Pricing models in software development
Choosing the right model for pricing the work of a software house is a crucial decision that has to be really carefully thought through. Two most common models of pricing are FIXED COST & TIME AND MATERIAL method. Let’s find out which one will suit better your product / project development.
In this model You are asking us for one price (as precise as possible) for exactly defined scope of work. You are also clearly stating what is your planned release date for ordered work items.
With that information we will proceed to start the estimation process to propose FIXED PRICE for ordered work. Also we will declare if the release date proposed by You is possible to obtain by us. Sometimes it has to be adjusted due to the lack of short-term capacity of our development team.
Where FIXED COST method will be beneficial for You:
- small budget projects that will need almost NO maintenance & development after release;
- projects that have strictly pre-defined and tested user scenarios & graphic design;
- implementation of extremely pre-defined, “small” software solutions ;
- easiest way to price work which will have very predictable outcome (copying small, already existing solutions);
- lack of almost any client’s involvement into development process
- very small margin for any scope/quality/release date adjustments during development ;
- problems with estimation processes ; (there are no such thing as precise estimations);
- lack of long term perspective (what about support & development after release ?) ;
- problem with defining “proper” quality level of the end product; (high quality = high cost);
TIME AND MATERIAL
In this model you are considering us as a potential medium/long term partner for your product development & maintenance processes.
What you have to specify at the very beginning is:
- WHY you want to develop your product (industry/business specification),
- HOW you want to achieve your business goals ( how you want to scale etc.)
- WHAT is your desired technology (web or mobile app , custom software solution, certain technology/coding language etc).
This information (Why, How, What) is necessary for us to help You create a proper plan for your product development using our experience on the software development market.
Once we will understand your needs our developers will start to build the MVP (minimum viable product) version of your product and then develop it by applying agile, iterative frameworks/tools such as Scrum (or ScrumBan/KanBan ).
You will become a Product Owner and stay in very close contact with our dev. Team. This will give you opportunity to:
- make adjustments to scope & direction of planned work at almost any time of development (how frequent depends on the chosen agile framework/tool);
- accept and give feedback about current state of development on week to week (or even day to day) basis;
Ultimately we will be charging You month-to-month for:
- hours spent by our team members on your product/project development; (TIME);
- all necessary technology costs connected to developing your product in certain (accepted by You) direction (MATERIAL);
Where TIME AND MATERIAL method of pricing will be beneficial for You:
- development of complex products & solutions that are now in early stage but are planned to last long term;
- products that have to be continuously maintained & developed;
- extremely low time-to-market due to possible fast MVP release;
- agile frameworks will give you chance to gather feedback from end users and easily adjust scale, scope and direction of your product development;
- highest quality of end product due to continuous improvements;
- high demand on frequent client involvement during whole development process;
- TIME & MATERIAL pricing model is founded on trust and mutual understanding of agile frameworks/tools;
If You find it hard to understand what AGILE mean in context of software development - please read this short article prepared by our Scrum Master: