Confusing pricing is one of the most common reasons offshore engagements go wrong. Understanding the three common models helps you pick the one that matches how your project actually works.
Monthly retainer (dedicated team model)
You pay a fixed monthly fee per engineer, which bundles salary, office, HR, and management overhead. The engineer works exclusively on your roadmap.
Best for:
- Ongoing product development lasting 3+ months
- Teams that want predictable monthly cost
- Situations where priorities shift frequently
Watch for: minimum commitment periods and what happens if you want to reduce headcount.
Hourly billing
You pay for hours actually worked, often with a cap or estimate per task.
Best for:
- Short audits, code reviews, or one-off fixes
- Highly variable workload where a full-time engineer would sit idle
Watch for: hourly rates that look cheap but come with slow, metered output, and vague scope leading to hour creep.
Fixed price projects
You agree on a scope and price upfront, and the vendor owns delivery to that spec.
Best for:
- Well-defined projects with a clear, unlikely-to-change scope
- Buyers who want cost certainty over flexibility
Watch for: change requests turning into expensive add-ons, and quality shortcuts when the vendor is incentivized to finish fast.
How to choose
Ask yourself:
- Will scope change significantly over the next quarter? If yes, avoid fixed price.
- Do you need continuity and domain knowledge over time? Choose dedicated retainer.
- Is this a short, bounded task? Hourly or fixed price both work; pick based on how well you can define scope today.
Red flags across all models
- No fully loaded cost breakdown, only a headline rate
- No clarity on what happens if an engineer leaves
- Contracts with unclear IP assignment regardless of pricing model
Related reading
- How to reduce software development cost
- Dedicated developers vs in-house hiring
- Staff augmentation vs dedicated teams
Want a pricing model matched to your project? Contact us at /contact/.
