Outsourcing 101: Time and Material Outsourcing Model

Before the development of your project starts, one of the questions you have to answer - what is the right model of cooperation for you? Whether it is a dedicated team or time and materials affair - it defines the scope and manner of every subsequent element of the project in its own way. Also, it affects the cost of the project. 

There is no one-answer-that-fits-all, unfortunately (or fortunately), in terms of what outsourcing model would be perfect for a web or mobile development. However, it is better to familiarize yourself with the differences so that you can choose the one you would feel most comfortable with. 

There are several models of cooperation commonly used in outsourcing. In this series of articles, we are going to talk about three: Time & Materials, Dedicated team, and Extended team.

This article is about Time & Materials model.

What is Time and Materials model?

Time and Materials model is a type of a contract that takes as a foundation actual time spent working on the project i.e. you pay for time and effort spent. The charging is based on the amount of time spent on the project combined with the costs of the materials (effort) used in the process.

At the moment, it is one of the most common types of contracts in outsourcing business due to its convenient structure and relative flexibility. The T&M project can be easily adjusted to any changes without much of a fuss.

Time and materials model is perfect for the following cases:

  • A long-term project with an evolving set of requirements
  • Projects in the process of scope investigation
  • Projects that require maximum flexibility for the market situation
  • Projects with the vaguely defined specification
  • Projects connected with untested business models
  • Projects that don't require hard-to-find specialists (i.e. if you need a very specific framework developer, it's much easier to just go with a dedicated/extended team model so the developer would be hired specifically for your project - but we're getting ahead of ourselves.)

With this model intact, the project takes a more open-ended stance for tweaks and fixes all the way through according to the business needs.

Let’s explain the advantages of the T&M approach in detail.

Advantages of Time and Materials Model

Work Scope Tied to Project, not People

One of the biggest advantages of the T&M model is in its approach to the definition and management of the scope of work. T&M model means applying an agile approach to the development process. There is a goal and a way to achieve that goal. 

While the goal remains constant, the methods of realization may evolve in the process and priorities may shift according to the situation. Since you're not tied to specific specialists, you can use the ad-hoc basis for the technologies and workload. 

In other words, time and materials approach gives the client room to set the priorities of the project more freely. It is especially convenient for smaller companies and startups as they can reshuffle the project according to the current situation. 

Budget Flexibility

Another strategic advantage of T&M model is cost control and budget flexibility. Due to clearly defined price units - you can plan out the budget to a tee and if over the course of the development priorities shift occurs - adjustments could be made without breaking too many eggshells.

Due to the agile approach, any changes in the project are easier to implement and this will not significantly disrupt the workflow. 

Time and Material is a balancing act sometimes, but it is still much less stressful and risky than, for example, fixed price's consequences might be for everyone involved. 

Time Management

Time management is a hard thing to maintain. Something always tends to drag or happen too fast.

The well-organized steady pace of the workflow is one of the most important elements of the development process. In the barely predictable world of app development, it is especially important as it can be a decisive factor in the successful development of the project.  

Flexibility and tight scheduling of the time and materials model requires more reasonable dealing with time. That factors in with the priorities of the projects and give an opportunity to chip away the superficial and concentrate on what really matters to the project.

Hands-on control

Keeping things under control is a must when big money is at stakes. One of the benefits of time and materials model for the client has the more hands-on approach in the development process.

How? Due to flexibility and overall increased mobility of the project, the client is basically required to be involved more deeply in the workflow. Otherwise, the project might not meet his expectations.

However, that doesn’t mean that the client must be present at every meeting every time no matter what. Not at all. This responsibility lies on the shoulders of project managers who keep the client in the know about the undergoing of the projects and presents the results at a specific schedule.

Market Sensitivity via MVP

Another quite important feature of the time and material model is an ability to adapt the product according to the demands and needs of the market early on. At the APP Solutions, we advise beginning with an MVP in cases with both Time and Material as well as Dedicated team schemes, but with T&M it is the easiest path and the most cost-effective. 

This is made possible by producing Minimal Viable Product that consists purely of the essential elements of the product without an excessive fat. With this approach, you can test out how the product will go and then improve it according to the customer feedback and/or market trends. Basically, MVP provides an insight into what direction the project should be moving.

On the side note - because of hourly rates you can also streamline or expand the scope of operation depending on the budget possibilities and current needs of the project.

What about Fixed-Price model?

There is also another working model tangentially related to T&M that should be mentioned. It is known as Fixed-price.

It is a type of a contract with a clearly defined sum right off the bat. It is much like any other contract in any other industry - you pay the money and get the thing.

Within this model, outsourcer was supposed to complete the project within the determined budget and time constraints. Nice and simple.

But the reality is a little bit more complicated and that makes the fixed-price model increasing unfeasible due to ever-changing nature of market and software development processes. Fixed price requires a lot of time for preparation of the project to a minuscule detail. The technologies are rapidly evolving and the market is constantly changing gears.

So you might have an idea that has the potential to change the world, but the world changes while you can't change the project's scope to adapt. Whoops.

Conclusion

Software outsourcing is a tricky business. It spawned out of things going too well. But in order to really shine and brings astonishing results - it needs to be precisely configured from the ground up starting with the model of cooperation.

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