Fixed Price or Time & Material? How to Settle with an IT Company
05 Jul 2018CommunicationCooperation
What is fixed price?
The fixed price settlement model assumes that we are able to estimate in advance. To clarify: we know how much time and human resources a given project will require. We set the terms and key functionalities with the client. We set the date of commencement of works, and their scope. However, it is a settlement model that has relatively little wiggle room. Any deviation from once established business requirements is an additional cost.
Who can benefit from a fixed price approach?
Fixed price works best in projects with an exact specification of requirements available. The customer must be sure that these requirements will not change significantly. Therefore, this model can often be chosen for smaller projects.
Choose fixed price if:
- your project is carefully thought out and planned to the extent. That you do not expect sudden and unexpected change.
- you have a developed work schedule
- you trust and understand your IT partner
What is time & material?
Time & material is agile. Why? Because the project is handed in a piece by piece, and the work is settled and verified on a regular basis. The customer verifies the project on an ongoing basis. Since there can be considerable deviations from the original arrangements. The working hours of development teams are settled.
For instance, time & material is most often used when the amount and scope of work are difficult to determine. Or when the design requirements are expected to change during the implementation of the project.
Who can benefit from a time and material approach?
This type of settlement works best for long-term projects that are expected to evolve and deviate from the original assumptions. In this model, project modification stems directly from ongoing feedback. Time & material works well for companies with their own IT who understand how agile works.
Choose time & material if you:
- are familiar with an agile approach
- have your IT
- don’t have defined all the business requirements and you expect the project to change
- know that your project is an advanced and long-term project
How about a mixing it up… fixed price with time & material
Yet another option is a mixed settlement method. The minimum business requirements set at the very beginning are implemented and settled in the fixed price system. However, the duration of the project cannot be longer than 6 months. After this time, when the client sees that the project is growing and changing, you can go to the time & material settlement model.
fireup.pro – we are transparent
When you chose a form of settlement, whether what it is fixed price or time & material, we want to reliably estimate the possible scope of work. This is strictly connected to the project. And an estimated time of execution. As well as the number of development teams involved in the project.
Therefore, to be able to properly prepare an offer and, if possible, accurately price our work, we prepare an initial project analysis. Such a diagnosis of the project allows our obligations and commitments. As well as to state at how much we value our work. So, what can we build for you?
The presented content was written by our experts and is based on our company's experiences.