29.10.2018

Fixed price vs time and materials, which model to choose?

Single

When cooperating with a software house you need to know which pricing model to choose so your project will be done according to your goals. There are two most popular pricing models: fixed price and time and materials. However, some companies could have a combination of both. And to understand which is better for you, you need to know the differences between them.

Fixed price
Fixed price model basically means that you pay a certain amount of money for the project to be finished in a certain amount of time. While this model is very good for budgeting and planning, you are losing the opportunity to make changes to your project in the process. Even if you decide that you don’t need some features you will end up paying for them. You need to have a clear vision of your project and very precise agreement to avoid receiving the project you are not happy with. But if you have a small and uncomplicated project fixed price will give you more control over your finished project and spendings. With the fixed price you will have a lot of control at the very beginning during the planning phase but you will not be able to apply big changes during the realization. And your project can be rushed if a deadline wasn’t set up right.

Time and materials
Time and materials model is very different. When choosing this type you will be charged for the number of hours spent on your project. This gives you a lot more control over the execution and an opportunity to make changes on the go. T&M is beneficial for long-term projects when you have just an end goal but don’t have a thorough plan. Also, with a T&M model you can start working right away, while with a fixed price you need to prepare a contract with all the steps depicted first. However without a defined budget and plan you risk spending on your project a lot more than you expected.
But it is essential to understand all the pros and cons of both models and choose the one that will suit your expectations the best.

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