7 min read

When looking for a software development agency to hire, you might not realize that there are actually three distinct types or why this is important. 

If you engage with the wrong type of dev agency, you could find that your real needs aren’t getting met during the development process. A lack of resources can lead to unfulfilled expectations, product release delays, and ultimately sunk costs. 

There are over 23.9 million software developers around the world, and that number is projected to reach 28.7 million by 2024. That might sound like a lot, but given current demand in the context of wildly fluctuating and expanding business needs, it’s a major challenge for employers to find and retain the right talent and digital solutions.

However, don’t rush to fill your open slots using agency services before you truly understand the different types of software development agencies. Whether you need to create enterprise software or mobile applications for e-commerce functionalities, manage big data, or just secure custom web development for other uses, you’ll need to be very selective about the development partner you choose.

In this post, we explore the three different types of agencies, present their pros and cons for startups and other businesses, share an example of each, and offer a quick test to check which type you should engage with.

Rather than go straight into vetting different companies, your first step should be to decide which type of agency is the best fit to manage your brand’s digital transformation.

Rather than go straight into vetting different companies, your first step should be to decide which type of agency is the best fit for your needs.

What services do software development agencies provide?

The services that a software development agency will provide depends in large part on the type of agency it is. 

For example, some agencies will only offer software engineering services such as Laravel development and PHP development. They will expect you or someone from your team to handle all strategic product direction as well as project management.

On the other hand, other agencies will not only provide technical development from the front-end to the backend but also business strategy. Some might offer UX design, UI design, and quality assurance management as well.

It’s important to consider what you’re looking for now and how your company will likely grow in the future. For example, if a web application might be in your future, ask potential partners about past application development projects, web design experience, whether they work in both iOS and android, and what their UI/UX background is. Can this software development agency grow with the brand to offer new and innovative software solutions?

How will this software development team assist in building better API security into your products and services? Can they help you achieve business goals safely and securely? If you need bespoke products, do they have case studies that demonstrate their versatility as a custom software development company?

Can your in-house team handle the complexities of developing with user experience in mind? Will you find yourself outsourcing extra support if you don’t have a scalable agency on this project?

And finally, if you’re in fintech, blockchain, healthcare, or other verticals that are heavily regulated, you’ll need to ensure that your software development agency can help you meet regulatory requirements and stay compliant with applicable laws.

Top 3 types of software development agencies

Engaging with the wrong kind of agency can stress out your internal resources, hinder your launch timeline, and waste your investment. 

These are the 3 categories of software development agencies:

Let’s take a look at them in more detail below so you can get a better understanding of where your best path forward might lie. 

1. Scalable, fully managed services

First up, let’s dive into the type of agency that offers end-to-end development at scale.

What this type of software development agency offers

This category of software development agencies is the most comprehensive and scalable. It typically includes everything required to launch and maintain quality software:

Pros and cons

When you choose a fully managed agency, you’re not burdened with coordinating resources and keeping everyone on track. 

However, you do hand over the reins with this type of agency, so make sure that you choose a company that has some sort of transition services in place, for when you want to manage the team. 

Example: DevSquad

devsquad software development agency

For example, DevSquad enables entrepreneurs and executives to take charge of product management and QA when they are ready. 

As a nearshore software development company, DevSquad offers fully managed software development teams who collaborate remotely from Utah and Latin America. 

Focusing primarily on SaaS application development, DevSquad handles product development at every step of the way: from strategic MVP roadmapping to engineering, user-friendly design, DevOps, and QA testing. 

DevSquad is not only scalable and fully managed, but also has systems in place to help you take the reins of product management and QA, when you’re ready to do so. 

2. Boutique development firm with limited capacity

A boutique dev firm is also fully managed, but not as scalable.

What this type of software development agency offers

Boutique development firms might also offer all of the above custom software development services in order to see a software project from start to finish.

However, what is offered can vary widely depending on the agency’s internal skills. Achieving high-quality digital products can be hit or miss—or just costly.

Pros and cons

When working with a boutique agency, you can often get a great client experience, and rest assured that the project is being taken care of end to end. But that greatly depends on what the team can provide. 

These companies tend to have just a few employees and to not work with many contractors. There are often very long waitlists, as the CEOs of boutique agencies are looking for a nice business, but not interested in scaling. 

Because they manage everything for you, they may or may not have systems in place to help you take ownership of the software product when the time comes. 

Example: Ikayzo


Based out of Honolulu, Ikayzo is a boutique agency that offers web app and mobile app development along with website design and development. The company has 11 full time employees, so it’s not as widely scalable. 

Boutiques like these can yield very skilled resources, but they might have long waitlists and they might lack the type of talent you need. 

3. Staffing agency with no management

Now, let’s look at agencies that help you staff developers. 

What this type of software development agency offers

This type of agency offers either:

In any case, they do not offer end-to-end software development. They don’t include UX design, QA management, or DevOps along with the software engineering resources.

Most importantly, they don’t manage these resources for you. They just give you access to devs, and it’s up to you to produce quality software. 

Pros and cons

Employment of software developers is expected to grow by 22% from 2019 to 2029, which is far faster than most other types of jobs. A staffing agency can help you find and hire the right software developers, but that’s only half the battle.

Because a staffing agency doesn’t help you assemble and manage high-performing product teams, that burden falls on you and your internal resources. 

To craft beautiful software that works, you need not only software engineers, but also product managers, DevOps engineers, UX designers, and QA testers. 

Example: Toptal


Toptal is a well-known software development agency, but as one of our clients pointed out to us, it’s more of a staffing agency than anything else. 

Toptal does not offer end-to-end software development services, leaving it up to their clients to handle business strategy, product management, QA management, and more.

This model could be an okay fit for you if you have world-class product managers on staff, but if you don’t, you run the risk of losing your entire investment in software engineering because you lack the other skills required to support, launch, and maintain their work. 

How to choose the right type of software development agency for your needs

Now that you’ve seen some of the top software development agencies, you might be wondering which one is right for you.

Rather than go straight into vetting different companies, your first step should be to decide which type of agency is the best fit for your needs. 

In order to get clear on which category is right for you, answer the following questions:

Do you need guidance in feature prioritization and product strategy?

If you know you need strategic guidance in business processes and making the right product decisions, then you’ll want to work with either a scalable, fully managed agency, or with a boutique agency. A staffing company will not be able to provide this.

Do you need other resources besides software engineers?

If you need DevOps engineers, UX designers, and QA managers in addition to software developers, your money will be better spent at a fully managed agency or boutique agency. A staffing company will provide you with full time hires, and you may not have full time work for all of these resources.

Do you have the capability and capacity to manage all required resources?

If you have an inhouse product manager who can pull all of these resources together to create a product your end-user will love, then you can probably do fine with a staffing agency. If not, work with a fully managed agency that provides product management. 

If you can’t own product management now, do you hope to inhouse this in the future?

Maybe you’re not able to take the reins of product management now, but you’d like to in the future. In that case, make sure you’re working with a fully managed agency that makes the transition smooth for you. 

Ultimately, before you choose the right agency, you first need to get clear on the type of agency you’re looking for. This will help ensure that your investment is a success. 

Need a high-performing software team? Check out DevSquad. 

DevSquad Infographic The 3 Types of Software Development Agencies and Which to Choose v1 scaled

Leave a Reply

Your email address will not be published.