8 Offshore Software Development Models You Should Know Too (Aside from Build-Operate-Transfer)

Last Updated on 2024-10-11

Offshore software development has become crucial for companies looking to scale their operations, reduce costs, and access global talent. 

As the demand for skilled developers continues to outpace local supply in many regions, businesses are increasingly turning to offshore solutions. 

This article explores various offshore development models, helping you understand which approach suits your organization’s needs best.

8 Alternative Offshore Software Development Models

Each of these models offers unique advantages and comes with its own set of challenges. The choice depends on factors such as the company’s size, budget, long-term strategy, desired level of control, and specific project requirements.

So check out the eight other offshore software development models aside from the build-operate-transfer model.

1. Joint Venture

Structure	Two companies form a new, separate entity
Ownership	Shared between partners, often 50-50 or other agreed-upon ratios
Advantages	• Combines strengths of both companies • Shares risks and investmentsPotentially easier market entry in some countries
Challenges	• Cultural and operational differences can cause conflicts • Decision-making may be slower due to shared control
Best Fit	Companies looking for long-term partnerships and local market expertise

2. Captive Center

Structure	A wholly-owned subsidiary in an offshore location
Ownership	100% owned by the parent company
Advantages	• Full control over operations and intellectual property • Dedicated team aligned with company culture • Potential tax benefits in some countries
Challenges	• High initial investment and ongoing management costs • Requires a deep understanding of local laws and regulations
Best Fit	Large companies with long-term offshore plans and sufficient resources

3. Managed Services

Structure	The external provider manages specific IT functions or processes
Ownership	The service provider owns the resources, and the client owns the output
Advantages	• Predictable costs through fixed-price contracts • Access to specialized expertise • Allows focus on core business functions
Challenges	• Less control over day-to-day operations • Potential for vendor lock-in
Best Fit	Companies looking to outsource non-core IT functions

4. Staff Augmentation

Structure	Temporary hiring of offshore talent through a provider
Ownership	The client directs work, provider handles HR and administration
Advantages	• Quickly scale team size up or down • Flexibility to choose specific skills needed • Integration with existing teams
Challenges	• Potential for high turnover • May lack deep integration with company culture
Best Fit	Short-term projects or handling workload spikes

5. Project-Based Outsourcing

Structure	Specific projects or tasks outsourced to an external team
Ownership	The client owns the project output, and the provider owns the process
Advantages	• Clear deliverables and timelines • Access to specialized skills for specific projects • Minimal long-term commitment
Challenges	• Less control over the development process • Potential quality issues if not managed properly
Best Fit	Well-defined, self-contained projects

6. Dedicated Development Team

Structure	A team provided by the vendor works exclusively for the client
Ownership	The client directs work, provider handles team management
Advantages	• Deep integration with client’s processes and cultureScalable and flexible • More control than traditional outsourcing
Challenges	• Requires active management from the client • Potential for miscommunication in remote settings
Best Fit	Long-term projects requiring consistent team involvement

7. Build-Operate-Lease-Transfer (BOLT)

Structure	Similar to BOT, but with an added lease period
Ownership	Transitions from provider to client over time
Advantages	• Allows for a longer evaluation period before a transfer • Reduces initial financial burden on the client • Provides more time for knowledge transfer
Challenges	• More complex contractual arrangements • Potential for misaligned incentives during the lease period
Best Fit	Companies wanting a gradual transition to full ownership

8. Virtual Captive

Structure	Offshore center set up with help from a local partner
Ownership	The client maintains control, partner provides local support
Advantages	• Combines control of the captive center with local partner’s expertise • Lower setup and operational costs than full captive • Easier market entry and compliance management
Challenges	• Balancing control with partner’s involvement • Potential conflicts in long-term strategy alignment
Best Fit	Companies wanting captive-like control without full investment

It’s also worth noting that companies often combine these models or transition between them as their needs evolve.

Comparing the Models

What’s the best model that fits your needs? It’s tough to decide, and doing a hasty one can present more issues for your business. 

So here are some points to consider to help you make an informed decision.

• Cost: Initial investment vs. long-term savings
• Goals: Short-term needs vs. long-term strategic goals
• Control: Level of oversight and management required
• Scalability: Ability to adjust team size and skills
• Risk: Intellectual property protection and operational risks
• Knowledge Retention: How to maintain expertise within your organization
• IP Conditions: Intellectual property concerns and data security requirements

Choosing the Right Model

This table provides a high-level comparison. The actual implementation of each model can vary based on specific agreements and circumstances. 

You should consider your unique needs, resources, and long-term strategy when choosing a model.

MODEL	OWNERSHIP	INITIAL COST	LONG-TERM COST	CONTROL LEVEL	SCALABILITY	TIME TO SETUP	BEST FIT
Build-Operate-Transfer (BOT)	Transfers to client	High	Medium	High (after transfer)	High	Long	Companies seeking eventual full control
Joint Venture (JV)	Shared	Medium-High	Medium	Shared	Medium	Medium	Long-term partnerships, market entry
Captive Center	Full client ownership	Very High	High	Very High	High	Long	Large companies with resources
Managed Services	Provider-owned	Low	Medium-High	Low	Medium	Short	Outsourcing non-core functions
Staff Augmentation	Client directs work	Low	Variable	Medium	Very High	Very Short	Short-term needs, workload spikes
Project-Based Outsourcing	Client owns output	Low	Variable	Low-Medium	Low	Short	Well-defined, self-contained projects
Dedicated Development Team	Client directs work	Low-Medium	Medium	Medium-High	High	Short-Medium	Long-term projects needing integration
Build-Operate-Lease-Transfer (BOLT)	Gradual transfer to client	Medium	Medium-High	Increasing over time	High	Long	Gradual transition to ownership
Virtual Captive	Client control, partner support	Medium	Medium	High	Medium-High	Medium	Control with lower investment

Why Staff Augmentation Stands Out Among All BOT Models

Staff augmentation has emerged as a preferred model for many companies engaging in offshore software development. It offers a unique blend of flexibility, cost-effectiveness, and control. 

Here’s why this model often outshines the alternatives:

1. Unparalleled Flexibility—Staff augmentation allows companies to scale their teams up or down rapidly in response to changing project needs.
2. Cost-Effective Solution—Unlike setting up a captive center or entering a joint venture, staff augmentation requires minimal upfront investment.
3. Access to Global Talent Pool—This model opens doors to a vast, worldwide talent pool.
4. Seamless Integration with Existing Teams—Augmented staff can work directly with in-house teams, fostering knowledge transfer and cultural exchange.
5. Maintained Control Over—Projects Unlike full outsourcing models, staff augmentation allows companies to retain direct oversight of their augmented team members.
6. Reduced HR and Administrative Burden—The staffing partner handles recruitment, payroll, and other administrative tasks, allowing the client company to focus on core business and development activities.
7. Ideal for Long-term and Short-term Needs—Whether it’s a short-term project requiring specialized skills or a long-term need for additional development capacity, staff augmentation can accommodate both scenarios effectively.
8. Lower Risk than Other Models—Compared to models like BOT or captive centers, staff augmentation presents lower financial and operational risks.
9. Faster Time-to-Market—By quickly onboarding skilled professionals, companies can accelerate their development cycles and bring products to market faster.
10. Cultural and Time Zone Advantages—Staff augmentation allows companies to choose offshore partners in regions that offer the best balance of skills, cultural compatibility, and convenient time zone overlap.

Why Choose Full Scale’s Staff Augmentation Solutions

For startups and software development teams looking to leverage offshore development, Full Scale offers a compelling solution. Here’s why:

• Expertise in Scaling: Full Scale specializes in helping startups and small to medium-sized businesses scale their development teams quickly and efficiently.
• Vetted Talent Pool: They provide access to pre-screened, experienced developers, ensuring high-quality additions to your team.
• Flexible Engagement Models: Full Scale offers various collaboration models, including dedicated teams and staff augmentation, allowing you to choose the best fit for your needs.
• Cultural Alignment: They focus on matching not just skills but also cultural fit, ensuring smooth integration with your existing team.
• Transparent Pricing: Full Scale provides clear, predictable pricing without hidden costs, crucial for startups managing tight budgets.
• Scalability: As your needs grow or change, Full Scale can quickly adjust your team size and composition.
• Intellectual Property Protection: They prioritize your IP rights, ensuring all work product belongs to your company.
• Ongoing Support: Full Scale offers continuous management and support, allowing you to focus on your core business while they handle the operational aspects of your offshore team.
• Technology Stack Diversity: With expertise across various technologies, Full Scale can support a wide range of development needs.
• Proven Track Record: They have successfully partnered with numerous startups and established companies, demonstrating their ability to deliver results.

Choosing the right offshore software development model is crucial for the success of your projects and long-term growth. 

By understanding the various models available and carefully considering your company’s specific needs, you can make an informed decision that aligns with your strategic goals.

Whether you opt for a Build-Operate-Transfer model, staff augmentation, or another development approach, the key is to find a partner who can support your vision and help you navigate the complexities of offshore development. 

For many startups and software teams, Full Scale offers an attractive option, combining flexibility, expertise, and a focus on scaling businesses effectively.

Explore Our Staff Augmentation Services