Time And Material vs Fixed Price Model: Which Is Better For Your Digital Product Development?

Want to develop your digital product? Want to know more about the pricing model and what to go for to manage your budget the best?

Commonly, software development companies propose two of the most common agreements for the pricing model: Time and material or Fixed Model.

If these terms seem foreign to you, do not worry; we are here to help you with this. In this blog, we have covered some important pointers of both:

• What is the Time and Material or Fixed model?
• Advantages/ Disadvantages of both models
• Difference between both models 
• Which one do you prefer and when?

So let's get started! 

What Is Time And Material Model In Digital Product Development?

So, the name Time and Material itself is simple to understand. The model depends on the time taken by the company to complete a project and all the materials used in the development. The total cost depends on the quality and time of work the client wants. This model does not have a particular total cost at the beginning of the work.

Moreover, most importantly both parties agree on the hourly rates and the material that will be used. So even when the project takes some extra time, both parties have confirmation of getting the work done and reimbursement.

Everything is included in the contract, including all the meetings, project management, and other required actions.

Advantages of Time and Material Model

There are many advantages of time and material agreement; let's have a look at some of them:

• As the project is dependent on time constraints, the developers will work hard to achieve things within the time limit. And every second will have their importance applied to the project. 

• The team and business can have regular one-to-one briefs about the project's progress and updates. 

• As the budget is not fixed and dependent on material and time, it provides more flexibility to the team to work on multiple aspects that are best suited. 

• Due to the agreement, there is no need to worry about the project or say there is protection for both parties. 

• The quality of the project is mostly above the client's expectations due to the use of the best approach and appropriate time. 

Disadvantages of Time and Material Model

Everything has its pros and cons, and so do time and material models. Although it might look like the best option for you, you should be aware of the drawbacks as well to gain full knowledge. 

• The cost can be one of the major issues, as it is not fixed, so it can increase throughout the development process according to the implementation and the things covered.

• The time frame is also not fixed, so it can take longer than expected in some cases due to the implementation and integration factors.

• As the model has more time involvement, it takes more client involvement, and this can be positive for some and can also become negative when having frequent communication.

What Is the Fixed Price Model In Digital Product Development?

In this type of project model, the client is already aware of the time and amount required for the entire project before it starts. Sometimes, it can go a little higher than the initial set price but not extremely much due to some other implementation and requirement demanded by the client, and they are well aware of the situation from the start.

So, how does the strategy work? Let’s take a real-life example to understand it better: it’s your birthday, and you want to look perfect wearing a princess gown, so you go to your favorite boutique and get your measurements done and decide all the fabric, color design everything at the last the owner will provide you with the total cost and a time.

But what if you change your mind and don’t want that dress anymore after some days? So, in this case, the person working on your dress cannot help you with it; they can suggest modifications, but they cannot change the whole base of the dress. Similarly, the projects are provided with all the details and time frames. You can just do the modification once it gets started but cannot change the whole project, so be careful about the decision in the very beginning.

Advantages of the Fixed Price Model

The fixed price agreement has multiple benefits for the clients. Let's have a look at some of them. 

• The client knows the budget from the very start and the time period that it will take to work on the project from the team. It makes it easy for both parties to decide things accordingly.

• The client doesn't have to worry about the project budget as they can provide all the details to the company and they will provide a set budget to meet your requirements.

• The company provides a particular deadline to the client and tries to complete the project within the deadline, and if not completed due to any issue, the client is informed about everything in advance.

Disadvantage of Fixed Price Model

Here are some drawbacks of the Fixed price model that you need to have a look at before coming to a decision.

• As the final price is already known to the client and fixed, it provides less flexibility to the team working on the project. As they have to work with particular things, they can manage within the budget. Thus, it can make things a little difficult and rigid for them.

• Client involvement is less in this type of model as the team knows what to do and what the requirements of the project are. But it is important to be in the loop to get things clear and better in the development.

• Sometimes, the cost can go higher if you are asking for the modification of something, and the client should always keep this thing in mind and ask before implementation of any new thing.

Time And Material vs Fixed Price Model: Core Differences

To see the core difference let’s have a look at the table made below.

Aspect	Time & Material Model	Fixed Model
Cost Structure	Based on actual time spent and materials used	Fixed cost agreed upon at the beginning of the project
Flexibility	High flexibility; scope can evolve throughout the project	Limited flexibility once scope and cost are agreed upon
Risk Management	Shared risk between client and development team	More risk on the development team
Scope Changes	Easier to accommodate changes in project scope	Scope changes may incur additional costs or delays
Project Control	Client has more control over project direction and budget	Developer has more control over project schedule and budget
Transparency	High transparency as costs are tracked in real-time	Limited transparency until project completion
Predictability	Less predictable in terms of final cost and timeline	More predictable final cost and timeline
Client Involvement	Requires more active involvement from the client	Client involvement may vary depending on agreement
Adaptability to Changes	More adaptable to changes in project requirements	Less adaptable to changes without incurring additional costs or delays

When To Choose A Time and Material Model For Digital Product Development?

We have mentioned some important points in this section so that businesses looking for development can make better choices.

1. If you are planning for long-term and complicated project development.

2. When you are not clear about the requirement it can change accordingly as development carry-outs.

3. You need your project to be perfect, and work should be done with flexibility.

4. You didn't have any budget issues and were ready to invest.

5. You need full control over the project by being in the loop.

When To Choose A Fixed Price Model For Digital Product Development?

Here are some points to know when you can choose the fixed model for your project.

1. When you want to develop an MVP for your project or if it is a medium- to small-sized project, you can go for a fixed-price contract.

2. When you have a budget and want to work within it.

3. The project requirements are clear and won't change.

4. If you want to work on the existing project for some modifications or extra implementation.

5. You very urgently want to work on the project and want to deliver it as soon as possible.

How To Choose The Right Model For Your Digital Product Development?

Till this section, I hope you have a good amount of knowledge about both models but are still confused about which one is the best model to choose from for your Digital Product Development. There is no doubt both models are best in their ways and can be helpful for diverse project requirements. As we discuss, everything has pros and cons. So we cannot decide which one is the best choice for your project. 

But according to the above points you can easily differentiate between both and decide as per the requirement. If you are looking for a long-term project and don't have any time constraints nor a budget is fixed you can, without thinking much go for the Time and Material model.

On the other hand, if you want to rework on the existing project or want to just make an MVP for your digital project, you can go for the fixed model. Secondly, if you have a fixed budget, this is the best choice. Go for it.

At the end, the decision is yours, and for more details, you can contact the experts who can explain everything according to the project requirement you have.

Why Choose PixelBrainy For Your Time And Material Or Fixed Price Model, Tailored To Your Needs?

Still confused over both terms don’t worry we are here to help you with deciding the best for your digital product development. At PixelBrainy, we focus on helping clients reach the best height. We have a team of expert developers who are well-versed with the latest technology and trends to implement things at their best.

As a leading software development company, we strongly believe in the power of innovation and clients' requirements. Working with us on any type of agreement, you still have control over the budget, and our team will work dedicatedly on your project as per your needs. We have delivered some of the million-dollar projects related to mobile app development and website development with many happy clients.

Connect with us today and get the best choice for your digital product development.

Key Takeaways

Coming to a conclusion, choosing between the Time and Material (T&M) or Fixed Model for your digital product development depends on various factors and demand of your project. Both have their pros and cons and can do best in their field.

It is you, the end, who decides which one to choose as per what you are looking for in your agreement.

Choose wisely, or get the help of experts today to start your digital product development journey.

Frequently Asked Questions

What is the difference between Time and Material vs Fixed Price Model for project development?

The main difference between the Time and Material (T&M) and Fixed Price models lies in their approach to project pricing and management. In the T&M model, costs are based on actual time spent and materials used, providing flexibility for evolving project requirements. In contrast, the Fixed Price model involves agreeing upon a set price for the entire project scope upfront, offering predictability but limited flexibility for changes.

What factors to consider when deciding between Time and Material and Fixed Price models?

When deciding between Time and Material and Fixed Price models, factors to consider include project complexity, clarity of requirements, budget constraints, client involvement, risk tolerance, and the level of flexibility needed in accommodating scope changes.

How does the Time and Material model handle changes in project scope?

The Time and Material model handles changes in project scope by offering flexibility to adapt to evolving requirements. Clients can request changes throughout the project, and costs are adjusted accordingly based on additional time and materials needed. This allows for greater agility in responding to changing needs and priorities.