Fixed Cost or Hourly Rate: Which Pricing Model is better for Your Project?

While choosing the model of collaboration with IT firm, you should pay attention to opportunities which opens the door for fixed or hourly pricing model as per the requirement. Most popular pricing model in mobile app development company is Hourly rate and fixed cost contracts.

Fixed cost: 
Fixed price assumes that the total budget of the project is approved or unchanged before the development starts. The exact deadline must be accepted before the development begins. Also, the risk of implementation of the work borne by the contractor. On the one hand, if we see this type of model seems so convincing for you, as a customer you better know how much time and money the project development requires before initiating project starts. If you dug deeper, you would see the project will receive on time, but budget and quality will always be doubtful. To avoid penalties, development companies that work on fixed price criteria deliver the project on time. If we see the cost estimates, developers who are working on the fixed price structure always put their additional costs to the budget to ensure themselves from uncertainty.

Contract with a fixed price is mainly used for small projects and there is no scope of change into the functionalities when it comes to fixed cost structure. 

Factors creating the impact on fixed costs are given below:
  • Amount of work 
  • Fixed deadline 
  • Project costs 
  • The inability to make changes after the contract is signed 
  • Higher development rates 
  • Possible compromises regarding product quality. 
Hourly rate: Don’t get confused with the word “time” is in this model. It does not mean that the pay for developers time. Contract time and material assume payment by the fact of work’s performance. If you see in detailed you will know how it works:

The project usually divided into tasks each of them estimated separately so that you will be having the opportunity to make any additions during the project development. Usually, project team assess the task and gives you the data how many hours/man need to for completing the assigned task. Multiply developer and man/hours rates to get task estimation. When the task is completed you have a visible result - pay for the work of the team monthly, quarterly basis as the preference. While working on Time and material pricing model mostly developer is interested in delivering you quality results on suitable time which ensures the possibility of later successful cooperation.

Time and material rate disadvantage is the additional communication with the company like 
Mobile app development company in USA although this can be plus point when discussing in detail, you will always know on what stage your project is where it moves or may need improvements or changes in it.

While developing a complex solution for large or medium sizes business which is complex for logistics, CRM system or mobile applications, etc. In large project’s while development starts, a customer has a rare idea about the required functionality, with bit by bit the project development, customer digs deeper into the project need that is how we get new ideas or improvements appear.

Advantages of Time and material rate 
  • Flexible pricing model which is perfect with the agile principle. 
  • Ability to proceed with the development unlike fixed priced contracts working on the time and material process you get to work on the most immediate process. 
  • Transparent hourly rates allow customers to manage tasks. 
  • Opportunity to get the visible result of work. 
  • You receive a solution which meets your expectations.
Well, we have discussed the today’s popular pricing models that almost all the app development companies follow while serving to any project, both have pros and cons which depends upon the specific requirements and the budget estimate of the client what we choose.

If you are choosing a fixed cost model, then you are compromising with the quality of the app along with the scoop of not getting any changes. Alternatively, for time and material rate (hourly rate), your cost would be on the higher side, but you get the product as want.