Advantages of Time & Material contracts
With our core competence being the delivery of Consultants on a Time & Material basis – either on-site or via our Nearshoring centers in Poland – one of the things that is often unclear for many companies, is how Time & Material contracts can be an advantage compared to Fixed Price Agreements.
The biggest and greatest advantage of time and material contracts is undoubtedly the flexibility it carries. Time and material contracts are simple to make and to extend, but also to stop. That makes it possible quickly and efficiently to scale up or down in resources as needs and demand change. And, exactly the ability to scale up and down in resources efficiently and flexibly is key for many modern companies – especially big IT companies. Furthermore, time and material contracts are flexible in a way, where you can either have resources added fulltime, part-time or just for a few hours. IT all depends on the need.
In a development organization dealing with change and the ability to change direction is a crucial factor. Agility has become a bigger competitive parameter than ever before. The need to flexibly being able to change your “start-position” may be a necessity to meet customer and market demand. It is a need that can happen overnight, where action needs to be taken quickly in order to keep the flow in development. Time-based contracts require that readiness and agility. The process of bringing a consultant on board and the simple contract terms make it possible to get resources quickly so that development does not stop. This is in sharp contrast to fixed-price agreements, where a lot of time is needed to define a scope that can then be a starting point for a price. Furthermore, it reduces flexibility and the ability to handle change, as changes in scope require that you revisit the original agreement.
The preferred choice of specialists
The “Gig-economy” is upon us - especially regarding the IT industry, there is a growing trend amongst specialists to seek out project-oriented work. For the hourly contracts are clearly the preferred choice and the industry standard. Essentially, if you want your hands on the sharpest IT professionals, then time and material contracts are inevitable.
Remember to keep an eye on the budget
Compared to fixed-price agreements, it is clear that with hourly contracts you do not get a specific solution or service for a certain amount of money – it is, however, more loosely founded. Therefore, one must, of course, keep track of progress in terms of hourly consumption, to ensure that you get the desired value from the consultant, but also that the budget does not get out of hand.