App development pricing models – time & materials vs fixed price

Building a great app is a complex process, including many stages and requiring different specialists. No wonder, an app tailored to your needs is quite difficult to price.

Most software houses rely on two popular strategies for pricing their services: Fixed Price or Time & Materials. Basing on our experience, we also offer a Mixed Model, which combines advantages of these two.

Here’s everything you need to know about these pricing models to help you pick the right offer from the start.

TIME & MATERIALS

In this pricing strategy, the vendor bills you for every hour spent working on the project. Most companies offer an estimated amount of time required for completing a project. Still, they get paid even if they exceed this estimated time.

PROS

CONS

FLEXIBILITY

The critical advantage of this pricing model is that it allows to easily adjust the development process to the evolving requirements of the project. Time & Materials-based software development is practically unlimited. The amazing flexibility of this pricing strategy positively impacts the output of the development team.

POTENTIAL RISK OF RUNNING UP THE DEFINED TIMELINE

Time & Materials model is prone to exceeding the deadline if you don’t control it carefully. After all, if you make a lot of changes to your project, you have to assume that there may be a delay in delivering of your app. However, if you pay attention to your project’s timeline and fully participate in the app development process, this risk is possible to avoid.

HIGH PRODUCT QUALITY

As a client, you can be sure that the product you get with Time & Materials pricing strategy is of top-notch quality. Following numerous iterations and adjustments, it’s bound to become exactly what you want. Plus, developers have plenty of time to test it, so you don’t need to worry about any technical glitches.

PROJECTS ARE ADAPTABLE TO SCOPE CHANGES

In a Fixed Price contract your developer may be reluctant to make changes to the scope of your project. After all, these changes might easily exceed the vendor’s estimation and generate additional costs. In Time & Materials model, you can make these changes and the vendor will agree to them without a blink. They’re being paid for their service regardless if they exceed their own estimates.

WHEN TO CHOOSE TIME & MATERIALS?

This pricing model works for large projects with a poorly-defined scope. Choose Time & Materials if your app development project is likely to keep changing, or you’re planning a series of tests to check its viability at different stages of development.

FIXED PRICE

This pricing strategy allows the client and the vendor to agree on the total price of the project upfront. It’s most often used for relatively small software development projects which have clear requirements, specifications and timelines.

PROS

CONS

FIXED BUDGET

In this pricing model, all the financial risk is on the vendor’s part. They’re committed to completing a project for a specific price, so if they fail to complete it on time, for example, because of a series of corrections, they’re on the losing side.

LACK OF FLEXIBILITY

With Fixed Price model the flexibility of your project is very low. If you suddenly decide to change your app significantly, for example by adding new functionalities, chances are your developer won’t agree to do it within the budget you’ve settled at the beginning.

FIXED TIME

If you want your project to be launched in a specific time, Fixed Price model is a good idea. In this pricing strategy your project will get a detailed timeline and developers will do their best to meet all the deadlines because they can plan all their work in advance.

EASY TO FOLLOW DEVELOPMENT PROGRESS

Having a detailed timeline, you will be able to follow closely the progress of works on your app project at each stage. In a Fixed Price model, the majority of planning is done at the beginning as you have to settle all its details. After that, your project is going to run smoothly.

WHEN TO CHOOSE FIXED PRICE?

If your project is small and has a well-defined scope, which is unlikely to change, it is a good idea to choose this model. Fixed Price is also used in developing simple solutions for internal use or prototypes. It’s a good option for short-term software development tasks as well, especially if they don’t require your close supervision.

AN ALTERNATIVE: MIXED MODEL

Mixed Model is an alternative pricing strategy we adopted after years of collaborating with different clients on projects with a variety of scopes. The pricing model combines Fixed Price and Time & Materials into a functional whole.

When talking about a project, we fix each iteration separately and strive to keep it within the set budget. Once the current iteration is completed, we offer a more flexible approach towards the following one. We consult with clients each step of the development process, ask them about possible changes they want in their app and let them know which changes are worth implementing and how they affect their budget which at this point can be changed as well.

PROS

CONS

EVERY ITERATION HAS A SET BUDGET

Every single iteration in the project will have a fixed budget. As a provider, we keep a close eye on the development of the iteration to ensure that the budget isn’t exceeded.

ENGAGEMENT IN EVERY SINGLE ITERATION

Mixed Model requires clients to be fully engaged in developing and confirming every single iteration. But all the time spent on the project is certainly worth it!

ASSESMENT OF PROJECT CHANGES

Sometimes clients request changes which generate high costs but don’t bring substantial benefit to the users of the app. We do our best to assist our clients and use our expertise to help them implement changes which have a real impact on the quality of the final product.

ITERATION-BASED COOPERATION

Our collaboration can be halted at any moment. In this pricing model, we’re tied to the project’s iteration. This way the client can see our team in action and decide whether they want to continue the collaboration.

WHEN TO CHOOSE MIXED MODEL?

Do you want safety of the budget and flexibility at the same time? Maybe it is good to choose the Mixed Model. If you wish to engage in your project and get exactly what you want, this option is worth considering.

KEY TAKEAWAY

When choosing to collaborate with a software house on an app development project, make sure that the terms of your contract clearly state what happens to the project price as the project’s scope changes.

Time & Materials solution is the best when you are not sure yet, what exactly your project will look like or want to have a huge dose of flexibility in changing your initial app idea or the project is very big and difficult to estimate.

On the other hand, Fixed Price strategy can be advisable if you have a clear view of your app or develop a small, simple project and want to be sure your deadline and budget are settled for good.

Finally, our custom Mixed Model is an answer those who need to have more control over their budgets, but don’t want to sacrifice their product over lack of flexibility.

 
 
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Katarzyna Lorenc
Marketing Specialist

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