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Pay for what they deliver & not for the hours they spent

Whenever we outsource our software application development work to some offshore software vendor we normally pay for the hours spent by the vendor’s team on our project and not for what they deliver. If the vendor is spending some hours on our project obviously they have to deliver what we expected right? So why can’t we just pay for what the vendor delivers?

Well, in many cases the vendor will not agree to engage with you if your plan is to pay for what they deliver. It’s simply because your vendor is not confident of whether they can deliver what you have expected, or whether they can deliver within your timeframe. Plus, this will not give them any room for making extra billing or to work in their comfort zone.

What happens if your vendor agrees to get paid for what they deliver? Well, at first they have to deliver what you have expected and secondly within your timeframe. But your vendor doesn’t want to take either of these responsibility. They just want to work in their comfort zone.

Conclusion

Ideally the whole software services industry should move towards a stage where the project payment model moves to the new age model where in the customer only pays for what the vendor delivers.

There is nothing to be scared about this model. In fact this payment model will be great for the entire software industry eco system, let’s explain this further. So what happens when a vendor (a software services company) gets paid only for what they deliver? Firstly, the customer will get what he expected & within his timeframe, this way all software projects will get completed as per the customer expectation & time. So the customer always wins.

All the vendors (software services companies) will also wins in this model because they will get paid only if they delivers what customer has expected & within customer timeline. So to cope up with this the vendor will find many innovative & creative ways of executing the project, they will do the proper project planning, architect the requirement properly and use their team/resources efficiently.

Just pressurizing the internal team to work for more hours will not work at all because the customer only pays you for what you deliver which means the whole organization has to start thinking in a new level, use new technology/tools, use innovative ways of executing & completing the work.

Did you like this topic or do you have a different opinion to share? Please leave a comment below or write to us at contact@therealpictures.com

56 comments

  1. I disagree with this article.

    I have worked on several software development projects and I would say why this is the case.

    1. The client does not have a clear idea on what they want:
    Yes, they do have the general idea but they are unsure of the specific details of what they want. This usually involves couple of meetings, showcasing to the client on the latest updates of the application and the client would usually add more features to the project.

    For example, a terms and conditions page is usually required a software. What if the client keeps updating the terms and conditions, adding links to the T&C or decided to break down into different categories for each T&C? Hours have to be charged.

    2. Moving away from waterfall methodology:
    If the project has a clear and fixed deliverable/specifics from the start, it would be easy. For many cases, for example, logo position, button position, the client would like to adjust here and there. This would take time as well. Moving towards frequent review of the software allows the client to gather feedback on how to improve on the application.

    Charging by hours is the most accurate and fair way of charging the client. If by deliverables, the client have to be 100% sure of what they want and the exact specifics.

    • Dear Weng,

      Thank you for your opinion on this, we really appreciate it.

      The whole idea of http://therealpictures.com/ is to take up some unique topics & start a conversation around that. By doing so we are providing a platform for everyone to share their opinion on each topics. We are glad you shared your opinion.

      Please do check out the about us section and other topics and share your opinion.

      Regards
      The Real Pictures Team

  2. Hi,

    I agree with some of the points mentioned in your article. We have worked with numerous clients and have been able to deliver successfully to their satisfaction. We have taken up turnkey projects and have worked out delivery based or fixed budget models to deliver to our clients satisfaction. We at http://www.Vorosoft.in really value client satisfaction and work in that direction. We deploy a consultative approach to help our clients understand various nitty gritty of an application development process and help them accordingly plan the right way to meet their needs.

    It is critical to understand that if your client grows – you would grow as well. If you need any help on application development, mobile app development and software, I would request your team to refer/consider http://www.Vorosoft.in for the same.

    Cheers
    Dev

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