Hybrid Contract is a type of software outsourcing contract that combines two of the above specified features. Take for instance, when a client pays a fixed price for a software project wherein once the project is completed both the client and software developer are expected to share revenue is a typical example of a hybrid contract.



1. Software outsourcing saves cost

One of the incredible advantages of outsourcing software development is that it saves costs. When software development is outsourced to another company, it saves the company requiring the services the extra cost that would have been incurred if such software were developed by amateur in-house staff. The implication of outsourcing software development is that a company does not need to incur costs of hiring, training, and maintaining expert employees for short-term projects.

2. It saves time

Another benefit of software outsourcing is that it saves more time. When expert software developers handle software development projects, they usually achieve the desired results faster than inexperienced in-house staffs. The incredible benefit of having software development outsourced is that the software developer works on developing the software round the clock while allowing in-house staffs to concentrate on other activities thereby saving the client’s time.

3. Enhances Accuracy and Efficiency

When software development is outsourced to experts, it enhances accuracy and efficiency which may not be obtainable when such projects are left in the hands of in-house staffs that may not have the required skill level and competence for such projects. Software development that are outsourced are more efficient and more accurate when it comes to performing the functions for which they were developed.

4. Reduced Risk

When a client company contracts out a software development project, such a client company reduces the risk that can arise when a software development project goes wrong. One of such risks is compliance. When software development projects are outsourced, it reduces the risk of non-compliance with industry standards in the development of software. Substantial non-compliance is a situation that may put a client company at risk in the form of exposure to sanctions such as fines and business restriction. More-so, software projects that are outsourced would generally be suitable for the purpose for which they were developed compared to a software that was developed in-house that may suffer from inefficiencies that may compromise the very reason for which it was made.

Above things make software development outsourcing become the unstoppable trend!

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