Fixed bid, T&M, FTE models are some of the popular pricing models used in IT application development or software development. Each model has its own plus or minuses. Each models would fit under different situations but from a customer point of view which is the best pricing model?
While each of these models fit perfectly under different situations & brings its own advantages & disadvantages, it is the customer who needs to take a call on which pricing model he prefers.
Software development companies would normally suggest the customer to go with T&M or FTE model because they will be in a safer zone as it brings more flexibility, ease, and no commitment/risk for them and a high potential for over billing.
Note, both these models are not In Paper tied into any final delivery. Which means as a customer you will pay & you don’t know what you will get in return. This may end up in a situation where your project may never get completed as per your timeframe & you may be taken for a ride.
While in a Fixed bid model, the pricing is tied into some deliverable by the company in a pre-agreed time which puts a customer in a better situation because you get what you pay for & in agreed time.
In T&M and FTE model the software companies might share daily progress report, employee’s timesheet & they may be more transparent. But what can a customer do with this? Where is his expected software application? when will it be delivered?
So as a customer if you want to get a software application developed within a specific time it’s better to go with fixed bid model.
The fixed bid model also creates a win win situation for both customer & the software company. Because the customer knows what exactly he will get by what time and the software company knows what exactly they need to deliver by what time.
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