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Advantages of Fixed Price and Time & Material cooperation

Fixed Price or Time & Material?

Properly selected cooperation model should provide favorable conditions for both parties. Adhering to jointly agreed upon rules will allow addressing many important questions and dispel doubts that naturally arise during project implementation. What are the characteristics of Fixed Price and Time & Material models? Which one will work best for you?

Successful cooperation with the customer – the key to the success of the application

To be able to guarantee the success of the application, the most important thing will be constant cooperation between the parties. Consultations and analyses should take place at every stage – this will allow avoiding all inconsistencies in the final implementation. Thanks to established cooperation models, it is possible to determine what is the scope of the company’s responsibility and what remains on the customer’s side.

The most popular cooperation models in the software industry

Currently in the IT industry, outsourcing is particularly often used. Not every company is able to employ its own IT department – these are very high costs, as well as a lot of time needed for training specialists. This in turn makes more and more companies rely on support from external partners to achieve goals related to websites or applications. Such cooperation can take place in different models, which concern both the way of performing tasks and the billing for work.

Body leasing

Leasing specialists has special significance in the case of software houses. This approach allows maintaining full flexibility in terms of the number of employees in the company. It’s also a comfortable solution for programmers themselves – in such companies they have a chance to relatively freely choose between interesting projects or clients. However, leasing an employee (or employees) requires a certain degree of involvement from the customer: on their side, it is necessary to provide optimal working conditions, determine the scope of duties, monitor the progress of work and manage the project.

Leasing the entire team

This is in a sense an extension of body leasing. When the entire team is leased, the software development company is responsible for more. Its employees take care of the daily work, the quality of processes and the progress control in the project. The customer’s task is to integrate the team into the company’s structures so that its members can understand the business goals and needs well.

Outsourcing with an autonomous team

In this scenario, the external team operates completely independently. It is responsible for finding programming specialists along with a manager, as well as experts responsible for business processes. The customer’s involvement in this model is reduced to a minimum.

Fixed Price vs. Time & Material – proven billing models

Cooperation between the customer and the agency should be as transparent as possible. Therefore, the billing models should be established from the beginning. In this regard, it is worth looking at the two basic forms: Fixed Price and Time & Material.

Fixed Price – you know right away how much you’ll pay

Billing in the Fixed Price model is particularly recommended for entrepreneurs who want to know right away how much the commissioned project will cost. This model assumes an „upfront” estimate of the entire implementation cost. This amount is calculated based on the customer’s initial requirements. The biggest advantage from the customer’s perspective is the absence of additional expenses – there should be no room for surprises when billing. However, with the implementation of larger projects, there are often numerous obstacles, so the Fixed Price model is best suited for simple applications that can be prepared quickly.

Time & Material – for long-term projects

This model works well for complex, long-term projects. The customer only pays for the work and resources that were actually used. Importantly, at the beginning of the cooperation, a full project specification is usually not created. Specific functional elements and billing are refined on an ongoing basis during the execution of specific tasks. Only the key functionality and basic business assumptions are initially defined. The greatest advantage of such billing is the flexibility for both parties.

Which billing model to choose?

Both the Fixed Price and Time & Material models have their own advantages and disadvantages, and are suitable for specific scenarios. The final decision should depend on the type and complexity of the project. The customer’s needs, available budget, and the time frame in which the application is to be prepared are also important.

Fixed Price is suitable when we can define the scope and schedule of work at the beginning. Time & Material is a suitable proposal when we want more control over the progress of the project. It is also the right choice when it is difficult to indicate specific assumptions and the shape of the entire project in the initial phase.

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