Time and Materials: How This Model Works

Introduction

Selecting the right collaboration model can impact the project's outcome. Whether you're a startup looking to launch your first app or an established business aiming to enhance your digital presence, the choice between various model types is important enough in order not to loose money at the end of collaboration. One of the most flexible and popular options in software development is the Time and Materials (T&M) approach.

Time and Materials approach is the preferred one at What the Flutter. We appreciate it for multiple reasons and so should you. Let us explain all the pros and cons worth considering this pricing model for your software development. This article delves into the details of the Time and Materials model, exploring how it works and when it is most appropriate to use.

What is a Time and Materials Model?

The Time and Materials (T&M) pricing model is a flexible approach in which the client pays for the labor (the sum of actual hours development team spend on the project) and the materials (servers, development tools, cloud hosting services, third-party libraries, etc.) required to complete the project. This model is commonly used when the project scope is uncertain or subject to change, offering flexibility to adapt as needed.

Materials in software development

In software development, "materials" refer to the resources needed to complete the project. Examples include:

• Servers: Hosting platforms used for testing or running applications.
• Cloud services: Cloud infrastructure like AWS, Google Cloud, or Azure for storage, computing power, or hosting environments.
• Hosting services: Web hosting or application hosting services used during the project.
• Third-party SDKs: Software Development Kits (SDKs) provided by third parties, which may include pre-built functionalities like payment gateways, analytics tools, or social media integrations. If these SDKs require a paid subscription, their cost is considered part of the "materials."

Typically, the cost of these materials is not included in the development team's invoice, as clients often manage these payments directly. For example, if the project requires hosting on a cloud platform or the use of a third-party SDK like a payment gateway, the client will have their own billing account with the service providers and handle those payments independently. This allows the client to retain control over the subscriptions and services they choose to use for the project.

Labor in software development

Labor refers to the actual hours the development team spends on the project. For example, if a Flutter expert works on the maintenance for X hours in a month, and their hourly rate is $Y, the labor cost would be:

X hours * $Y/hour = total labor cost.

If no additional materials (e.g., paid tools, extra cloud services) are required, the client's cost for project maintenance would only payment for labor.

Estimation of budget and timeline

Before starting the project, the development team provides the client with a rough time estimation based on the project requirements. This estimation helps the client understand the expected timeline and cost. However, because the T&M model allows flexibility, the budget and timeline can be adjusted as needed. If new features or changes arise, the project’s timeline and costs may be revised accordingly.

Invoicing process

At the end of each month, the development team prepares a detailed time report that breaks down the hours worked. This report includes information on each task that the team completed.

The invoice sent to the client at the beginning of the next month will reflect only the labor costs, with a breakdown of hours worked and their corresponding tasks. For example, if the team worked X hours at an hourly rate of $Y, the invoice will show a total sum.

This model ensures transparency, allowing clients to manage their material costs independently while paying for labor based on actual hours worked.

Time and Materials Model Pros and Cons

Like any collaboration model, the Time and Materials one has its advantages and disadvantages:

T&M model pros

1. Flexibility: one of the main benefits of a T&M is its flexibility. Unlike Fixed-Price contracts, where changes in scope can lead to costly renegotiations, T&M contracts allow for ongoing adjustments. It is particularly useful in mobile app development, where user feedback or market trends may necessitate changes mid-project.

2. Easier project start: With the Time and Materials approach, you can kick off your project without needing to finalize every detail upfront. This model allows you to leverage the expertise of the development company, making the initial phase faster and more flexible. While it's still important to assess the project's risks and timeline early on, the actual start is quicker, and not all decisions need to be locked in from the beginning.

Additionally, rather than planning all features and design elements at once, you can iterate through development stages until you reach the Minimum Viable Product (MVP). After validating the product and the market, you can then focus on enhancing the software. Crucially, with each iteration, you can provide feedback to the development team, enabling adjustments that better align with your evolving needs.

3. Higher quality: Choosing a Time and Materials model often leads to a higher quality outcome compared to a Fixed-Price one. This approach gives your development team the flexibility to explore the best solutions and approaches, resulting in a more refined final product. It also allows for more focus on creating a superior user experience and optimizing processes, which can ultimately reduce long-term maintenance and optimization costs.

4. Potentially lower cost: Clients only pay for the actual time spent and materials used, potentially leading to a lower overall budget compared to a Fixed-Price model, where agencies often inflate costs to cover potential risks. In T&M contracts, clients pay for real risks as they occur, rather than potential risks built into a fixed price.

5. Transparency: T&M approach offers a high level of transparency. Clients receive detailed reports on how time and resources are being utilized, which provides insight into where the budget is going. Such transparency helps build trust and ensures that the project stays aligned with the client’s expectations.

6. Collaboration: The T&M model fosters a collaborative relationship between the client and the development team. Clients are involved in the process, providing input and feedback throughout the project.

T&M model cons

Time and Materials is not cons free. Below, we are presenting all the cons you should consider with this pricing approach:

1. Uncertain final cost: At the beginning of the project, clients receive only a rough estimate of hours and an approximate budget. While development teams generally strive to stay within these estimates, unforeseen challenges or changes in project requirements may cause the actual costs to rise. This lack of fixed pricing can create uncertainty for clients, though regular communication and time tracking help mitigate surprises.

2. Uncertain timeline: The initial timeline provided is also an estimate and may shift due to unpredicted complexities or evolving project needs. As the project progresses, additional features, refinements, or technical issues can lead to longer development times. This flexibility allows for an improved final product but makes it difficult to guarantee precise delivery dates.

3. Requires active involvement: In a Time and Materials, you'll typically receive daily reports and participate in planning meetings, which means more involvement in the project than with a Fixed-Price model. While some clients see this as an advantage, others may find it requires more of their time.

It's important to note that your service provider can still assign a Project Manager to oversee the project, just as they would in a Fixed-Price model. Although this approach demands more of your attention, the overall project management remains the responsibility of the contractor.

When to Use T&M Model?

Below are scenarios where a T&M model may be the most appropriate choice:

1. Projects with evolving requirements: If your project has requirements that are likely to change or evolve over time, a T&M approach is ideal. This is common in app development, where market conditions or user feedback can necessitate changes mid-project. The flexibility of a T&M allows you to adapt without the constraints of a fixed scope.

2. Uncertain project scope: In cases where the project scope isn’t fully defined at the outset, a T&M model provides the necessary flexibility. It is often the case in innovative projects or those involving new technology, where it’s difficult to predict all the requirements upfront.

3. Collaborative projects: If you’re looking for a collaborative approach where you can be actively involved in the development process, a T&M model is suitable. It allows for ongoing feedback and adjustments, ensuring that the final product aligns with your vision.

4. Long-term projects: For long-term projects where it’s impractical to define every detail upfront, a T&M offers the adaptability needed to manage changes over time. It s particularly relevant in complex app development projects that may span several months or even years.

5. Focus on quality: If the quality of the final product is more important than sticking to a fixed budget or timeline, a T&M allows for the necessary flexibility to achieve the desired results. By allowing for adjustments and refinements during the development process, this model ensures that quality isn’t compromised.

Key Considerations Before Starting a T&M Project

To avoid unnecessary problems with this development pricing approach it is good to care about a couple of items before starting collaboration based on T&M model — it will help you to better understand the cost on your invoices:

Project outline

While a T&M allows for flexibility, having a clear initial project outline is necessary to start any project. It should include the project's objectives, key deliverables, and any specific milestones. This outline serves as a reference point and can be adjusted as the project progresses.

Roles and responsibilities

Clearly define the roles and responsibilities of both the client and the development team. It includes specifying who will be responsible for decision-making, approvals, and communication.

Rates and payment terms

It is necessary to specify the hourly or daily rates for each team member, along with any additional costs for materials. Payment terms, including billing frequency and accepted payment methods, should be clearly outlined. It’s also beneficial to include provisions for handling disputes over time or costs. These things are usually covered in contracts for services.

Scope management

While the T&M model is flexible, it’s important to have a process in place for managing scope changes. You should detail how scope changes will be handled, including how they will be documented, approved, and billed.

Reporting and communication

Regular reporting is necessary in a T&M model to maintain transparency. You should discuss how progress will be reported, including the format of reports, the frequency of updates, and the methods of communication.

Project timelines

Although T&M is flexible, it’s still important to have a rough timeline for the project. It should include any milestones or deadlines, even if they are subject to change.

Quality assurance

Quality assurance is one of the important aspect of software development. You should ask your partner to specify the quality standards the project will adhere to and the processes for testing and validation.

Once you know who works on the project, what tasks are assigned to the person and how much time it takes to deliver each part of the software, you can easily foresee your invoice total and if you stick to the established timeline.

Conclusion

As you can see, the Time and Material model provides enough flexibility to allow for changes to the requirements without the necessity to overpay. With the T&M model, you get your software development partner committing to the delivery and quality of the needed functionality with adjusting fast and within the budget constraints if the requirements change.

Time and Materials model is used at What the Flutter for all our projects as this approach allows our and your team to deliver a valuable piece of software with the end-user in mind. Working in a T&M you can introduce all the changes much more easily, react to market changes and apply new ideas to your product.

If you're ready to take the next step in your app development journey, we're here to help. Contact us today to discuss your project needs and find out how we can help you bring your vision to life.