When choosing a price model for a software project, you have two choices: fixed-price or time and materials. Fixed-price may seem less risky because you know the cost of the project before getting started, but that’s not necessarily true.
When working in a fixed-price model, all decisions must be made up front. So, the entire scope is set in stone before the project begins to take shape, which isn’t usually in the best interest of the client.
In our experience, a time and materials model will yield the best results for a product owner.
Here are a few reasons why:
In the time & materials model, you can adjust the project’s requirements and shape to constantly changing business circumstances. This way, there’s no need to renegotiate the contract or conduct painful discussions with the software development firm to determine whether a feature was or was not in the scope of work.
In the time and materials approach, the scope can be adjusted ad hoc. For example:
- Did you forget to mention a feature in the discovery process? No problems. Let’s add it.
- Are one of your UX ideas little too complicated for users? That’s ok. We can simplify on the fly.
As a software project progresses, some of the features that were seemingly most important at the beginning fall down the list and others emerge as top contenders. With time and materials, the project can re-evaluate quickly and reprioritize those features, unlike the fixed-price model, where the to-do list is set in stone.
If you’re working with a good software partner, then they’ll want to deliver the highest quality product they can, and while operating under a fixed-price model, the software firm is naturally trying to complete the project at the lowest cost, which could negatively impact the end results.
Time and Materials is Faster
With a fixed-price model, the scope of the project, along with a detailed timeline will be presented to the client before beginning the project, but that doesn’t mean this estimate is going to be on the nose. Building software takes time, and rarely are strict time estimates accurate in the end.
With time and materials, the work is usually broken into sprints, allowing the development team to work quickly and efficiently, focusing on certain features at a time.
For some, not knowing the final cost of a project can seem risky. However, unlike the fixed-price model, with time and materials, the client isn’t contractually obligated to continue working with the software firm if you’re unpleased with the work they are doing.
On top of that, the time & material model requires significant transparency from the software firm. This allows you to track progress and know exactly where the team is at any point.
If you’re still on the fence, here are a few things to ask yourself before choosing a pricing model for your software project:
- Do you know EXACTLY what you would like to build?If you’re still unsure of a few things, go with time and materials.
- How much is managing the financial risk important for you?If it’s crucial, pay the extra money and go with the fixed price. If not, go with T&M and control exactly what you are developing.
- How important is flexibility to you?If important, go with time and materials. You’ll be able to prioritize and adjust your project scope every 1-2 weeks.
At SOLTECH, we’ve built software solutions for 19 years, and we believe that the T&M model of software development pricing is the best way to get exactly the product you’re looking for, with minimal risk.
If you’re looking for an experienced software partner to get your software project off the ground, let us know! We’d love to hear your ideas!