During the cooperation between a customer and a software provider, many aspects are important in terms of the well-being of these two sides.
During the cooperation between a customer and a software provider, many aspects are important in terms of the well-being of these two sides. One of the key elements to provide comfort to both partners is a properly matched type of contract to the nature of the product. The two most popular models are Fixed Price, which is a contract in which the price for the work is predetermined and unchangeable, and Time and Materials, which we will talk a little more about.
What do Time and Materials stand for?
Time and Materials are characterized by the fact that settlement is determined by the team’s rates per day of work and follows a fixed period (for example, monthly). Payment in this case depends on how much time the developers have spent on the project. Thanks to this form of contract, you can flexibly modify the initial assumptions of the project and have full control over its costs.
In the T&M model, the most important features are:
- fast delivery of results,
- ability to start work on the project quickly
- flexibility in terms of making modifications to the project
It is essential to know that the Time and Materials model often requires much more involvement from the product owner, in the entire development process.
Does T&M take less time?
One of the biggest advantages of the T&M model is that work on the project can start instantly, as it does not require waiting for a documented specification. This is one of the common reasons why product owners tend to choose this type of contract.
The flexibility of the T&M model
In the T&M model, modifying expectations is not difficult. This is because expectations are not rigidly defined at the beginning of the project so that changes can be made flexibly according to need. After sprints, which usually last two weeks, the finished parts of the application are analyzed and tested. The more becomes known about the product, the scope can be expanded. It is therefore an ideal type of contract for those projects that require extensive and complex solutions. The T&M model divides the work into stages, which can be analyzed and adjusted on an ongoing basis to the realities of the market.
Since in the T&M model, billing is only for days of labor and materials, additional costs can be avoided. This is a feature that greatly distinguishes T&M from other types of contracts. For example, the Fixed Price model assumes the possibility of error, so it leaves financial space to cover costs should something go wrong.
The Time and Materials billing method is very transparent during the collaboration. Using this type of contract, we can easily track the progress of the product, using numerous project management platforms (for example, Trello, and Jira). An additional possibility is the use of CI/CO i.e. continuous integration and continuous discovery, by means of which we can see a demo every day, showing changes in our product.
What could be a possible downside of the Time and Materials contract is the problem of specifically defining the release date of the final product. While it is flexible to modify expectations and add new functionality on an ongoing basis, it has the downside that indeed the time of creation is unspecified.
The T&M model is characterized by strong communication between the product owner and the software provider, so it is not a good type of contract for someone who does not want to be involved in the development process. Time and Materials require working with an informed and knowledgeable person who will be able to verify the various stages of work on the product. The product provider’s side, on the other hand, is to come up with an MVP or Minimum Viable Product, which will quickly help gather valuable feedback from users. This, you can quickly catch any errors and make improvements that may not have been considered at the beginning of the work,
Canceling the contract
The Time and Materials contract always has specific termination rules, so if you are not satisfied with the supplier’s services, you will have full freedom to change it while the product is being developed.
Why choose the T&M model?
T&M is also beneficial for the reason that it facilitates building a strong business partnership, due to the close involvement of the Product Owner in the application development process. Long-term partnerships often bring a lot of comfort and satisfaction during cooperation, for both parties, as professional software development agencies prove. Remember that the quality of cooperation is always reflected in the quality of the product, so it is worth making sure that the cooperation takes place under favorable conditions for mutual benefit.