Tuesday, 15 October 2024

Time & Material Vs. Fixed Price for Dedicated Teams: Which Fits You Best?

When thinking about your next dedicated teams project there’s always the big elephant in the room, and that’s about cost. Two main options you have is between time & material (T&M) and fixed price. And it’s a big decision. Choosing one over the other can impact your bottom line.  

The right model can have a major impact on your project’s flexibility, budget, and overall success. So which one is right for you? And how do you know you have made the right choice?  The answer in short is all about your project.  

In today’s blog, I will take the time to cover both models, their strengths, weaknesses and where they work best. Let’s jump in.  

First off, why are we talking about dedicated teams? Globally the IT outsourcing market is on the rise. Outsourcing was valued at $565.43 billion in 2023 and is projected to reach $609.53 billion by 2024.  

North America leads in IT outsourcing, holding a significant share of the market. Meanwhile, Asia-Pacific, especially countries like India and China, is expected to see the fastest growth due to larger pools of teams to hire from. With 56% of global companies now using remote hires, dedicated teams mean quicker access to talent from around the world. This gives companies more choice when it comes to matching solutions to their project’s demands. 

Why does Time & Material work for dedicated teams? 

T&M has one big advantage going for it and that’s flexibility. In short, T&M means you only pay for the hours & resources used. This makes it a great match when the project scope is still evolving. But it’s not the only benefit. Here’s why T&M might work for your project, especially when you look for a  dedicated team to hire in a trustworthy software house company.

T&M offers you flexibility  

T&M contracts are adaptable. This means if your project’s needs change, you don’t have to renegotiate the entire contract. You can adjust the project when needed. When it comes to dedicated teams it’s a great way of bringing on specialized skills. Having this flexibility means you aren’t just tied to one technology or language.  

It gives you transparency in spending 

With T&M, you have a clear view of where your money is going. Regular reports detail how much time has been spent on each task, this is mostly tracked through software like Jira. This can allow you to adjust your budget in real time. This can be a bonus when managing a dedicated team so you can see where their efforts are being spent.  

You are always on board with what’s happening 

T&M projects give you the chance to be hands on. As stated, they’re great for flexibility, so throw yourself into the iterative sprints to share your feedback. This allows you to steer the project as needed and provide input. This model is ideal if you like to stay hands-on and it can help your dedicated team integrate with your in-house team. 

You have a core team  

Since T&M contracts often last for the duration of the project, you get consistency. The same team works with you throughout, meaning your team will develop an understanding of your goals and processes. This can help better align them with the project and development process. 

The problem with a T&M model   

However, T&M projects come with a few potential downsides. The flexible nature of T&M means that final costs can be unpredictable, so if you’re working with a tight budget, you’ll need to keep a close eye on spending. Effective time management is also crucial to avoid project overruns. 

Why does fixed price work for dedicated team projects 

If your project scope is well-defined from the start and you need predictability, Fixed Price could be the right fit. Here’s why you might choose this model, especially when working with dedicated teams. 

You are certain of your budget 


With Fixed-Price projects, you know the total cost upfront. This means predictability, and if you have a strict budget, or that spending stays on track, this can be a valuable bonus. It also makes it easier to get project approval from stakeholders, as you can present a clear financial plan from the start. 

Your project’s scope is clear from the start  

Fixed Price contracts are built around a defined scope and set of deliverables. This means that everyone knows what to expect from day one. This model is a great fit for projects where requirements won’t change, and it allows you to focus on other priorities while your team works on delivering results.  

You can be more hands-off  

With Fixed Price, once the scope is set, you don’t have to be as involved day-to-day. You can leave the execution to your development team, which can free you up to focus on other things. This approach is perfect if you prefer to step back after the initial planning and let your team take control.  

Structured Payment Milestones:  

Fixed-Price projects often have payments tied to specific milestones. For you, this means peace of mind, as you can track progress through these milestones. You can be confident that your project is moving forward, and on schedule. 

Fixed Price doesn’t work in all cases  

That said, Fixed-Price contracts can be rigid. Any changes to the scope after the contract is signed can be costly, as they often require a formal change request and renegotiation. This model also requires detailed upfront planning, which can delay the start of the project if you’re eager to get things underway. You and your software partner will need to create a detailed project plan and you must have an idea about the end product.  

Deciding Between Time & Material and Fixed Price for Dedicated Teams 

Your choice between T&M and Fixed Price will depend on several factors, including the scope of your project, your budget, and how involved you want to be in the day-to-day. Here are some key things to think about 

  • Project Scope and Flexibility: if you expect requirements to change, T&M provides the necessary flexibility to adapt as you go. For projects with a stable, well-defined scope, Fixed Price offers predictability and financial security. 
  • Budget Constraints: T&M is cost-effective for projects where you want control over spending and can adjust the budget as needed. If you need a set budget, Fixed Price will offer the financial stability you’re looking for. 
  • Preferred Level of Involvement: T&M suits projects where ongoing input is beneficial, as it builds collaboration and helps you make adjustments in real-time. Fixed Price is ideal if you want to be hands-off after the initial discovery phase planning, as the project can proceed independently, working to the defined goals and outcomes. 

Using Dedicated Teams with the Right Model 

Using dedicated teams in either T&M or Fixed Price projects provides benefits to your project. With T&M, you can adjust your team on the fly, bringing in skilled engineers for specific tasks as and when. In a Fixed Price setting, you get dedicated resources focused on a single solution, often resulting in faster delivery of the project’s goals. 

Ultimately, whether you choose T&M or Fixed Price will depend on your project’s needs, scope, and budget. Match your objectives to the best outcome you need, you can match the development process that delivers on your goals, whether through the flexibility of T&M or the predictability of Fixed Price. 



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