When you decide to outsource your project, you’ll probably meet with two pricing models used by software development companies – Fixed Price and Time and Material model. As they’re influenced by different factors and belong to different approaches, the distinction can be confusing and pose a lot of questions.
In this article, I’m going to clear all the information out. How do these software development pricing models differ? What are their pros and cons? And how to choose the one that will be beneficial for you and compatible with the project management approach? Also, we’re going to tell you why we prefer a Fixed Price contract over Time and Material when collaborating with a client for the first time. Let’s find out which of these two models fits your business.
Two pricing models are used the most by software development companies. These include:
Now that you know the basic definition of these two software development pricing models, let’s focus on their pros and cons.
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Very often, when people hear the estimate and you think, ‘why is it so pricey?’. For this reason, an IT company will list the project cost and what constitutes this. But for now, we’re going to do it right here.
Learn more about what affects the cost of software development from our article.
If you’re looking for a software company with experience in many projects, you’ve got your match. At Gorrion, we provide you with the best solutions for your situation. We try to adapt the price model to the given project to fit you as our business partner and the development team. We strive to always respond to the needs of the given project.
At Gorrion, we care about the transparency of the whole development process. That’s why we’re going to give you feedback on every step of the work. Also, you’ll get a dedicated team with a product owner or project manager who will inform you of the costs and where they come from. In this way, you’re going to have clarity as to what you are paying for, and we’ll be able to adapt the solutions that best suit your needs.
We use both pricing models depending on the situation. When we cooperate with someone for the first time, we build the product on a Fixed Price model. Later on, when our client comes back to us, we switch to Time and Material.
Why do we do it this way? The Fixed Price model simplifies the cooperation due to its orderly manner and sets us off to a better start. It allows us to learn working with each other and develop relations which can turn into long-lasting cooperation. The client knows beforehand what they can expect from us. Thus, later, since they already know how we work and trust us, we can switch to a less formal T&M model and have Agile project execution.
Let me tell you a bit about our model – Fixed Price with a little twist. We encompass all its benefits, including a fixed budget, strict deadlines, clear project specifications and predictability. Plus, it’s also agile since you can make all the necessary changes and get a flexible development team. On top of that, our process remains transparent, and we continue to work efficiently.
In brief, we first do the essential product and then, depending on feedback from tests, we add new parts to meet the market’s needs. Easy, right? And thanks to the static budget, the client knows how much money he has to put into the project from the beginning. Results? The whole operation becomes less stressful for both sides.
Software cost estimations are tricky as they consist of many factors. Before we become discouraged by the numbers, we should know what these pricing models consist of and how they differ. In this way, we can choose the one that best fits our needs and strategy. With the right company and approach, you’ll reach your business goals and build a product that will bring value to the market.
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