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COOPERATION MODELS Flexible billing
Time&Material vs. Fixed Price

Choose a settlement method adjusted to your expectations and the nature of the app being created.

Programistka GOGOmedia

The Time & Material Model

The Time & Material model involves billing based on the number of hours worked. If you do not yet know exactly what the scope of the project or its requirements will be, or you expect that the scope of work may change during the course, choose this option.
The main advantage of this model is its flexibility when carrying out work. The client is able to modify their requirements during the course of the project. This is often necessary as these requirements may change with subsequent stages. This can happen, for example, when using agile methodologies such as Scrum or Kanban. On the other hand, we have more space for finding new solutions that can improve the final quality of your product. In the Time & Material model, we provide you with the necessary reports and analyses on an ongoing basis to help you decide on the direction of further action. The form of the project may therefore change as your comments are implemented. The Time & Material model is used for projects where the time intensity of future work is difficult to estimate. The client then defines the general shape of the future application and then specifies its requirements during the course of the project. Activities in the case of the Time & Material model can start immediately. There is no need to prepare a specific product specification.

Advantages

  • A quick start

    We can start work quickly without having to wait for precise assumptions and project schedules.

  • Flexibility

    You can continuously monitor progress and send feedback that influences the final product.

  • MVP

    You can quickly see the MVP (minimum viable product) version, for example by running a test version.

  • Priorities

    You have the freedom to set a higher priority for the most important activities to the end-user so that less important solutions can be added later.

Disadvantages

  • Variable costs

    No final project budget is specified. We can give you an initial estimate of the costs and time needed to complete specific tasks, but the flexibility of the project comes with a flexible budget.

  • Work schedule

    A final schedule of works is difficult to determine.

  • The need for constant communication

    This model requires more involvement or additional costs (due to how the product is shaped during the work - good communication is necessary, hiring a Product Owner can also prove helpful).

  • Additional administrative costs

    The higher administrative costs occur due to, among other things, the need to account for the IT company's time and its continuous reporting.

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The Fixed Price Model

Billing in the Fixed Price model involves setting an upfront price to complete a project or part of it. Choose this option if you already know exactly what your future product should look like and how it should work. The Fixed Price model requires requirements to be clearly specified, so a detailed specification and list of business requirements and often a prototype of the application must be prepared.
Projects created on a Fixed Price model basis have a strict timetable, so you know when you will receive the finished product. This makes it easier to plan business activities. The Fixed Price model also gives you the chance to determine the budget of the project. This allows you to plan your expenses in advance. The Fixed Price model is also worth using if your budget is fixed (or limited), and this is a priority during the application development process. Projects in the Fixed Price model are easier to manage from the client’s side. They don’t require much commitment from you, so you can save a lot of time. You only deal with controlling and accounting for our work. The Fixed Price model works well for projects where it is possible to estimate exactly how much work needs to be done. Remember, however, that there is a risk here that the costs of the project will be overestimated. As a result, you may end up paying more than you would have paid using the Time & Material model. When deciding on the Fixed Price model, it is important to take into account that any modification to the shape of the product during the course of the work will mean new pricing of the project and a change in the time for its execution. There is also a risk that you will receive a product that is not compatible with your needs. The market situation and the client’s requirements may change, and a product billed on the Fixed Price model basis will be created as agreed when the specification was created. When opting for this model, you also need to be well-versed in creating digital products or using consulting companies, analysts, or designers. Fixed pricing presupposes the precise formulation of a list of requirements, for which it is necessary to have specialists of the right caliber at one’s disposal.

Advantages

  • A pre-defined budget

    A predetermined budget that will not change.

  • Strict schedule

    Knowing the budget and all the requirements, the schedule is predetermined, making it much easier to plan the subsequent steps.

  • Reduced communication costs

    The client incurs fewer communication costs with the IT company and is not forced to control the process closely.

Disadvantages

  • Little flexibility

    Fixed Price means little flexibility during the software development process: when you need a new feature, you need to recalculate the cost and change the schedule.

  • Risks

    There is a risk that the project will not meet the final needs if the exact requirements are not provided or are not properly defined.

  • Revaluations

    A possibility of overestimation of project costs on the part of the client or underestimation on our part.

  • The need for accurate documentation

    The need to provide the IT company with strict requirements. However, it is possible to outsource the project analysis to a contractor or specialist company for a fee.

WHAT TO CHOOSE? Time & Material or Fixed Price?

01 The Budget

If you can be flexible with your project budget, opt for the Time & Material option. If you have a specific budget that you don’t want to exceed, the Fixed Price model is better.

02 The ability to precisely define requirements

When you don’t have a precise list of requirements, choose the Time & Material model. It may also transpire that even if you do create such an analysis, the Time & Material model can still be more cost-effective as there is no risk of over-budgeting, which can happen in the Fixed Price model. If you can accurately define your requirements, you can opt for the Fixed Price model.

03 Flexibility

The Time & Material model allows you to freely shape the form of the product as you create it. In the case of a Fixed Price model, the form should be defined before the work starts. Changing requirements means additional costs and a modification of the schedule.

04 The scale of the project

When the project is more complex, it is better to opt for the Time & Material model. This model makes it possible to adapt the product to changing market realities and client requirements as they arise and to divide the work into iterations/stages.   Small and short-term projects can be successfully billed under the Fixed Price model, as major changes to the product form may not be required during the course of the work. Larger projects can also be accounted for in this way, but only if you have a good analysis of the requirements and we can work together on a realistic schedule for your project.

05 The need to specify the time for the completion of works

In the case of the Time & Material model, the delivery time of the finished product is not strictly defined. This makes business planning somewhat difficult. The Fixed Price model, on the other hand, allows you to set a specific completion date.
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Considering these factors and the pros and cons of each model will allow you to make an informed decision about the model of collaboration right for developing your new digital product. This will allow you to avoid dissatisfaction with the form of the process or the result of the work. Therefore, it is advisable to define the nature of the project well, even before deciding on the form of settlement.

FAQ Popular questions

  • In which types of projects will the Fixed Price model work best?

    The Fixed Price model works well for projects where the amount of work can be accurately estimated. This model allows the client to specify the project budget in advance, which works well when the client’s budget is fixed or limited.
  • In which types of projects will the Time & Material model work best?

    The main advantage of this model is its flexibility when carrying out work. This model has been successfully applied to projects whose time consumption is difficult to estimate. Additionally, when choosing the Time & Material model, activities can start immediately without the client having to prepare concrete and complete product specification.
  • Can the shape of a Fixed Price project be modified during its lifetime?

    Yes, however, when deciding on this model of billing, you should remember that any modification of the shape of the product during the course of the work will involve a new valuation of the project and a change in the time of its implementation.
  • I do not know which form of settlement to choose. Can you help?

    The model of cooperation between the client and the IT company should be adapted to the nature of the application being developed. We can help you choose the best cooperation model for your project.