When it comes to choosing an engagement model, it is quite a confusing task to choose one among the Fixed price, Time & Material and Dedicated team model. Here, we bring a detailed article on outsourcing, pros and cons of outsourcing and measuring each engagement model with their features, pros, cons, and when to use them. Read in detail.
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It is very difficult yet an important task for any organization to select the perfect engagement model for their upcoming product. Today we will talk about Fixed Price vs Time & Material vs Dedicated Team comparison in detail.
The task is quite the same as deciding between waterfall and Agile software development. If you choose the engagement model then it will give positive results rather than the methodologies.
A client engagement model is a plan or design that decides the reason for collaboration between the software development company and the client.
The engagement model mainly aims at wants, needs, and interests of the customers by ensuring the level of responsibility, flexibility, and control.
There are three most desired engagement models that are used in software development and they are fixed price model, time and material model as well as a dedicated team.
How does it work?
Fixed Price Model is basically a fixed price contract where the software development team of the company submits the project within a particular sum that is agreed by the client and the company.
Fixed Price Model is profitable for the clients as they don’t have to pay anything except the agreed price. But the process can be difficult for the software development team of the company.
This is because if the clients decide to make any changes when the project is in the development stage, then the IT company has to repay the excess amount by decreasing the profit margin.
The entire process can instantly make the business relation bitter. Then it will solely become a risk management venture where the company’s focus would be in minimizing the risk instead of achieving the business goals.
The situation may get worse when the company, as well as the PM of the provider, are at odds when there is a change in scope. With this, you can understand that you can’t take any risk to make changes in this engagement model.
The Fixed Price Model can be adopted only for short-term projects. This is because their specifications, as well as the requirements of the short-term projects, are predictable and rigid.
When to use it?
One of the most important points to consider is that the client makes the payment for the total time needed for the development of the project. There is no payment for the time when they do their personal work.
It becomes important for the client to offer the scope of the project and to supervise it. So you have to define your requirements very clearly so that the client can deliver you the project as fast as possible.
On the other hand, if you fail to define your requirements clearly, it may consume additional time to rework on it.
If you don’t explain your requirements precisely then you may have to pay extra money as in this model you are paying the client on a timely basis in which the cost depends as per weekly, daily, or hourly basis.
When to use it?
In this model, the service provider, as well as the customer, sign a mutual agreement as per the project requirement workload for a certain period of time.
On the other hand, the development company offers IT professionals who suit the needs and demands of the client.
The in-house team will totally devote its time on the particular project whereas the outsourcing service provider will be having entire management control over the team as well as the project. The company will be held responsible for administration and recruitment support.
The DTM has a simple and clear pricing method. There are monthly payment methods depending on the size of the team. The payment system includes the fee of the service provider and members’ salaries.
When to use it?
There are many methodologies of development in the IT field but mostly the companies prefer to implement Waterfall and Agile methodologies as these are suitable for Fixed Price and Time and Material Contract.
Waterfall Methodology is also known as Liner Sequential Life Cycle Model which works in the consecutive order. This means when the first step is done perfectly then only the team will move forward into the next step.
The developer cannot make any changes once the task has been started. That’s why it is important for the company to arrange complete information about the project.
Waterfall Methodology can be perfect for start-ups because the team leader and its members have all the information and ideas about their project.
It is like functionality, features, design, target audience, and total budget needed to accomplish the goal then a Fixed Price Model can be the best choice here. This will help you to decide Time and Materials vs Fixed Price model.
Generally, the start-ups don’t have expertise in the field of technology, so they find huge difficulty in supervising the project.
Agile Methodology is a way where the team manages and controls the project. They do it by segmenting into various stages as well as involving the engagement of stakeholders.
In this methodology, the outsourcing vendor seeks constant improvement as well as reiteration at each and every step. Time and Materials vs Fixed Price PMI can be determined here as well.
If you have planned the ideas in advance and if you are familiar with the features that you are willing to add in the project and you don’t have enough time to recheck and manage the development team, then feel free to use the Fixed Price Model.
On the other hand, when it comes to redesigning an existing mobile app or old website or you have got a project where you need to add lots of features or customized options as per the demand of the company, then you can use Time & Material Model.
So, this is the in-depth Fixed Price vs Time and Materials model.
Comparing the Three Engagement Models
|Time & Material||Dedicated Team||Fixed-Price|
|Project Size||Moderate – Large||Large||Small|
|Time Span||Normal – Long Term||Long Term||Short – Medium Term|
|Control of the client||Average||Full||Less|
|Rate||Weekly, Daily or Hourly basis||Fixed payment per month||Fixed rate|
|Requests for changes||Can be changed during the implementation of the project||Can be changed during the implementation of the project||Can be changed after the completion of the project|
|Time-frames||Step by step||Approximate||Preset|
|Scalability of team||High||Medium||Low|
|Dedicated resources||Not assigned||Scalable||Allocated|
|Opportunity to work||Low – Moderate||High||Moderate|
|Reports||Regular reports||Regular reports||NIL|
|Technology Stack||Depends on situation||Flexible||Planned in advance|
We have discussed the features, pros, and cons of Fixed Price, Time & Material, and Dedicated Team Models among which the Dedicated Team Model always stands ahead.
Before this discussion, we have already discussed Fixed Price vs Time & Material vs Dedicated Team the difference.
There are lots of reasons which play a significant role to make it the best model among all. Following are the reasons:
The companies can hire experts from any part of the world who are experienced in their respective fields like PHP, Node js, Angular js, etc.
This helps the company to make a choice whether they want to expand or shrink the team size. Once the expert is hired, they proceed to the next phase.
Once the experts are hired by the development company, they can easily get rid of the unwanted stress in various aspects like technical support, recruiting, hardware, infrastructure, software, other tasks, etc.
This is because these works are managed and controlled by experts. Now the company is free to focus on other works.
If you have hired a dedicated team that belongs to another country and is serving all your tasks very efficiently, then there won’t be any problem in legal aspects related to international taxes, international properties, etc.
Tracking the performance of the development team is the major task of the outsourcing company .
This will help them to know whether everyone is maintaining the proper rules and regulation to fulfil the goal of the company as guided by you.
The outsourcing company has the right to take strict action if there are any discrepancies or issues. It will help you to decide the Team vs Time comparison.
The outsourcing vendor will sign a contractual agreement with the dedicated team which will ensure that the outsourcing vendor has the authority to look over all the tasks related to HR.
Various tasks such as salary hike, employee benefit, annual bonuses, employee leave, medical allowances or insurance will be managed by the outsourcing vendors.
If you belong to a company or a project manager, you know that outsourcing costs are very huge.
Not only some companies pay a bulk rate simply for initiating the project development stage but Dedicated Team Model is quite different to this even after being an outsourcing model.
This is because the payment structure is based on the work done and the company plans the budget as per that.
It will help you to know the Fixed Price vs Time & Material vs Dedicated Team comparison.
So we have gone through various engagement models – Fixed Price vs Time & Material vs Dedicated Team and their types.
We have also elaborated each and every model that include advantages, disadvantages, features, methodologies and lots more among which the Dedicated Team Model is the best option for the long-term contracts.
It has lots of advantages as you can guide your team directly and save additional costs.
You can also get in touch with eSparkBiz Technologies – A Top Web Application Development Company to know more about the outsourcing business models.
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