One of the common pricing models in outsourcing is the Time&Material contract.
Time & Material is a model of work in which not the end result is paid, but the time spent on the tasks. This scheme is absolutely flexible and does not require a long and deep analysis at the start.
How does Time&Material work?
Time&Material is advisable to use in cases where it is not possible or very difficult to determine the full scope of work or the timing of their implementation.
It is recommended to choose the Time&Material model for such projects:
- The project is at the stage of testing, maintenance or revision.
- A project, the development period of which takes up to 6 months, for a team of 5 people and requires technical documentation.
- Large projects with development periods from one year.
Usually, all tasks are divided by levels of difficulty and distributed in accordance with the workload and qualifications of a specialist. Also, a time frame is set which the specialist must meet. At the end of a certain period of time, previously agreed with the customer, a full report is made about what has been done, by whom and in what time frame. After that, based on the report and the level of complexity of the tasks, an act of completed work is made.
Let's highlight the main advantages and disadvantages of working with Time&Material for the customer.
Advantages:
- Delegation - the customer communicates with the project manager and discusses the main requirements with him/her. The manager, in his/her turn, plans the entire development and distributes the 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 the budget. On medium and large projects, the Time&Material model helps the customer to save 10%-30% of the budget, since the project is divided into short and clear stages.
- Balanced team. The customer has the right to determine the size and qualification of the team together with the project manager.
- Transparent development and result. The client is maximally involved in the project, having access to the 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 the complete functionality.
Disadvantages:
- Deep involvement. A Time&Material project requires both more attention from the customer and sufficient competence to manage the project.
- Undefined budget. In the absence of a clear understanding of the scope and timing of project development, the customer bears financial risks.
- Unscrupulous contractor. There is always a risk of facing an unscrupulous company that will inflate real labor costs in order to make a profit.
Why Choose Time & Material?
The Time&Material model assumes that you pay for the result, and the payment is based on the time spent developing specific tasks. Depending on the client's requests, the payment is made after each stage of the development process.
Unlike the Fixed Price model, the development team is not constrained by tight budgets and deadlines. This creates the opportunity to provide customers with the most thoughtful and therefore effective solutions.
Dividing the workload and tasks into separate chunks called sprints makes the work even more efficient. Each sprint is estimated separately (in hours) and agreed with the customer. When the tasks are completed and paid for by the customer, the developers start working on the next sprint.
Thus, the Time&Material model is a solution for long-term projects without any established requests and visions. This option is suitable for different types of projects and is beneficial to both parties. The client pays in fact for the work completed, and the performer understands how much work the project carries and how much the company can earn.
If you have any questions or concerns about the model you need at this or that stage, let us know and we will discuss and select immediately the one suitable for you.
