Which methodology is better for your IT project?
If only I could answer this question right away, I would happily do it. But, obviously, it isn’t that simple.
The first one, waterfall methodology, often uses a Fixed Price cooperation model, while the second one is often based on Time and Materials model. There’s a lot more than this, concerning the two methodologies, but in this article I will focus on main differences in the pricing and deadlines, which are the reasons for most questions for people unfamiliar with IT projects.
Let’s start with what it means exactly to use these cooperation models.
Fixed Price has been used as long as humanity existed. The two sides of a contract agree on a price and deadline. Both sides have a perfect understanding of the scope and its complete specification is a part of the contract – before the two parts sign it.
Meanwhile, Time and Materials is more like hiring a person or a team for your project and agree on a hourly rate, which is billed once a month. No total price, no strict deadline and the scope can change.
Now, the two methodologies are different in a way where the advantages of the first one are disadvantages of the other. Let’s dive into it.
Fixed Price – advantages and disadvantages
✅ Known price – well, I don’t think I have to describe or comment it. You know the total price from the very beginning, so you know that it fits in the budget
✅ Known deadline – same here. You know when the product is going to be ready to use, that’s what you pay for
🟥 Longer preparation time – you can’t start right away. The client needs to do a lot of preparation before the project’s kick-off. The more complex the project is, the better it has to be described.
🟥 No scope changes, no flexibility – changes to the scope during the project are definitely NOT welcome. That’s why it’s so important to make sure that the project you pay for is exactly what you need. Want more features? It is going to cost you a lot and the deadline will be postponed.
Time and Materials – advantages and disadvantages
✅ Faster kick-off – the developer team don’t need the exact specification of the product you want to create. Usually an idea is enough to get started. Then you want to include your potential users/customers in the process as soon as possible through an MVP – and work on new features and implement then as often as possible.
✅ Scope changes are welcome – usually you start with an idea. Most small companies grow together with the software they operate on. The needs change, the market changes and you have to adapt. In T&M you can act immediately, while that’s not possible in Fixed price projects.
✅ Testing on small scope, then increasing – there’s a popular quote by Peter Drucker: „There is nothing so useless as doing efficiently that which should not be done at all” – by testing your solutions on the market very often, you can avoid developing unnecessary features and know the exact direction of your product. You read the market and respond to it. This is impossible in waterfall projects.
✅ Flexibility and easy contract termination – you start quick and you can also end quick or change the direction if you don’t see expected results
🟥 Unknown price – although you know the monthly rate and maybe even have an estimated cost, you never know the exact cost of the whole thing. The estimates were most probably free of charge anyway, so how much time and effort was used to make them?
🟥 Unknown deadlines – if you have to figure out what you are about to build in the first place, you simply can’t know the deadline. (unless the scope can vary)
🟥 Required engagement through the process – it can both be an advantage and disadvantage, but yes, the client is more involved in the process here than in the Fixed Price model.
It is impossible to use a model without any disadvantages that fits for all situations.
You should choose Fixed price if:
- ✅ You know exactly what you want and you’re not going to change it during the project.
- ✅ You have the time to define your requirements or optimally hire an IT Specialist to help you define them.
- ✅ You have some time or budget restrictions (well, actually you can go for T&M too, but you have to communicate it to the software house and overlook the process from the beginning)
You should choose Time and Materials instead if:
- ✅ You want to start with a little budget to test your idea and increase it afterwards.
- ✅ You’re not sure what features you need the most – you want to try different things and choose the best option.
- ✅ You need a long-term partner for your service (e.g. ecommerce shop where most of the work will be maintenance and adapting to the directions pointed by your Marketing Department)
We at Rocksoft work in the second model with most of our clients (T&M), but we have also done projects in the first model.
Feel free to contact us about your project.