Fixed price, fixed budget, time and material – Which one should you choose for your project?

Fixed price vs time and material

When it comes to developing web applications, software development houses usually offer two pricing methods – fixed price vs time and material. Each of them has their own share of benefits and shortcomings. Which one should you choose for your project? Are there alternatives? The answer requires thorough explanation, but when you do learn all the nuances, you set yourself to pay less for quality software development.

 

At the time when you turn to a software development house with your software project, it is often the case that you don’t a have a clear picture of how it will look when it’s done. You may ask yourself whether some of the features you envisioned are actually feasible and how much time and money it takes to implement them. Naturally, the software house makes its price estimation based on your information. It means that the more information it has, the narrower (and thus less risky) the price estimation range is.

 

Fixed price vs time and material explained

 

When you choose the fixed price, the developer is under a lot of pressure. As they don’t have full picture of the final product beforehand, they can’t be sure how much time and effort it will take to complete it. That’s why they usually overestimate and you end up paying a lot. What’s more, since the developer is not paid extra for each feature and task that could possibly come up during the development, the work can be rushed and of mediocre quality. You can probably already see the deal isn’t really risk-free for the client. The risk is a potentially subpar project that have lost a chance to be improved on the conceptual level during the development.

 

In most cases, the time and material method undoubtedly makes for a better product. The development team cooperates with you all the way to make the project as great as it could possibly be for your target. The scope of the project can be easily changed without having to modify the agreement. You pay for what you want to pay, prioritize tasks freely and have full access to reports on the development process. The only major shortcoming is that depending on how much time, effort and, well, material will be used, the price will increase accordingly.

 

Make an informed choice

 

Information is key to picking the most efficient pricing method for your project. Before you make your decision, ask yourself:

  • Do I really know what I want to accomplish?

 

You should try to acquire proper knowledge on both business and technical level to get a good estimation of the time and effort. Regardless of that, flexibility will always help. A quality software house is more than just a tool to develop your project. It possess great knowledge of what kind of technologies and features work best in various situations. Use their advice to your advantage.

  • Am I ready to take a risk?

 

The concept of risk management when it comes to software development is multidimensional. If what you’re concerned is the price, make sure that you know what you want your project to be like as soon as possible. If it’s the highest possible quality, pick the time and material method and talk to your developer. Cooperate with them each step of the way to develop just the right product for you audience. One in which a golden ration between the money spent and its business usefulness is achieved.

 

Fixed price vs time and material

 

Fixed price
Time and material
Static variable
Scope, cost, time Quality
Flexible variable
Quality Scope, Cost, time
Assumption
Work estimation and schedule is accurate and requires no changes The client’s goal is to make a product that best corresponds to the needs of its target audience
Risk bearer
Software house Client
Risk examples
– limits costs,
– if the price turns out to be too low, it will almost surely influence the quality negatively
Software house doesn’t influence the budget directly
Potential problems
Possible problems include disputes over what the agreement includes and what calls for an annex Increasing the project scope and further changes may end up being too costly for the client
Flexibility
Little to none, new ideas that come up during development are rarely included in it Big, you can modify the project freely during development

 

Fixed budget – the smart alternative

 

What If we told you that you can influence the shape of your product throughout the whole development phase and end up with what you really want while still benefiting from the fixed price? The method is called fixed budget.

 

With fixed budget, you define the project budget (estimated) and priorities, providing as much information as you can about it. Based on the information, the developer tells you how much can be done and when you can expect the final result. Much like the time and material method, fixed budget usually also includes hourly rates, but the developer knows upfront exactly how many hours they will spend working. In fixed budget, the developer helps you choose features and balances the whole project in a way that allows both of you to stay in the fixed budget. It’s a modern alternative that gives another perspective on the fixed price vs time and material debate

Sensinum is a Polish software house supplying companies, marketing agencies and teams with cutting-edge software development services. Whether you need a subcontractor or want to cooperate with a software house directly, Sensinum brings effectiveness to the table. Our experienced developers regularly working on advanced projects are something you look for. Get to know more, contact us and consult your software idea for free.

Sebastian
Sebastian Data Engineer / COO