Time & Material vs. Fix Price

Customers often demand a Fix Price Project, because of the capped costs. However, costs are not the only Success Factor when undertaking a BI Project. Thus, I tried to highlight the Scenarios in which a certain type of Project makes Sense.

Time and Material Projects make sense when the Customer doesn’t have any previous Experience with BI Apps and consequently might not know a 100% what they want since the T&M allows to accommodate changes much better with the advantage that the customer gets what he in Terms of Business Requirements or needs.

Fixe Price Projects don’t allow any flexibility after the Requirements gathering Phase and maybe earlier since the Scope or Content of the Project have been placed into the contract, which would need to be changed if Requirements change. Thus, the Fixe Price projects are suited for Customers with Product experience and are able to formulate exactly what they want before the Project starts and when the Contract is signed.

Regardless of the Fix Price or T&M, the Project team must also balance a structured approach with pragmatic aspects. While a structured approach might provide the methodology to prevent or minimize the risk of heading into future issues it also imposes an overhead on the effort. Whereas a pragmatic approach might be to accept a certain risk of heading into issue (and possibly defining a structure to a second instance) it is also much leaner.

Thus, both these types of Project require a different behaviour from the Customer and from the Delivery supplier.

Usually Req. change or the Understanding of the Requirements change making it difficult to offer a Project on a Fix Price basis.

The most important thing in any Project is to control the Customer and e.g. resist the urge to accept Change Request, but rather formulate this for a next Phase.