Software development pricing models

Just like in the case of other services, pricing models for software development assume multiple forms. The two most popular are "fixed price", meaning the price for the entirety of the project, and "time&material", that is, the cost of the effort of individuals. The choice of a pricing model depends not only on the Customer's budget, but also, most of all, on the project's technical specification.

We are going to show You how to reasonably price Your IT project!

1. Fixed price

   What do You pay for in this model? For completing the task with detailed specification already in mind.

   "Fixed price" is an option for those who are conscious and certain of their goals. If You have specific expectations about Your project and know how to check if the final product will match them, choose this pricing model. Its great advantage is the fact that You know the total price from the very beginning, which means it can easily be included in the budget.

   That does not mean, however, that the expected price is bound to be the same in the end. Sometimes the documentation requires alterations when the process of completing the project is already well under way. In such a case they are priced separately, though.

   If the Customer does not have a detailed idea for the project in mind (that is, it lacks technical and functional details), this model may be rather frustrating. It is because the software house is going to ask numerous questions, many of them not expected by the Customer, before it even prices the project. It would not be the first time a project"s execution has been thwarted due to the lack of answers. And it all could have been avoided if only the "time&material" model had been assumed!

2. Time&material

   What do You pay for in this model? For the time it takes for individuals to complete Your project.

   "Time&material" is the most flexible of all software development pricing models. Its most efficient option is so-called "team leasing". It means hiring a self-contained team comprising all the specialists You need to complete the project - not only programmers, but also IT project managers, testers, and analysts.

   "Body leasing" is similar, but a little less advanced. In this case there are only 1-2 professionals with specific qualifications - the people that the Customer would otherwise not be able to hire on their own.

   The individuals hired with the "time&material" model can be either self-contained specialists or teams of specialists, or parts of the internal organisation structure of Your firm. There are many possible ways they can complete the tasks assigned to them - by working in the Customer"s headquarters, their employer"s headquarters, or simply remotely. 

   What needs to be taken into consideration, however, is that in the case of "body leasing", even though the Customer can manage their employee"s time as they will, they still retain full responsibility for the management of the project. While the project has been saved from understaffing, it still requires a great deal of engagement. That is why we recommend "team leasing" - it helps solve both staffing and business problems.

Software development pricing models - a conclusion

The outcome of a "fixed price" model is the product completed according to the Customer's clear instructions and collected in consistence with any predetermined rules. A "fixed price" model, on the other hand, begins with no documentation at all and assumes all the necessary details will clarify as the process moves on with the help of the hired team.

The options above are not the only ones that can be assumed during the Customer - Software House cooperation. Nothing prevents the Customer from taking on a hybrid model. For example, they can order a system audit or optimisation, but in the end decide to hire an entire team with "team leasing". Or "lease" 1-2 specialists permanently while working with the team only on the new projects.