Entrepreneurs need flexibility when it comes to engaging a software supplier that should provide them flexible engagement models, created to satisfy their needs and meet their requirements. Usually, the duration of the project and the number of resources involved are important in calculating the final price. Therefore, there are two engagement models from which you can choose: the fixed bid model and the time and materials model.
The fixed bid model's mechanism is quite easy to understand as you need to give the supplier all the information about what you want and he will provide you the price. The next step is signing the contract and allowing the developer to build what you required and finally you need to approve the project and pay the developer. The process is very simple, but the fact is that early stage custom software development will cost more and provide less than expected. Due to the fact that custom projects needs to be 100% unique and suited to your needs, the development of the software is more complex and will imply higher costs. For instance, you can make a comparison with buying a house. If you are looking to buy an existing house you negotiate the price based on the materials used in the structure, the number of rooms and everything that you can see, plus the estimated costs of making changes. The negotiated price is the maximum price that you are willing to pay for what you get, while for building a custom house from the ground up, there's nothing you can see from the beginning, so the final price is very hard to be negotiated. Still, you can tell the developer your whole budget and tell him to stick to it when drawing the plans o the house. Therefore, the same situation occurs in the case of building custom software.
The time and materials model will help you avoid increased costs and time requirements for hashing out infinite details on how the application will work, give you the agility and speed to adjust to new information learned form developing your customers and reduce the risk of unmet expectations. The main goal of every company is to spend as little money as possible and get the highest level of quality. Moreover, if you opt for this model instead of fixed bid, you will be able to have daily visibility into how your money are being invested and will give you the possibility to make adjustments in necessary. Moreover, you have the final decision and say when the software is ready. This model gives you the opportunity to bring to life unique ideas that can't be realized through the fixed bid model. Therefore, you need to search for a trustworthy team of experts and ask for a time and materials contract.
The first model involves a fixed price, delivery time frame and project scope, but errors might occur in estimating the time needed to build the system. So, the risk of cost over-runs will appear and it can be absorbed by the customer of the provider. Consequently, the supplier will overcharge you for the project and for possible extensions of changes. On the other hand, the second model ensures to real incentives for the software provider to be effective and the client may have limited control and visibility on the development budget and progress. In conclusion, the best choice will be somewhere between the two models, a solution especially created to fit your business needs.
![[Valid RSS feed]](http://www.talkinmince.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
