Software Outsourcing Glossary

Dedicated Development Team

Dedicated development teams are self-contained groups a provider assembles, typically several engineers, plus on larger engagements a project or delivery lead, who work exclusively on one client's project for the length of the engagement. The team integrates with the client's existing tools and processes but carries more day-to-day autonomy than staff augmentation, and less ongoing client-side management overhead than a fully outsourced project. It sits between staff augmentation (individual engineers who join a client's own team directly) and full project outsourcing (the vendor manages the entire engagement, including planning).

StepTo dedicated development teams

Provider-Employed Model vs. Bench Model

Provider-employed and bench describe how a provider assembles the people who will actually work on your engagement. In a provider-employed model, the provider employs each engineer directly, payroll, benefits, legal employment, and assigns them full-time to one client for the length of the engagement. In a bench model, the provider maintains a pool of contractors or subcontracts through additional layers, assembling the actual delivery team only after a contract is signed, meaning the specific people doing the work may not be confirmed, or may be rotated, until later. The provider-employed model generally means more continuity and clearer accountability, since the engineer isn't splitting time across other clients.

IT Outstaffing

Functionally the same model as staff augmentation: a provider employs and pays engineers who work full-time embedded in a client's own team, under the client's management and processes, rather than under the provider's own project management. "Outstaffing" is the term used more often in Europe, particularly Eastern Europe, while "staff augmentation" is the more common US term for the same relationship (see Staff Augmentation below for the full definition). Some providers keep "outstaffing" for long-term, exclusive arrangements with the same named engineers, and "staff augmentation" for filling a shorter gap.

StepTo pricing and terms

Managed Team

A team recruited and administered by an outsourcing provider, covering hiring, payroll, equipment, and typically a delivery or account manager, that works on a client's project as a cohesive unit rather than as individually sourced freelancers. The term overlaps heavily with Dedicated Development Team above; it's most often used to draw a contrast with marketplace platforms that match individual contractors without a provider managing the team as a whole.

Nearshoring

Outsourcing software development to a provider in a geographically close country, typically one in the same or an overlapping timezone, rather than a distant one (see Offshoring below). For US companies, nearshoring usually means Latin America; for Western European companies, it usually means Eastern Europe, including Serbia, Poland, Romania, Bulgaria, and Ukraine, all of which sit in or near the CET timezone. The tradeoff nearshoring optimizes for is real-time collaboration, sometimes at a higher rate than farther offshore alternatives.

Offshoring

Outsourcing software development to a provider in a distant country, typically with limited timezone overlap with the client, chosen primarily to minimize hourly cost rather than to maximize real-time collaboration. Common offshoring destinations for US and Western European companies include India, Vietnam, and the Philippines. The tradeoff is the inverse of nearshoring: potentially lower rates, at the cost of communication that's largely asynchronous, often 0-3 hours of working-day overlap.

Outsourcing

Outsourcing is the umbrella term for hiring an external company to perform software development work that could otherwise be staffed internally. It covers several distinct models with different levels of client control: project outsourcing (the vendor manages and delivers a defined scope end-to-end), staff augmentation/outstaffing (the vendor supplies individual engineers who work under the client's own management), and dedicated teams (a self-contained unit assigned to one client). "Nearshoring" and "offshoring" describe where the outsourcing happens geographically, not which of these models is used.

Software development outsourcing: models, costs and risks

Project Outsourcing

Project outsourcing is the model in which a vendor takes a defined scope and delivers it end to end, managing the team, the technical decisions and the delivery process, while the client receives a finished product and deals mainly with a project or account manager rather than with individual engineers. It is usually priced as a fixed price for the agreed scope. It differs from staff augmentation, where the client directs the engineers day to day, and from a dedicated team, which works exclusively on one client's product with the client setting priorities.

Outsourcing vs in-house development

Staff Augmentation

Staff augmentation, also called outstaffing, is an engagement model in which a provider supplies individual engineers who join a client's existing team and report into the client's own management, tools, and sprint process, while the provider handles employment, payroll, and (where applicable) local tax and labor compliance. It differs from a dedicated team, which operates with its own internal management, and from project outsourcing, where the vendor manages delivery of a defined scope rather than just supplying headcount.

StepTo staff augmentation in Eastern Europe

Employer of Record (EOR)

An employer of record is a company that becomes the legal employer of a person you have chosen, handling their contract, payroll, taxes and statutory benefits in the person's country, while you direct their day-to-day work. It lets a company hire in a country without opening a local entity. An EOR does not source or vet engineers for you, which is the difference from staff augmentation or outstaffing, where the provider both supplies the engineers and employs them.

Outsourcing to Serbia: contractors, own entity, EOR or partner

Team Extension

Another name for team augmentation: the provider's engineers extend your own team and are directed by your managers, tools and processes, rather than working as a separate unit. It differs from a dedicated development team, which works as a self-contained group on your product, and from project outsourcing, where the vendor manages delivery of a defined scope.

Team Augmentation

Adding several engineers to an existing in-house team at once, still directed by the client's own managers and processes. It is staff augmentation at a larger scale, sometimes called an extended team or team extension, and it differs from a dedicated development team, which works as a self-contained unit with its own tech lead.

CET (Central European Time) / Timezone Overlap

CET (UTC+1, UTC+2 during daylight saving) is the timezone used across most of continental Europe, including Serbia and Poland, closely adjacent to the CET+1/EET zone covering Romania, Bulgaria, and Ukraine. "Timezone overlap" measures how many working hours a remote team shares with a client's own business hours: full-day overlap with Western Europe, and roughly 3-4 hours with the US East Coast (less with the US West Coast). More overlap enables real-time collaboration, standups, pairing, same-day answers, while offshore regions with 0-3 hours of overlap push most communication to asynchronous handoffs.

IP Box

A reduced corporate tax regime, offered by several countries including Serbia and Poland, that applies a lower effective tax rate to profit derived from qualifying intellectual property, such as copyrighted software, rather than the standard corporate rate. Serbia's regime taxes qualifying IP income at an effective rate as low as 3%, alongside a separate double R&D expense deduction. It's a country-level tax policy rather than something an individual vendor offers, but it can factor into a provider's cost base and long-term pricing stability.

Outsourcing to Serbia: rates, GDPR and IP