The Pros and Cons of T&M model

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The correct building of the relationship between the customer and the vendor is half the success of the development. The type of contract that is suitable for the project helps to minimize risks and increase the chances of a positive result for both parties: the client and the software vendor. Let's take a look at one of the outsourcing pricing models - the Time & Material contract.

When Time and Material is mentioned, the question often arises: "Why doesn't the vendor take the time to get more money?" It's actually a matter of trust. This method of pricing allows the vendor to flexibly customize the development process, without fencing off additional costs from risks and without erecting obstacles in the form of strict technical specifications for the customer. A well-known contractor company is interested in the correct result and keeps the processes transparent.

What is a Time & Materials?

T&M is a model of work that only pays for the actual hours spent by developers. This model will help you, as a client, save your budget. Also, the model is great if you want to supplement your project with new features. T&M is ideal for projects in the process of development or with unclear requirements, it works effectively when the client needs to implement several parts of the project at different times.

How does the T&M model work?

T&M is good to use where it is impossible to determine the full scope of work or the timing of their implementation. Lightpoint Global recommends using this model for the following projects:

1
The project is at the stage of testing, maintenance, or revision. T&M is a very convenient option for performing individual blocks of work. Each stage can be described in detailed terms of reference, especially when all the project documentation is ready.

2
Projects, the development period of which takes up to 6 months, for a team of 5 people and require technical documentation. The pay-as-you-go model allows the contractor to adapt to the wishes of the client and the requirements of the market, so clear specifications, although necessary, may not be available at first. Then the documentation will be written in the course of work or will become the first task within the project.

3
Large projects that require a team of 20 people, with a development time of one year. Due to the large volumes and long development time, preliminary specifications will be fragmented and can take thousands of pages, which will be adjusted during development.

How Lightpoint Global work by T&M

Firstly, our specialists closely communicate with the client before starting the project to determine the main milestones. Each stage is assessed in terms of cost and timing. The client can make any changes or additions during the development process, no approval or signing of additional documents is required;

We estimate the project in hours required to complete the stage. At the same time, we do not put risks in order to be reinsured as in the case of the Fixed price model;

Upon completion of the development, the project manager coordinates the final estimate with the customer, after which payment is made. In most cases, work on Time & Materials is cheaper for the client, since the studio is not burdened with the risks that Fix price conditions impose on the project;

By developing products based on T&M, we are able to flexibly build the development process and try to maintain maximum transparency. Delivering the result you expect in the shortest possible time. This is how we are trying to establish long-term cooperation in the future.

The result of work in a specific period can be both a working prototype, a release version, and a full-fledged software build.

In practice, such a model is impossible without a good system for planning tasks and monitoring their implementation. To do this, we use systems such as JIRA or Redmine in order to mark and keep track of the hours.

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Pros and cons of working on Time & Material from the customer's side

Benefits:

Delegation. The client communicates with the project manager and discusses the main requirements. And the manager already plans the entire development, distributing tasks within the team;

Agile development. The scope and order of work is changed if necessary, it is enough to add new requirements to the project backlog;

Saving your budget. The T&M model helps the customer save up to 30 percent of the budget since the project is divided into short and transparent stages into medium and large projects.

Balanced team. The customer has the right to determine the quantitative composition and qualifications of team members together with the project manager on the part of the contractor.

Transparent development and result. The client is maximally involved in the project, having access to task management and labor accounting systems. By dividing the project into stages and having an agreement on intermediate results, the client receives working intermediate versions with complete functionality. This eliminates unpleasant surprises in the case of months of development without customer feedback or miscommunication.

Minuses:

Deep engagement. A T&M project requires more attention from the customer and sufficient competence to manage the project. This can be a disadvantage in terms of the time spent on the project, but it will turn out to be a significant advantage in terms of the quality of the final product;

Undefined budget. In the absence of a clear understanding of the scope and timing of project development, the customer bears financial risks. Wishing to save on the number of specialists, the client also risks receiving additional costs for project development;

Unscrupulous contractors. There is always a risk of facing an unscrupulous company that will inflate real labor costs in order to make a profit. Therefore, you need to be very careful when choosing a contractor and planning the development of a project.

Constantly changing requirements. Throwing the project from side to side demotivates the development team. The constantly elusive result of work and the change of goals leads to burnout. People need to see a clear goal and feel the movement towards the result. Collaborating on the Time and Material model, the company is interested in providing you with a high-quality result in the optimal time - this, in turn, guarantees further successful cooperation.

So, Lightpoint Global as a professional software development vendor recommends a more flexible development model. As practice shows, clients rarely have an accurate idea of the functionality of the project, and new ideas often arise during the development process. Constant communication with technical specialists allows you to create a project that not only solves business pains but also has prospects for its development in the future.

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