The risks and challenges faced by client companies involved in offshore project development are many. Clients impose a range of control mechanisms to mitigate such challenges. Building on prior research utilizing control theory, we investigate the effect of knowledge transfer requirements and client ISD capability in shaping the choice of control modes, choice of offshore model and relationships in offshore application development projects. We utilize a grounded theory approach to examine four offshore application development projects. Results indicate that formal controls and pure-offshore models predominate in projects involving low knowledge transfer requirements, while a portfolio of control modes and hybrid models are preferred in projects involving high knowledge transfer requirements. Partner relationships are preferred in projects having high client ISD capability, while one-off relationships are favored in low ISD capability projects.