Fixed Price vs Time & Materials – Which Is The Best Option For Custom Software Development?

Custom software development is a complex and time-consuming process that requires expertise, dedication, and a considerable amount of resources.

As such, to get the most out of the investment in a custom solution, businesses must choose the right pricing model that suits their needs and goals.

There are two pricing models in the custom software development industry: fixed price and time and materials.

The latter option is the industry standard – for reasons we will explain!

The traditional way that custom software development companies operate is through time and materials pricing.

In this model, the client is given a price that covers the costs of the development of their software, including admin, communication, development costs and so so.

However, this model has a major downside for the client:

Some of the prices will go to secondary costs (regardless of if they are told this up front), leaving the client in a position of uncertainty about how much money they will be required to complete the software build.

On the other hand, the fixed price model is far better for a client as it provides a clear and predictable cost for the client.

Specifically, the software development company takes the time to understand the client’s requirements and gives a fixed price for the entire project, which includes secondary costs.

And as such, this fixed price model has more pros than cons for the client, as the clients know the total cost of the project from the beginning, ensuring no surprises in the future.

While the fixed price model may cost slightly more for the client, it provides significant benefits for them, not only with this predictable cost but also with a clear project timeline for completion.

In contrast, the time and materials model really only provides benefits to the software development company.

So, when it comes to custom software development, choosing the right pricing model is crucial to the success of the project.

While the time and materials model has been widely used in the industry, the fixed price model is gaining traction as it provides clear benefits for the client.

But, to ensure the success of your custom software project, consider working with a software developer that offers a fixed-price model to help you achieve your goals with certainty and transparency.