If you’re hiring a web development team, it makes sense to know all the details of contract pricing. There are two primary ways, or models of billing, which may be established between parties based upon the IT services performed:
- Fixed Price Model (FPM)
- Time and Material Model (TMM)
Choosing the appropriate pricing contract will ultimately depend on your project’s size and complexity. There are plenty of nuances to consider while determining the appropriate model.
Take a closer look at the Time & Material Pricing Model (TMM) and its applicability for your business.
What is Time & Material Pricing Model in Web Development?
TMM implies that you pay for the result. Payment is based on a time spent on the development of specific tasks. Depending on the customer requests, payment are made after each stage of development process. Unlike the Fixed Price Model, the development team is not restricted by rigid budgets and timelines under the TMM. This creates the opportunity of presenting clients with the most contemplated and therefore effective solutions.
Why choose Time & Material Pricing Model for Your Project?
Time and Material Pricing Model easily combines with Agile approaches, for example with Scrum. The partitioning of the workload and division of tasks into separate units, called sprints, makes work more efficient. Each sprint is estimated separately (in hours). Such estimates are agreed with the customer. Once the task is completed, the customer pays for the work, and developers start working on the next sprint. The process involves the following stages:
- The client describes his wishes to the web development company.
- Analyses and workload estimates are performed by the IT team.
- Execution and other details are discussed with the development company.
- Time & Material proposal is made.
- Both sides negotiate the final agreement.
- Implementation begins leading to the effective solution.
Note, that in Time & Material Model, estimation of workload and project deadline is approximate. What is more important is the quality of final result.
When to Use Time & Material Model?
TMM is usually used when the final requirements, and consequently the price can not be determined, or they may change in the process of development. This model is a good one for long-term projects that presuppose a large scope of work.
Time & Material Model Advantages
Flexibility
With TMM the client is able to modify the workload, revise materials and design or even change the work plan in a course of project’s implementation. It helps keep pace with constantly changing business circumstances. There is no need to renegotiate the contract.
Feedback and Control of the Process
TMM enables you to monitor the process of work as well as control the result of each development stage and give your feedback. Interaction with a development team increases the work quality and lets the client to get what he exactly wants. The customer has access to any information and is always aware of the development process.
Testing
A development team can create a minimum viable product (MVP) on your request. For example, you can release a test version of the product. Target audience reaction enables you to understand and determine features that should be improved. Such approach leads to a better performance in the future.
Quick Start
As there is no need to agree on the final result and all the details of the project, the web developers can start coding right away.
Efficiency
TMM easily combines with modern agile methodologies, for example with Scrum.
Time & Material Model Disadvantages
Undefined Budget
Usually it is not possible to estimate the budget in advance, as it may change in the process of work.
Unfixed Deadlines
In the process of development, a plan of project changes all the time, if there is any. Usually there is no final plan, as the workload is divided into smaller stages and the next one is based on the previous. Therefore, it is complicated to forecast the time of complete project’s implementation.
Administrative Supervision
In TMM you have to spend a lot of time communicating with the provider in order to manage the development process. Not every customer can keep in touch with the team, especially if they are from different time zones.
To Recap
A Time & Material Pricing Model is a solution for long-term projects with no set requests and visions. This model is oriented on achieving a high quality product. With its flexibility, close communication and readiness to keep pace with the latest changes, the achievement of this goal is effortless. However, consider the all the advantages and disadvantages of TMM before making the final decision.
Please contact us regarding further support in choosing contract pricing model. If you are not sure, which pricing model will fit you best, we can provide you with 24/7 assistance and recommendations on your project.