Why Flexible Pricing Models Work
By Nael Shamsie
At TribalScale, we are commonly asked by clients why we work on a time and materials basis. Time and materials refers to a system where our clients pay us based on the number of hours a project takes as opposed to a fixed price upfront. To answer this it’s worth looking into our development methodology first.
We work in an Agile way (specifically following Extreme Programming Methodologies), ready to pivot and add or remove product features at a moment’s notice. We start by building a Minimum Viable Product (MVP) with just enough features to gather validated learnings about the product from real users, and then add additional features. This Agile way of working has many benefits. Throughout the course of development, project requirements change for reasons such as discovering new insights into user behaviour, additional features required by stakeholders, and technical client integration. The ability to pivot and react to changing conditions creates a final product that reflects what the end user actually wants. This way of working is only possible on a time and materials basis as clients are only paying for the time necessary to complete the project. Clients don’t commit to a rigid set of requirements based on preconceived notions of the end product.
With this pricing model, clients may be concerned by uncertainty around the details and requirements coming into an engagement. At TribalScale, we alleviate any uncertainty by conducting an in-depth scoping session with our clients to hash out the necessary features, detail the level of effort to build these features, as well as identify any technical or design uncertainties surrounding the product. A common misconception clients have is that there are no fixed deliverables, but that’s not the case, at least not at TribalScale. Our contracts include fixed deliverables, however we charge our partners on a time and materials basis, in order to retain flexibility. The ironic thing is while clients often prefer a fixed price approach for reasons of certainty, they are only getting certainty as to price, but losing the certainty of getting a product that actually fits with their end users’ needs.
All in all, it’s clear to see the benefits of charging on a time and materials basis as it enables firms to work in an Agile manner, giving them the flexibility and adaptability to create products that align with user needs. For this arrangement to work, everything is contingent on a relationship of trust and transparency and an experienced partner that follows a disciplined approach to software design and development. We pride ourselves on establishing and maintaining this sense of trust and transparency with our partners throughout our engagements, while sticking to our highly refined XP methodologies. Time and time again (pun intended), we find that our clients benefit from being charged for what’s essentially our process and letting that define the journey and outputs along the way. They usually end up with products that although are different from what they initially envisioned, are what their users actually needed.
Nael Shamsie is a Digital Transformation Partner at TribalScale. Having lived in 10 countries so far, he’s happy to now call Toronto home. When he’s not staying on top of trends in the tech space, he loves checking out new places to grab a bite or binge watching a quality show.
