Time&Material: how does the cooperation model with hourly pay work? and in which projects you won't regret choosing it
he timing of the project and the method of payment are the two main things that both the client and the contractor always want to find out "on the shore. Luckily, you don't have to reinvent the wheel, nor do you have to reinvent models of cooperation with contractors. Let's talk about one of the main such models - Time&Material. And right away let's try to figure out why you should sometimes prefer it when creating web products to, for example, the simpler and more straightforward Fixed Price.
How it works
Time&Material — is a type of collaboration when the performer gets paid for the total number of hours he or she has spent on the job. It's not a fixed amount for a specific project, as with the Fixed Price model.
"Yeah," you'll say, "It's all hands on deck for my contractor to drag out the process, work longer and get more.
And... you're not quite right. Using the T&M model, on the contrary, you will be protected from such an outcome, because here the project is not developed at once in its entirety, but is divided into several blocks.
Step by step, the planning of the work looks like this:
- Determination of the overall Scope of tasks. At the first stage it is important to separately form expectations from the result of the work — what business needs are covered by the product, its functionality, and to preliminarily estimate how much time and money should be spent on the project.
- Depending on the functionality of the product, the cope is broken down into general groups of tasks that the contractor will need to implement as part of the project (features). For example, the creation of a personal user account on the site is a feature. And each feature includes subtasks (epics) and a detailed description of the product's individual features from the perspective of the average user (User Story). In our example, the creation of a user's order history in the Personal Account is an epic, while the user's ability to examine or make adjustments to his or her history is a User Story.
- After that, for each block of tasks you determine the amount of time (sprint) that will be spent on it and the cost of this work. You pay your contractor based on the completion of one or more sprints.
With this scheme, the customer is involved in the project to the maximum. You will monitor the implementation of each stage of product creation step by step. You can give the team/developer feedback and make adjustments to the project as you go along. If necessary, you can move the deadline for the next blocks or even decide to change the contractor, if you are not satisfied with the quality of work.
On the one hand, this means that you are no longer just signing a contract and waiting for the result of the work to be done. On the other hand, the chances that the finished product will meet all your expectations are greatly increased.
Fixed Price VS Time&Material
T&M, unlike Fixed Price, is a more flexible model. It's not "money in the morning and chairs in the evening," but an opportunity to carefully inspect each "chair" before payment and make sure that it is of high quality and meets the T&M.
In addition, when determining the time to create a product at Fixed Price, the developer will try to tell you the final date, taking into account all his possible (and often impossible) risks. Usually it is not less than +30% to the actual time he will spend.Source:
Decomposing the solution of problems in the Time & Material model, you can understand that actually to create your product you need 2-3 times less time, and therefore — and money.Source:
On the other hand, if you work with Fixed Price, you know when the project will be completed, but if you choose to pay by the hour, you should be aware that the deadline is a relative concept. As, however, are the scope of work. And sometimes the result itself.
And a little more about the advantages and disadvantages of the T&M model
We've already figured out why it's more convenient and profitable in some cases to use the Time&Material model than Fixed Price. But that doesn't mean you should give up on the latter and choose the hourly rate for absolutely all projects.
The benefits of the model are certain:
- Greater involvement of the customer in the project. You can closely monitor the implementation of the idea (or you can not observe, but, dibs, then blame only on yourself).
- Ability to make changes in functionality, interface, product specifications right in the process of its development. Test hypotheses and, if necessary, change the direction of work.
- Better implementation of the product. Especially when it comes to large projects. It's hard to imagine that Fixed Price would work really well when developing a large-scale web-product or a startup, where new ideas and hypotheses are constantly emerging along the way. But for small tasks, it's better to go with the good old Fixed Price.
And here are her shortcomings:
- Uncertainty. Both financially and in terms of time. For example, if you just need a clear deadline. Or if you are not ready for additional costs and you need to clearly budget for the cost of the project.
- The unfairness of the performer, who decides to overestimate the actual man-hours spent in order to earn more. However, this risk will be reduced to almost zero if you are fully involved in the project — to know and understand how much time is needed to perform a certain block of tasks.
For which projects to choose Time&Material
In our humble opinion, this model of cooperation is best suited if you have:
- A project at the testing stage. When you need to divide the work into several stages. There are still many hypotheses, refinements, bugs that need to be fixed.
- A startup whose result is not yet completely clear to you. There is a possibility that it will undergo dramatic changes in the process of product development.
- A medium-term project (up to six months) that lacks clear specifications and documentation at first. All this will emerge in the course of the work.
- A big project from scratch. Do you attract a large team of developers, and the deadline for implementation starts at a year? With such volumes and time, it's difficult to create specifications for the entire project. There are a lot of adjustments and revisions waiting for you.
We are also ready to cooperate with you according to the Time&Material model. All changes will be made to the project promptly, and each stage will be implemented on time.
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