Software Project Pricing Model : Fixed Cost Vs Time And Material

planning

Every problem has a unique solution in the software development world. Sometimes existing solutions can work for you but sometimes they don’t. Sometimes these solutions might not be the most compatible with your tech stack or aren’t the most user-friendly. So you decide to outsource it. 

Now comes the difficult segment. Which software project pricing model to choose? These increasing prices of software development can leave you scratching your head when finding the right pricing model. Outsourcing isn’t as straightforward as it was before. This pricing model must fit into your operating procedure, contracted requirements, and goals along with the expenses of the vendor. 

This will be an article comparing the two most popular pricing models and will state the pros and cons of each. 

Choosing the right software project pricing model

Here, you will choose the development model and the next step is choosing a pricing model that is compatible with your development model.

Fixed cost and time and material are the two most commonly used types of pricing models. Each has a different set of pros and cons which should be considered before choosing a pricing model.

Fixed cost Or Fixed Price Model

This is a very straightforward pricing model. You pay the vendor a lumpsum amount to the service provider and the service provider will complete the project for that agreed amount.

Now, this is a great agreement model to pick if your project is a short-term one and you have very clear visions and expectations.

Also, the requirements, specifications, and rates of your project are highly predictable.

But if with time you realize that one of your features isn’t really providing you with any value or if you need a different API, it will need some additional cost. 

It is almost like ordering a birthday cake. Once both parties have agreed on the flavor and type of cake, you cannot really change it. You might have to pay extra for an entirely new cake. 

But if you are having a limited and fixed budget, you know the scope of your project is small and limited, you have clear requirements and deadlines then this is a great way to go. 

This is also a pricing model used while building MVPs because it is cost-effective

 Time and material project.

In this type, rather than agreeing on a particular amount, you pay your developers hourly for the materials that they use.

Now, this is a great way to go if you know that would be a long-term project.

You can change the technologies and tech stack according to your requirements and choose features that provide your end users with some value. 

But how does that happen in practice?

We divide the project into smaller teaks each having estimated time, workforce, and cost. Once You decide it, the development team starts working on it immediately. 

Now, this sounds amazing cause you have authority, transparency, and flexibility

But how will you control the budget ? 

This is why it needs constant supervision of the budget and the deliverables.

This is why this pricing model is used by people who do not know the scope of the project

Also if you know that your development team is equally as involved as you are in this project only then this model would work for you.

But most projects actually opt for a hybrid of these two models. 

Both cooperation models have their own sets of pros and cons.

Hence you have to choose the one according to the scope of your project. 

Hence at Assystant, we analyze your business model and agree on a pricing model after consulting with you. We suggest the one that is specific to your project, cost-effective and will provide you with value. 

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