The Complete CTO Guide to IT Team Engagement Models

Written By

Anthony Neto


In the pre-COVID era, on-site team engagement was the most popular working model for a lot of businesses. However, during the pandemic, remote work emerged as a viable solution for businesses to cope with social distancing guidelines that were in place at the time. The outcome of this shift is the multiple engagement models organizations utilize today.

The IT world is a dynamic ecosystem that’s constantly evolving to accommodate the dynamic needs of businesses. This evolution is evident in the rise of multiple team engagement models designed to improve process efficiency and give companies the agility they need to succeed.

An engagement model in the context of the IT industry is a framework that governs how a vendor provides Software Development Services. 

This article discusses the different types of IT team engagement models, their pros and cons, and how to pick the right one for your business.

Table of Contents

What is IT Staff Augmentation?

What is an IT engagement model?
      Extended IT Team Model

      Dedicated IT Team Model

     Fixed Price Model

     Time and Material model

How to determine the best IT engagement model for your Software Development needs


What is IT Staff Augmentation? 

Staff Augmentation is a hiring strategy that involves outsourcing work to resources hired via a talent sourcing company. This allows clients to hire top-tier talent without the hassle of the traditional recruitment process

While most IT companies leverage staff augmentation to fill temporary roles, complete short-term projects, and extend existing teams,  this strategy can also be used for long-term commitments to support internal teams.  

Although remote work is not an entirely new trend, it gained more prominence during the and after COVID-19 pandemic. Many organizations today use offshore or nearshore staffing strategies to build their remote Software Development teams. These IT outsourcing strategies have several benefits, including:

  • Reducing the headaches of traditional recruitment processes
  • Access to a larger talent pool
  • Reduced Development costs

In recent years, nearshore staff augmentation has become widely adopted by US companies because it allows CTOs, Technical Recruiters, and Hiring Managers to find resources within the same timezones and geographical location to counter challenges related to collaboration, communication, language, and cultural barriers associated with Offshore outsourcing. 

What is an IT Engagement Model?

An IT engagement model refers to a set of guidelines that determine how a company collaborates with a technology partner or service provider to meet its software talent resourcing needs.

Characteristically, IT engagement models define the terms of engagement in relation to work delivery, payment schedules, and how the hired resource fits into the existing team structure. As such, there are various kinds of team engagement models in the software industry each suited for different types of workloads and client budgets. 

1. Extended IT Team Model

Under the extended team engagement model (ETM), the nearshore resources work as part of your existing in-house team. This model is useful when you already have an in-house core development team ready to take up a project but is lacking talent with a particular set of skills, such as experience with a specific Development language or Cloud platform.  


  • Access to a larger talent pool.
  • Saves time and costs incurred during the hiring process by leveraging nearshore Software Engineers.
  • Team management remains entirely in the hands of the outsourcing company.


  • Transferring knowledge to a remote team can be a lengthy process.
  • Remote Developers may take time to adjust to the organization's structure and working practices.

When to use:

  • When specific experts are required urgently for an ongoing project.
  • There is no intention to make any changes to the in-house team structure.

2. Dedicated IT Team Model

A dedicated IT team engagement model is similar to the extended model, with the only difference being that the entire team is made up of outsourced talent provided by a technology partner. This model is mostly used for long-term projects requiring experts from various domains such as Development, Architecture Design, and Database Design, to name a few.


  • Lower Development costs due to working with remote nearshore teams.
  • Management is easier since the model involves dedicated managers, and the reporting structure remains the same across the entire team.
  • You have direct control over team priorities and working methods.


  • Since this model is employed for high-profile, long-term projects, it requires thorough research, seamless communication, and strict accountability. All of these are challenging to maintain simultaneously.
  • Clients have to share confidential data with the dedicated team, which may require additional data safety measures such as Non-Disclosure Agreements (NDAs).

When to use:

  • When starting a long-term project from scratch and you do not have the required expertise in-house.
  • You need to expedite the development phase for a faster time to market for your product.
  • You wish to delegate the responsibility of managing a team.

3. Fixed Price Model

As the name suggested, the fixed-price IT team engagement model primarily defines the agreed-upon payment plan between you and the nearshore talent partner. 

Under this model, the entire cost of the project is agreed upon at the beginning and may be paid upfront, upon completion, or distributed over various milestones in the course of the Software Development project depending on the terms set. 


  • Since the cost is pre-decided, clients are rarely at risk of going over the budget.
  • The fixed price model requires extensive planning to communicate requirements and costs. This ensures that the deliverables are high quality and meet client expectations.
  • The thorough research also means that teams can jump straight into Development and waste less time on clarifications.


  • Once requirements and budget are decided, there is less flexibility for changing the project's scope.
  • The planning and research stage is long and tiring, and if not done correctly, can lead to poor-quality work.
  • A long planning window means a longer time to market.

When to Use

  • When project requirements and deliverables are crystal clear.
  • You have a limited software development budget.
  • Usually suited for small, short-term projects with little or no support required.

Check out our detailed software development cost guide to help you plan effectively for your next project. 

4. Time & Material Model

The time and material IT team engagement model is quite the opposite of the fixed-price model. This engagement model calculates all Development costs based on the time spent. It is the most widely used IT team engagement model as it provides flexibility to the client and due compensation to the Developers.


  • You have the leverage to change the project’s scope at the expense of increased Development time and cost.
  • It fits perfectly into the Agile working methodology, ensuring a smooth Software Development process and team management.
  • It accommodates the possibility of support and constant development in the future.  


  • The per-hour billing can sometimes incentivize developers to delay their work unnecessarily.
  • Clients are always at risk of going over the budget.
  • The open-ended nature of the project and lack of clarity on deliverables can lead to poor development practices and lowered motivation.

When to use

  • The time and material model suits prolonged, complicated projects with evolving end goals.
  • Ideal for scenarios where project milestones or deliverables are flexible during the development phase.
  • The time and material model is great for clients who envision constant development of their product in the far future.

How to Determine the Best IT Team Engagement Model for Your Software Development Needs

An appropriate IT team engagement model is essential as it directly impacts the quality of your software deliverables and the costs involved. There is no one-shoe-fits-all model, so you need to understand your requirements and conduct proper research before making a decision.

Here are a few key points for CTOs to consider before picking the preferred IT team engagement model for your organization: 

  • Nature of the project: A small-scale, short-term project can best deliver under the fixed price engagement model. It keeps the development cost in check and ensures clear communication of requirements. On the other hand, a large, complex project may be better delivered under the time and material model and provide flexibility for increased development and innovation.

  • State of the existing development team: Matching the project requirements with the available in-house specialists reveals whether a dedicated team is required or the ETM would suffice.

  • Project state and scope: CTOs should consider whether the project is currently in development or is to be built from the ground up. Furthermore, whether the project will require further development after an initial completion.

  • Client Budget: Your budget is probably the most significant deciding factor for any business conundrum. If the organization can spare additional money, the time and material model is suited to ensure quality Development. Otherwise, you may have to stick with the fixed price model and benefit from the cost of management and development flexibility.


Staff augmentation is a valuable tool for IT organizations of all sizes. By leveraging the expertise of technology partners and remote talent, businesses can quickly and cost-effectively fill gaps in their teams, and complete projects on time and within budget, in addition to achieving their business goals.

Choosing the right software team engagement model is critical to the success of any nearshore Software Development project. For this reason, efficient Software Development and delivery can only be achieved by understanding the different models and their pros and cons and matching them up with your unique business requirements. Some of key factors to consider in this context include project nature, state and scope, in-house expertise, and budget flexibility.

You may also be interested in:

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The Future of IT Staff Augmentation: 4 Key Trends

Nearshore Staff Augmentation: Top 4 Benefits for Businesses

Cloud Cost Management: Azure Cost Optimization Best Practices

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