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 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?

The time and Materials model is a type of 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 the 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.

The 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, the 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 the 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 stake. One of the benefits of the time and materials model for the client has a 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 the 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 a Minimal Viable Product that consists purely of the essential elements of the product without 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 a 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 the 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 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, the 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 increasingly unfeasible due to the ever-changing nature of market and software development processes. Fixed price requires a lot of time for the preparation of the project to 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.

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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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Norwegian Startups Matchmaking Organized by NUCC

Ukraine’s reputation as a reliable outsource partner with exquisite expertise and innovative approach is growing with each passing day. More and more foreign companies are visiting Ukraine in search of a company to do make their project a reality.

Case in point – recent visit of Norwegian startups for matchmaking.  


Here’s what happened. On April 16-18, the Norwegian-Ukrainian Chamber of Commerce (NUCC) had brought a delegation of Norwegian companies and start-ups for a series of networking events in Kyiv. The catch is that these companies had never been in Ukraine and never used outsourcing services before. So it was both a trying to a new ground and establishing new relationships.

The main purpose of these events was to discuss business opportunities, possibilities of building working relationships between companies, the potential of the outsourcing market in Ukraine, comparison business environments in both countries and build bridges with a potential to grow into a successful long-term partnership between the companies in various fields of interest.

April 16 was dedicated to discussions and bringing everybody on the same page concept-wise. The main topics of discussion were outsourcing business and the way it is done in Ukraine and methods of cooperation. There were several presentations dedicated to outsourcing in Ukraine and specifics of the Ukrainian business climate.

Mykola Slobodian presenting Ukraine as a great outsourcing destination.

The APP Solutions CEO Mykola Slobodian was there with a presentation about how The APP Solutions works with startups. (As you know, he was in Norway recently, meeting with the businesses on their “own ground.”) Over the course of the presentation at the Kyiv IT Cluster, he explained the basics of international cooperation and secrets of overcoming cultural differences, showed examples of The APP Solutions projects, and told about how the company is establishing a business relationship, i.e. taking part in events and collaborating.

April 17 was all about B2B meetings between Norwegian and Ukrainian companies. Every meeting was a short and intense matchmaking session. Companies exchanged their visions of cooperation and discussed the most feasible and viable possibilities.

Among the things Norwegian companies were especially interested in were:

  • communication (especially level of English speaking among the managers and development team);
  • UI / UX approaches;
  • innovative technical solutions in the hot industries (AI, machine learning, chatbots, drones);
  • out of the box thinking;
  • cooperation options (extended model, dedicated team, etc).

Later that day there was also a meeting with an Ambassador Extraordinary And Plenipotentiary Of Norway To Ukraine Ole T. Horpestad with whom Ukrainian and Norwegian companies had discussed business environments in both countries.

On April 18th Kyiv IT Cluster held a masterclass by Karin Ellis, CEO of Ellis Culture, author of the book “Working with Norwegians”. During the workshop, she showed several case studies on the subject of cooperation with Norwegian companies on various levels and shared few thoughts about major stumbling blocks occurring while dealing with Norwegian companies.

Networking and matchmaking between Ukrainian and Norwegian companies

[Source: IT Ukraine Association]

Overall, this series of events shows that Ukraine becomes more and more lucrative as an outsourcing service provider.

The main takeaway is that Norwegian companies are genuinely interested in developing partnerships with Ukrainian companies – not only it is due to lower prices and geographical location but also because of expertise and eagerness to explore.

Anyway, it’s definitely the beginning of something really-really exciting. Stay tuned!

P.S. The APP Solutions is a member of the Norwegian-Ukrainian Chamber of Commerce.


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