Types of payment at AIS Novations
When the customer signs a product development contract, you need to select the appropriate payment option. We at AIS Novations work with two models: Fixed Price and Time & Materials. Let’s see how they differ and which one is better to choose
Fixed Price
When choosing such a payment model, the project budget is negotiated before the start of the development and no longer changes. Also the deadlines are set for the delivery of the project. Risks for the failure of the deadline are taken by the performer. At first glance, this payment model is convenient for the customer, because you know exactly how much the product costs and when it will be ready. But there are drawbacks
Why this model can be unsuitable
When developing a product errors or defects occur, they are unavoidable. If something goes wrong, developers will need to fix it in a short time. Some companies sacrifice quality for the sake of the deadline. For such cases, we immediately put possible risks in the budget
This is suitable for such projects as
For small and simple projects with limited functionality. For products that do not need any changes and additions
Time and Materials
It is payment which is made on completing the project. That is, you only pay for the time that the specialist spent on the task
How it works
- The project is divided into parts, that is, it is divided into several tasks
- The project team evaluates the first task and reports on how many man-hours are needed to complete
- The man-hours are multiplied by the performers and the cost of the task is calculated
- When the task is completed, the customer receives reports and pays for it. After that, the performers proceed to the next one
Why we recommend the T & M model
AIS develops complex sites, applications and systems. We do not offer template solutions. Over 11 years of work, we have seen that at the initial stage, customers rarely know what they want to receive and how the finished product should work. In such projects, improvements are inevitable, so the T & M model is more suitable. You can make edits at each stage and eventually get the desired result
Disadvantages
You need to communicate with the performers a lot, which is not always convenient. But this can be considered as an advantage. Being constantly in touch, you know exactly at what stage the project is, what difficulties arise and how much work remains. In addition, you can make edits during the development
Let’s summarize
Features of the model Fixed Price
- Fixed budget
- Fixed scope of work
- Fixed deadline
- You can not make changes when the contract is signed
- Higher development rates — risks are taken into consideration
- Time is more important than quality
Features of the model Time & Materials
- Flexible payment model that is compatible with work on Agile methodology
- Dividing the project into separate tasks and payment after task completion
- The ability to control the progress of work and see the result at each stage
- You can make edits in the course of work
If you have an exact TK and you are sure that you will not add anything during the development process, then payment at a fixed rate is the best option. If you do not fully know what the finished product will look like and allow some space for improvements, if you have a complex project, the model Time & Materials is the best option for you
And, please, remember that constant communication with the project team and the ability to change something along the way will help you get a project that will work correctly and solve your business problems
