Expanding software development capabilities isn’t just a nice-to-have; it’s essential in today’s fast-paced tech world. Whether you’re tackling a surge in project demand or aiming to build a more resilient and versatile team, knowing your options is half the battle. From direct hiring to AI-driven productivity boosts, the choices are plentiful. But which ones make the most sense for your business? As someone who has navigated this journey from developer to CIO, I’ve seen it all. Here are your main options.

Direct Hiring: The Classic Move

Everybody likes hiring permanent staff. It doesn’t matter the company but my direct reports will always choose "permanent" over "contractor". Full-time developers gives me stability, cultural alignment, and in-house expertise. Unfortunately, I live in London (UK) so hiring more permanent staff is expensive and and slow (3 months or more). With the global developer shortage expected to hit 4 million by 2025 (MindInventory, 2024), I can’t see this situation improving.

Staff Augmentation: Flexible Scalability

I quite like staff augmentation as it gives me a quick boost to my team without the long-term commitment. Staff augmentation lets you bring in skilled contractors as needed, either free lancers or consultants from a trusted outsourcing partner. And with the IT outsourcing market valued at $617.69 billion in 2024 (Groove Technology, 2024), there’s no shortage of options. It’s a model I’ve used extensively in various roles. My permanent team provides the framework of the team, and the control, and then I use the externals to increase capacity. This works best if the externals are located where the permanent staff are. If not then time zones start to cause friction and face-to-face meetings are challenging to impossible. The best experience I’ve had of this was in Bulgaria where I augmented my permanent team with staff from a trusted vendor – they were all in the office in Sofia.

Build-Operate-Transfer (BOT): Long-Term Play

Speaking of Sofia, I set up a 160-person development centre in Bulgaria using the BOT model. Nearshore development is attractive because you can cut costs and still increase capacity. Going nearshore can save you 46% compared to onshore rates (Hatchworks, 2024). Personally I found nearshoring both cost-effective and without any sacrifice in quality. However, BOT involves working with a partner closely. They Build. They Operate. And then they Transfer to the customer. To prevent this from being a disaster I recommend building a close, trusting, relationship with the partner. You have to work with them every day to make it a success.

Outsourcing: Not My Favourite, But…

Pure outsourcing is attractive to many customers because this option appears cheap and they feel they are outsourcing the risk. Pure outsourcing is attractive to the supplier as well. In fact, every single outsourcing company I’ve worked with, and I’ve worked with a few, wanted me to outsource entire projects to them rather than use them for Staff Augmentation. Superficially this is because they can add in margins and contingencies into the fixed price. Having been on both sides of the fence, supplier and customer, I don’t see it like that. A fixed price contract is risky. As I’ve said before Contracts do not fix incompetence. It doesn’t matter to me whether I have the theoretical right to sue the supplier for failure to deliver. If the supplier fails as a company, or just fails to deliver, the bottom line is I don’t get the outcome I wanted. So I don’t rush to outsourcing; I prefer other models. Having said that, in my last role I was moving towards this model with a trusted partner in India. This was after a long time of the partner proving themselves in the Staff Augmentation model.

Hybrid Models: Best of Both Worlds

You can mix it up and use combinations of the above. I, for example, used both BOT and Staff Augmentation in Sofia. You can also explore Multi-Sourcing, Embedded Teams and Strategic Partnerships & Acquisitions. These hybrid models offer flexibility and specialised skills. I used multi-sourcing and found it works best if you have a few valued vendors rather than a smorgasbord. I’m a big fan of Embedded Teams; adding Specialists as Embedded Teams works well and I’ve done this a lot. It is a way to get cross functional teams. And I’ve used Strategic Partnerships to build a great little team in Medellin, Colombia.

AI: The Future is Now

While I haven’t yet used AI to expand development capacity as a strategic initiative, it’s impossible to ignore AI’s potential. Automating repetitive tasks frees up developers for more complex work, boosting efficiency (The Verge, 2025). Clearly there is more to think about here.

Conclusion

There’s no one-size-fits-all solution here. Each model has its merits and pitfalls, and the right choice depends on your business needs, budget, and risk appetite. You can, in fact, make any of them work. But one thing’s clear: if you want to expand, then doing nothing isn’t an option.

References

Groove Technology. (2024). IT outsourcing market analysis. Retrieved from https://groovetechnology.com/blog/software-development/outsourcing-statistics

Hatchworks. (2024). Nearshore development insights. Retrieved from https://hatchworks.com/blog/nearshore-development/nearshore-software-development-statistics

MindInventory. (2024). Global software developer shortage report. Retrieved from https://www.mindinventory.com/blog/software-development-statistics

The Verge. (2025). AI in software development. Retrieved from https://www.theverge.com/2025/1/17/24345865/microsoft-ai-announcements-2025-notepad

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